Cordon Investments Pty Limited v Lesdor Properties Pty Limited

A v Hayden (No 1) (1984) 59 ALJR 1 Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 CASES CITED : Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349 Fitz-Gibbon v Khoury (Supreme Court of New South Wales, Powell J, 1 March 1985, unreported) Idoport Pty Ltd v National Australia Bank Ltd [1999] NSWSC 828 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533

PARTIES : Cordon Investments Pty Limited (Plaintiff) Lesdor Properties Pty Limited (Defendant)

COUNSEL : Mr F Corsaro SC, Mr B Bradley (Plaintiff) Mr J Whyte (Defendant)

SOLICITORS : Anthony Simpson & Associates (Plaintiff) Solari Legal (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

55067/07 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd JUDGMENT 1 These proceedings concern a joint venture entered into by the plaintiff, Cordon Investments Pty Ltd, and the defendant, Lesdor Properties Pty Ltd. These parties entered into a joint venture for the development of land owned by the defendant in Miranda. 2 The plaintiff is currently seeking, as an interim measure, that the Court appoint a receiver to manage the property the subject of the joint venture pending resolution of the dispute between the parties at the final hearing. The notices of motion 3 By its notice of motion of 29 April 2008 the plaintiff seeks:

i. An order that a receiver be appointed to Lesdor Properties Pty Ltd (the defendant) for the purpose of enforcing the terms of the Interim Settlement & Orders ["ISO"] and Interim Management Agreement ["IMA"] dated 3 November 2006.

ii. In the alternative, the plaintiff seeks an order that the Defendant specifically perform its obligations under the ISO and IMA. 4 By its amended notice of motion of 6 May 2008, the defendant initially sought various orders, including: i. That the plaintiff's statement of claim be dismissed; and ii. That the IMA be set aside. 5 Ultimately, however, neither of these claims by the defendant was pressed. The defendant continued to seek its costs of its notice of motion on an indemnity basis from either the plaintiff or the plaintiff's solicitor. The principles to be applied in an application for receivership 6 Section 67 of the Supreme Court Act 1970 is in the following terms:

The Court may at any stage of proceedings, on terms, appoint a receiver by interlocutory order in any case in which it appear to the Court to be just or convenient so to do. 7 In Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445, the Court noted that the appointment of a receiver is a drastic step, and one which must be approached with caution [at 456 and 458]. Subject to this, the Court's discretion is very wide, allowing it to take all circumstances into account and weigh up the balance of convenience. There is no need to establish that the applicant seeking receivership has any proprietary interest in the property in question. The applicant need only show that he or she has "some legal or equitable right which will be protected or enforced by the making of the order sought and that no other available remedy is adequate for that purpose" [at 462]. The background to the proceedings

8 The primary dispute arises from a joint venture deed between the plaintiff and the defendant dated 2 September 2002 for the purposes of developing land at 629-633 Kingsway Miranda [the "joint venture agreement" or "the JVA"].

9 The defendant, the owner of the land, contracted the plaintiff to build residential units, commercial offices and parking facilities on the property. Under the terms of the deed, the plaintiff was required to take out a loan in order to finance the development, service that loan, and carry out the building work at its own cost.

10 The defendant's obligations under the deed included an obligation to execute the plan of subdivision once the building work was complete, and an obligation to guarantee the loan obtained by the plaintiff.

11 The deed provided that the defendant would be entitled to retain certain of the residential and commercial units. The plaintiff was entitled to receive the whole of the proceeds of sale of the remaining units ["the residual units"]. The proceeds of sale of the residual units would be used firstly to pay off the loan, then to pay any commissions owing. Any proceeds remaining after payment of these debts would be the plaintiff's profit on the development.

12 At some time in or around early 2006, the plaintiff claimed that the building work was substantially complete, and requested that the defendant execute the plan of subdivision. The defendant refused on the basis that there were defects in the building work such that the work was not, in fact, complete.

13 On 12 April 2006, the plaintiff commenced proceedings against the defendant seeking specific performance of the JVA and orders directing the defendant to execute documents for the purpose of obtaining approval for the strata division of the development. It also filed a notice of motion seeking related interim orders the same day.

14 On 5 May 2006, Barrett J dismissed the interlocutory application by the plaintiff. On the interlocutory application, Barrett J rejected the plaintiff's contention that 'complete' in the context of the deed between the parties, could be interpreted as 'substantially' or 'practically' complete. This is an issue on which the plaintiff intends to adduce further evidence at the final hearing.

15 After failing to obtain interlocutory relief, the plaintiff claims that it continued working on the project and rectified the defects identified by the defendant. The defendant, in contrast, asserts that very little physical work actually took place over this period.

16 On 1 August 2006 the plaintiff went into default on the loan facility for the development. The defendant, as guarantor, was required to pay out the facility. 17 In order to repay the NAB facility, the defendant, along with two other third party entities associated with the defendant, took out a loan from Macquarie Bank ["the Macquarie Facility"]. Under the terms of this facility, Macquarie Bank is entitled to call in the loan if a receiver is appointed, or if any steps are taken to appoint such a person. The loan is not secured over the property the subject of the dispute, but is secured over other properties.

18 On 8 August the defendant issued a notice of termination, on the grounds that:

i. the plaintiff had failed to complete the building works; and ii. the plaintiff had defaulted on the loan. 19 The plaintiff claims that such termination was invalid. The plaintiff asserts that, at the time the notice of termination was issued, the building works were in fact complete. The plaintiff also claims that it was in a position to service the NAB loan, and was prevented from doing so by the interference of the defendant. These are clearly issues which will need to be resolved at the final hearing, but which it would be inappropriate to address in the context of this interlocutory application. The interim orders and management agreement

20 On 3 November 2006, the plaintiff and the defendant agreed to an interim settlement and orders, pending final hearing. The Court orders and settlement terms noted by the Court were as follows:

The Court makes the following interim orders, by consent, and without admission by the Plaintiff/Cross Defendant that the Defendant/Cross Claimant has any right or entitlement to the orders made:

1. The Cross-Defendant is to deliver up to the Cross-Claimant no later than 10 November 2006 the following documents in its possession, power, custody or control:

(i) all original unregistered stratum and strata plans, unregistered section 88B instruments, and surveys pertaining to the Land obtained by or on behalf of the Cross-Defendant in pursuance of the joint venture referred to in recital (c) to the Deed between the parties dated 2 September 2002, as varied (the Deed);

(ii) all original approvals issued by Sutherland Shire Council, including and without limitation, all plans, specifications, drawings and designs pertaining to the Land obtained by or on behalf of the Cross-Defendants in pursuance of the Deed;

(iii) any "as-built" drawings pertaining to the Building on the Land obtained by or on behalf of the First Cross-Defendant in pursuance of the Deed;

(iv) all original Contracts for the Sale of Land entered into by the First Cross-Defendant as the First Cross-Claimant's attorney in respect of any (sic) the sale of any lots in the Project referred to in the Deed (the Project), together with the conveyancing files in relation to such sales held by the Cross-Defendant's solicitors;

(v) the original Occupation Certificate issued by the Sutherland Shire Council dated 17 December 2005 pertaining to the Project;

(vi) all original Certificates of Insurance obtained by the Cross-Defendant in pursuance of the Deed; and

(vii) all original leases, and / or documentation said to confirm any licence(s) and/or tenancies purportedly entered into by the Cross-Defendant its employees, servants or agents in respect of any part, parts, Lot and /or Lots upon the Land, and management agreements pertaining thereto. 2. The Cross Defendant agrees to immediately transfer any lease(s), licence(s) or tenancy(ies) entered into by the Cross Claimant in respect of any part, parts, Lot and or Lots upon the Land to the Cross Claimant.

3. The Cross Claimant agrees to pay to McBride Harle & Martin the sum of $5,995.00 in satisfaction of the costs and disbursements incurred by them in relation to the contracts for sale and over which they assert an entitlement to a solicitor's lien, upon completion of such sales, and the Cross Claimant agrees to pay McBride Harle & Marin their reasonable costs incurred to date (said to be approximately in the sum of $1,000.00) in relation to conveyancing files relating to contracts for the sale of Residual Lots which have not been exchanged, upon delivery of said files.

4. The Cross Claimant is to apply all rents, licence fees, sale proceeds of the Residual Lots received by the Cross Claimant (except for units 20, 21 and 25) to reduce the loan facility referred to in paragraph 21(d) of the Affidavit of Leslie Herbert Semken sworn 11 October, 2006 (the Facility).

5. The Cross Claimant will provide the Cross Defendant with a copy of all loan documents concerning the Facility by 10 November, 2006.

6. The parties agree to consent to the following directions in the proceedings: (i) The Defendant is granted leave to file the Statement of First Cross-Claim annexed and marked "A" to the Notice of Motion dated 19 October 2006, within 7 days.

(ii) A direction that the Plaintiff file and serve an Amended Statement of Claim on or before 17 November 2006;

(iii) A direction that the Defendant file and serve any Defence and any amended Cross Claim on or before 15 December 2006;

(iv) A direction that the Cross-Defendant file its defence to Cross Claim on or before 15 January 2007;

(v) The Cross-Defendant will file and serve a verified statement of account of all monies had and received by the Cross-Defendant, its employees, servants or agents in respect of lease(s), licence(s), and / or tenancies purportedly granted by it, its employees, servants, or agents in respect of any part, parts, Lot and /or Lots upon the Land (the Leases) up to and including 30 November 2006, by 1 December, 2006;

(vi) The Cross-Claimant will serve on the Cross Defendant each month a statement of account (including invoices) of all monies had and received by the Cross Claimant in respect of the Residual Lots. The Cross Claimant will serve on the Cross Defendant each month a statement pertaining to the current position of the Facility. The Cross Claimant will serve on the Cross Defendant a monthly statement of expenditure concerning rectification works carried out by the Cross Claimant in relation to the Project.

8. The Court orders the Cross Claimant not to cause, sell, dispose, or deal with or encumber (other than by way of lease) Residual Lots 20, 21 and 25 within the Strata Plan, pending the final determination or resolution of Supreme Court of NSW proceedings no. 2332/2006. 9. The Court notes: (i) The parties agree to carry into effect the Interim Management Agreement annexed and marked "A".

(ii) The Cross Defendant denies the existence of any defects or omission in the Project which it is reasonable for the Cross Claimant to rectify or repair and that the Cross Defendant will maintain as part of any defence to the Cross Claim and in the prosecution of its claim in the proceedings that any cost incurred by the Cross Claimant in purportedly rectifying any item of work in the Project is unreasonable and should not be regarded as a cost of the Project for the purposes of the joint venture referred to in the Deed, or otherwise. 21 The Interim Management Agreement "IMA" then set out as follows:

On, 3 November 2006, Lesdor and Condon agree to the following: 1. Lesdor shall cause to have registered the Council approved Strata Plans with all due diligence.

Lesdor's solicitors on behalf of Lesdor and Cordon will request the President of the Institute of Valuers (or equivalent) to nominate a valuer to prepare a valuation of the Residual Lots (except lots 13, 14 and 15) for selling purposes, and a marketing and selling strategy for the sale of the Residual Lots, within 7 days. Lesdor and Cordon agree to bear the cost of the valuer's fees equally.

Lesdor shall arrange and conduct the sales of the Residual Lots on the Strata Plan, with the exception of Lots 20, 21 and 25, and will do so in accordance with the marketing and selling strategy referred to in paragraph 2 above.

Lesdor agrees not to sell any Residual Lot below the value ascribed to same by the valuer referred to in paragraph 2 above, without Cordon's consent. If Cordon does not consent, the matter will be referred to the said valuer for his determination as an expert, and such determination shall be final and binding on the parties.

Lesdor shall direct the proceeds of the (sic) all sales and income received in connection with the Residual Lots (with the exception of Lots 20, 21 and 25) in the Strata Plan towards the payment of the refinancing of the loan facility referred to in paragraph 21(d) of the Affidavit of Leslie Herbert Semken sworn 11 October 2006, after deducting all reasonable costs and expenses, taxes and statutory charges associated with such sales.

5A. And thereafter upon the facility being repaid in full, any further proceeds of such sale and income (less outgoings) to be held in a controlled power account in the join names of the parties by Lesdor's solicitors pending further order of the Court or agreement between the parties.

Lesdor agrees to provide all information concerning GST to be paid by Lesdor in respect of the sale of the Residual Lots. The effect of the interim arrangements 22 Prior to the interim arrangement, the plaintiff claimed to be entitled to see the joint venture through to completion, and claimed to have the right to market and sell the units. Based on that claim, it had placed a caveat on the property. 23 The effect of the interim arrangement put in place by the parties was that the plaintiff gave up its claim to be entitled to control the process of marketing and the selling of the units, and transferred control of this process to the defendant. In order to give effect to this interim arrangement, the plaintiff abandoned its caveat and surrendered control of various documents to the defendant. Breach of the Interim Management Agreement 24 It is clear that the "Terms of Interim Settlement and Orders" contain both Court orders as well as provisions which were agreed between the parties and merely noted by the Court. Some terms, such as 1, 4, 6 and 8 are clearly orders of the Court, while others such as 2 and 3 are merely an acknowledgement by the Court of the agreement between the parties. Other terms, such as term 5, are more difficult to categorise. Term 9 notes the agreement between the parties to carry into effect the annexed IMA, but does not impose the IMA by order of the Court. 25 The plaintiff claims that the defendant has both failed to comply with the court orders and failed to implement the terms of the IMA. 26 The evidence establishes that the defendant has failed to comply with order 6 above. It has not served on the plaintiff the required documents, including monthly statements of money had and received in respect of the residual lots, and monthly statements pertaining to the loan facility. This is a clear breach of the Court's orders. 27 It is clear that the IMA was not an order of the Court. Nonetheless, even acknowledging its interim nature, it remains an agreement between the parties, capable of being enforced. 28 In breach of the IMA, the plaintiff claims that the defendant has: i. failed to have a valuer prepare a valuation of the residual lots for selling purposes and a marketing and selling strategy for the sale of the residual lots; ii. failed to pay its contribution to McLennan Steege Smith & Associates so that it may prepare a valuation; and iii. failed to arrange and conduct sales of the Residual Lots in accordance with the said marketing strategy. 29 Since the IMA came into operation, only one of the units has been sold. This unit was sold to Mr Semken, the director of the defendant, for $380,000 in July 2007. The defendant acknowledges that this unit was sold without compliance with the procedures set out in the IMA and without the knowledge or consent of the plaintiff. The unit was sold for a price which was lower than the value suggested by the plaintiff's expert valuation [the plaintiff's expert had valued a similarly located unit at $390,000 without a marketing strategy, and $400,000 with such a strategy].

30 In July 2007, the defendant sought the plaintiff's consent to sell a second unit to a solicitor employed at Solari Legal, the firm retained by the defendant. The defendant proposed to sell the unit for $380,000. This unit had been valued by the defendant at $390,000, and by the plaintiff at $420,000. The plaintiff did not consent, and this sale did not proceed. 31 The defendant's stated reason for failing to comply with the IMA is its subsequent assessment that carrying out the IMA procedures would lead to a net loss of approximately $500,000. The plaintiff disputes this assessment. Significantly, this dispute between the parties over the value of the property is the very issue which the IMA sought to avoid. The remedies available to the plaintiff for the defendant's breach of the IMA 32 While accepting that it is in breach of the IMA, the defendant denies that the appointment of a receiver or an order for specific performance would be an appropriate remedy. The defendant submits that any dispute concerning the IMA should be the subject of a claim properly pleaded and determined in the ordinary course. In this case, it argues that the present dispute concerning the IMA should properly be determined at the final hearing of the parties' claims in these proceedings. Are damages an adequate remedy for the defendant's breach? 33 The plaintiff submitted that the appropriate test in relation to the grant of this kind of injunction is not whether damages are an adequate remedy, but rather "(i)s it just, in all the circumstances, that a plaintiff should be confined to his remedy in damages" [cf Sachs LJ Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349 at 379]. In fact, this gloss adds little to the original test, which is already concerned with the 'adequacy' of available remedies in damages. The relevant principle has also been set down in Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445, where the Court held [at 460]:

(T)he appointment of a receiver, or for that matter any peculiarly equitable remedy, is to be had only where the remedies which the applicant could obtain from a court of law are inadequate to meet the ends of justice, insufficient to confer upon him all the relief to which he is justly entitled. 34 The finding is that damages are not an adequate remedy for the defendant's breach. The IMA operates as an interim arrangement pending the final hearing. In order to obtain the defendant's consent to the IMA, the plaintiff gave up valuable strategic rights, including the control of documents and the right to caveat. These rights can no longer be quantified in terms of damages, nor could they usefully be enforced, as suggested by the defendant, in the context of a final hearing. Prima facie case 35 In Idoport Pty Ltd v National Australia Bank Ltd [1999] NSWSC 828 I observed as follows at [44]:

"The plaintiff's entitlement to ultimate interlocutory relief being necessarily uncertain at an interlocutory stage, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the Plaintiff of the refusal of an injunction in support of relief to which the Plaintiff may ultimately be held to be entitled: see eg Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 216; A v Hayden (No 1) (1984) 59 ALJR 1 at 4-5; Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535." 36 The plaintiff has established a serious case of breaches by the defendant of the IMA. Balance of convenience 37 The defendant argues that the appointment of a receiver with the powers which the plaintiff seeks, or an order for specific performance of the agreement, would not have the effect of preserving the property the subject of the dispute. In fact, it is clear that such an order would result in the units being sold. The defendant claims that its valuation suggests that the sale of the units would fail to cover the loan, leaving the plaintiffs without any benefit, and the defendants with a significant liability.

38 The defendant submits that the appointment of a receiver would be financially 'ruinous', as it would involve incurring the additional expenses of a receiver in circumstances where the sale of the units is unlikely to cover the existing expenses. It relies upon the judgment in Fitzgibbon v Khoury (Supreme Court of New South Wales, Powell J, 1 March 1985, unreported), where the court held [at 12]:

This general rule not withstanding, it is equally well established that it is not inevitable that in any such case an interim receiver and manager would be appointed and that the court would turn to residual discretion as to whether any appointment should be made. One of the bases upon in an appropriate case an appointment will be refused is that the consequences of such an appointment will be ruinous. 39 Ultimately, the defendant's contention that the appointment of a receiver would be financially 'ruinous' is rejected. There is no evidence to suggest that the financial position of the parties if a receiver was appointed would be any worse than if the status quo situation, under which the defendant has failed to sell the properties and continues to incur interest on the loan facility, is allowed to prevail. 40 On the defendant's evidence, the interest incurred on the loan facility currently exceeds the rent received from the properties. In such circumstances, any delay in the sale of the properties reduces the balance of proceeds available to be distributed after the loan has been repaid. In the event that the defendant is correct, and the sale proceeds are insufficient to cover the debt, any delay serves to compound the defendant's alleged loss.

41 The plaintiff maintains that, if the sale of the property is delayed, the damages it will be entitled to claim, if it succeeds in the primary proceedings, will be significant. There is no evidence before the Court that the defendant is a company of substance apart from a claim in Mr Semken's affidavit of 25 July 2008 that it is solvent, "has a significant excess of assets over liabilities" and is "able to meet its debts as and when they fall due" (paragraph 28).

42 In addition, the plaintiff is justified in fearing that the property of the joint venture is in danger of being dissipated by the defendant. The defendant has demonstrated its willingness to sell units without the plaintiff's knowledge or consent, to related parties, and at a price which is lower than the market valuation obtained by the plaintiff. In such circumstances, the property may properly be described as being 'in jeopardy'. It is therefore necessary to appoint a receiver in order to secure the property pending the finalisation of the proceedings. 43 The defendant submitted that the Court should hesitate to appoint a receiver where it will result in prejudice to third parties. The appointment of a receiver will result in an instance of default under the Macquarie Facility, thereby affecting both the defendant and the two associated entities which have provided security for that facility. 44 This argument is rejected for two reasons. Firstly the Court was informed by Mr Whyte that the third parties were associated with the defendant. These parties became involved in the financial deals of the joint venture through the actions of the defendant, and may be presumed to have been aware of the situation which existed between the defendant and the plaintiff. 45 Secondly, the rights and interests of these third parties were in existence at the time when the defendant and the plaintiff negotiated and consented to the IMA. This did not prevent the defendant from agreeing to implement the terms of the IMA at this time. 46 Ultimately, even taking the interests of the third parties into account, the balance of convenience favours the granting of the injunctive relief sought by the plaintiff.

The choice between receivership and specific performance

47 In the course of these proceedings, the parties have not shown any signs of collegiality or meeting of minds. There is no evidence suggesting that they will be capable of cooperating to implement the terms of the IMA without independent third party assistance. In these circumstances, an order placing the assets of the joint venture in receivership is preferable to an order for specific performance.

Disentitling conduct 48 The defendant submitted that the Court should refuse to appoint a receiver or order specific performance of the IMA on the basis of the plaintiff's allegedly disentitling conduct. 49 The defendant submitted that the result of the orders sought by the plaintiff would be the reduction of the loan facility which had been taken out pursuant to the joint venture agreement to fund the cost of the building works on the defendant's property. The defendant sought to show that the plaintiff had drawn down money under the loan facility and applied those funds to other building projects in which the plaintiff, but not the defendant, had an interest. In such circumstances, the defendant submitted that the appointment of a receiver would result in the joint venture funds being used to pay for expenses incurred by the plaintiff and unrelated to the joint project. 50 The evidence establishes that on 27 May 2004 the plaintiff received an invoice for an amount of $278,549.50 in relation to settlement fees for the purchase of properties at 375 Kingsway and Willarong Road, unrelated to the joint venture [Affidavit of Kenneth Allen Goddard 16 September 2008 at paragraph 6.4]. On 28 May 2004 $78,549.50 was paid out of the NAB "Miranda Account". The NAB statement includes a handwritten notation that the transfer of these funds was the "Bal[ance] of Settlement Money for purchase of Willarong Rd". 51 Unfortunately, the plaintiff's evidence does not directly address these allegations. The plaintiff did not read, but tendered as evidence that it intends to rely on at the final hearing, an affidavit of Barbara May Ghosn of 13 July 2008. In the exhibits to her affidavit, Ms Ghosn sets out the expenses incurred on the Miranda project. While this affidavit may be of use in the context of the plaintiff's proposed quantum meruit claim, it understandably does not go into detail with regards to expenses incurred on other projects, or unrelated expenses which may have been paid from the Miranda Account. 52 Ms Ghosn's states in her affidavit of 13 June 2008: "From March 2004, the only construction project in which Cordon was involved was the Miranda Project. While some administration costs were associated with managing other property interests, the majority of all administrative expenses were incurred for the purpose of administering the Miranda Project." Without further information regarding the size and nature of the administration costs associated with other properties, and the funds from which these expenses were met, such evidence is insufficient to meet the defendant's allegations that unrelated expenses were paid out of the facility secured by the plaintiff for the purposes of the joint venture. 53 The so-called disentitling conduct submission is rejected as a reason for the Court not appointing a receiver. There is a weighing exercise necessary whenever both parties have from time to time breached the contractual arrangements. 54 In consequence upon the court taking in the usual undertaking as to damages a receiver is to be appointed in terms of order 1 of the plaintiffs motion. 55 The parties to bring in short minutes of order accordingly.

Costs 56 The defendant seeks orders that the plaintiff, or alternatively, its solicitor, pay its costs of and incidental to its original notice of Motion dated 11 April 2008 subsequently amended on 6 May 2000 May. 57 The defendant abandoned prayers 1, 2 and 3 of its amended notice of motion at the Court of before the list judge on 12 September 2008 abandoned prayer six of its amended notice of motion on 17 September 2008. 58 It is clear from the evidence that there has been a history of default by the plaintiff in compliance with directions. This history is frankly conceded by Mr Pambris in his affidavit made on 28 April 2008:

In this affidavit, I have addressed the orders made by this Court from the time ACS commenced acting for the Plaintiff on 29 March 2007. I take responsibility for the defaults in the timetable occasioned by the Plaintiff. I explain the circumstances of default in this affidavit.

On 4 June 2007, orders were made as set out in paragraph 74 of the Solari affidavit. ACS had only been retained for a short period before the directions hearing. The previous solicitor's file was delivered in boxes in no clear order and disorganised. It took some time to have the file ordered.

On 2 August 2007, orders were made as set out in paragraph 83 of the Solari affidavit. In relation to those orders, I say:

a. In default of the timetable, the Plaintiff served its List of Classes of Discoverable Documents two weeks late on 30 August 2007. A copy of my letter serving same can be found at MS-1:79.

b. In the interim, steps were taken to understand the history of the litigation to date, to confer with the client, to consider further direction of the matter, the status of pleadings and an application was made to transfer this matter to the Construction & Technology List.

c. As a result, the Plaintiff failed to comply with the order to provide its categories by 16 August 2007, for that omission, I, apologise to the Court.

On 31 August 2007, orders were made as set out in paragraph 96 of the Solari affidavit. In relation to those orders, I say: a. In compliance with the first order, the Plaintiff was in a position to exchange verified list of documents on 13 September 2007. A copy of the letter from ACS to SL can be found MS-1:80.

b. The exchange did not in fact take place until 20 September 2007 as the Defendant required some further time to finalise its verified list of documents.

c. On 21 September 2007, SL notified us that it considered the Plaintiff's list of documents was deficient as it did not contain documents that fell within the agreed category three (being all documents relating to all monies expended, received or levied by or on the Plaintiff, Defendant or any other entity or person, in relation to the items listed in category one and/or relating to the same aspects of building works). A copy of this letter can be found at MS-1:88.

On 21 September 2007, orders were made as set out in paragraph 108 of the Solari affidavit. In relation to those orders, I say:

a. In compliance with the first order, I caused a letter to be written to SL requesting an inspection of the Defendant's discovered documents on 25 September 2007. A copy of this letter can be found at MS-1:90.

b. Inspection of the discovered material took place on 27 September 2007.

c. Whilst there was some difficulty in locating all of the defendant's discovered documents (see letter at MS-1:92), I acknowledge that the failure of the Plaintiff to discover documents that fell within category three of the agreed categories was the most pressing issue.

On 19 October 2007, orders were made as set out in paragraph 119 of the Solari affidavit. In relation to those orders, I say:

a. The first order required the Plaintiff to "produce and provide" the documents referred to in category three of the list of documents by 26 October 2007.

b. In what I considered to be compliance with that order, I had arranged for the relevant documents to be made available for inspection at the office of Vincent Aboud & Associates, the Plaintiff's accountant. A copy of my letter to SL dated 22 October 2007 can be found at MS-1:100.

c. A dispute then arose as to whether the Plaintiff was required to prepare a further verified list of documents. I believed at the time that this was no longer required in light of the consent orders made on 19 October 2007. In any event, the documents remained available for inspection by the Defendant from 22 October 2007 onwards.

d. In compliance with the second order, an affidavit of Joseph Ghosn sworn 25 October 2007 relating to compliance with the Court's orders dated 3 November 2006 was served on 25 October 2007. A copy of the letter serving same can be found at MS-1:103.

e. In default of the third order, the Defendant failed to serve its affidavit relating to compliance with the Court's orders dated 3 November 2006 until 6 November 2006 (MS-1:114).

As a result of the Defendant's default of the third order made on 19 October 2007, the matter was re-listed before her Honour Bergin J on 2 November 2007 and orders were made as set out in paragraph 133 of the Solari affidavit. In relation to those orders, I say in compliance with the first order, SL served an affidavit of Paul Semken on 6 November 2007. I say that affidavit failed to demonstrate compliance with all the Defendant's obligations imposed by the orders of this Court made on 3 November 2006. To date, the Defendant has failed to comply with same.

On 9 November 2007, at the directions hearing before her Honour Bergin J, the issue as to whether the Plaintiff was required to provide a further verified list of documents remained to be resolved. Accordingly, the matter was referred to the motions list on 16 November 2007 to be agitated on that occasion. It was eventually heard on 23 November 2007.

On 23 November 2007, the Court made orders as set out in paragraph 158 of the Solari affidavit. In relation to those orders:

a. In default of the orders made on 23 November 2007, I did not complete service of a further List of Documents until 13 December 2007, being six days late.

b. The documents that fell within category 3 of the discovered documents are voluminous and exceed 20 volumes of material and hence it took some time to complete the further list of documents.

In light of the Christmas break and the need for the Defendants to examine the "category three" documents, the matter was adjourned on 14 December 2007 to further directions on 15 February 2008.

On 15 February 2008, orders were made as set out in paragraph 173 of the Solari affidavit. In relation to those orders, I say: a. In relation to the first order, the Plaintiff was required to complete service of its further evidence by 7 March 2008. Accordingly, on 22 February 2008, a request was made for access to the Property on 25, 26 and/or 28 February 2008. A copy of my letter to SL can be found at MS-1:149.

b. On 22 February 2008, I received a facsimile from SL stating that the earliest opportunity that full access could be obtained to the Property was 13 March 2008. Full inspection of all areas of the building was required by our experts.

c. Accordingly, without full access to the building, the Plaintiff was not able to comply with the first order.

d. On 26 February 2008, I received a letter from SL noting that full inspection of the building was available on 5 March 2008. I was not asked whether that date was suitable for our experts prior to receiving the facsimile. A copy of that letter can be found at MS-1:154.

e. On 27 February 2008, I informed SL that our building consultant was unavailable to inspect the property between 9am and 1pm on 5 March 2008. Given the " unreasonable narrow window " of time availed to the Plaintiff to inspect the building, compliance with order one was now not possible. I proposed alternative times for an inspection on 28 and 29 February 2008, but noted that if access couldn't be granted on those dates, our expert would then be overseas until after the next directions hearing. A copy of my letter to SL can be found at MS-1:155.

On 14 March 2008, the Court made orders as noted in paragraph 192 of the Solari affidavit. In relation to those orders, I say:

a. I failed to comply with the orders of the Court to serve our evidence on 14 March 2008.

b. I attempted to prepare some of the further affidavit material myself but by 4 April 2008, it was clear that I required assistance in completing and settling the affidavit evidence.

c. Access was also required for our experts to complete preparation of their reports.

On 4 April 2008, orders were made by his Honour MacDougall J requiring the Defendant to file a notice of motion dismissing the proceedings by Friday, 11 April 2008 for hearing on 18 April 2008.

On 18 April 2008, the motion came before her Honour Bergin J and was adjourned to 2 May 2008.

Since the above, I can confirm the following matters have been attended to: a. Junior Counsel, Ben Bradley of State Chambers, has been retained to settle the remaining affidavit evidence.

b. I expect all outstanding lay evidence will be finalised and served prior to 2 May 2008.

c. Access to the Property by our experts has been organised to take place on Tuesday, 29 April 2008.

d. The Plaintiff's experts have indicated that they will have their reports finalised and available for service prior to 2 May 2008.

I apologise for the Plaintiff's previous defaults in the timetable. I note that the matter has been substantially advanced and by 2 May 2008, the Plaintiff's evidence will be complete. 59 In the circumstances it is clear that the defendant is entitled on an indemnity basis to its costs of and occasioned by the defaults in complying with timetable identified in paragraphs 35 - 50 of the affidavit of Mr Pambris. Order 60 The court orders that the plaintiff pay on an indemnity basis the defendants costs of and occasioned by the plaintiffs defaults in compliance with the Court ordered timetables identified in paragraphs 35 - 50 of the affidavit of Mr Pambris.

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