El-Bayeh v Bayeh

Judgment

1. HER HONOUR: The plaintiff seeks repayment of interest that he alleges is owed by the defendants as a result of an agreement and subsequent variation of that agreement that was formed for a property development project in Bankstown, New South Wales.
2. The plaintiff is Yousseff El Bayeh ("Joe"). The first defendant is Samir Bayeh ("Samir"). The second defendant is Issam Issa ("Sam"). Joe, Samir and Sam are shareholders and directors of the third defendant, Bl Constructions Pty Ltd ("BI Constructions"). For convenience and clarity but without meaning any disrespect, I shall refer to the parties by their first names.
3. The dispute arises from the parties' arrangements for the financing of Bl Constructions, a corporate vehicle the parties created for the purposes of pursuing their property development venture in Bankstown.
4. Joe variously describes himself as a property development consultant, a pensioner and a carer. Samir is an engineer by profession. Joe and Samir are cousins. (Aff, El Bayeh 17 February 2015, [3]). Samir project managed the property development through a company, Bidana Pty Limited ("Bidana"). (Aff, Bayeh 7 August 2015, [6]). For carrying out this work, Samir was paid at a rate of 35% of the construction costs. (T133). The directors of Bidana were Samir and George Dannaoui. George Dannaoui was also a director of Chikal Pty Ltd ("Chikal"), the property development partner of BI Constructions under the joint venture deed. Sam is a practising solicitor.
5. Joe, Samir and Sam all gave evidence and were cross examined. Joe gave evidence with the assistance of an interpreter. The only other witness who gave evidence and was cross examined was Michael Saadie. He gave evidence via videolink (with the assistance of mobile telephone) from Dubai. Joe relied upon two of his affidavits, dated 17 February 2015 and 14 March 2016 respectively, as well as the affidavit of Michael Saadie dated 22 August 2017. Samir relied upon two of his affidavits dated 7 August 2015 and 7 June 2016. Sam relied upon two of his affidavits dated 7 August 2015 and 21 September 2016.
6. At the outset of the trial, namely 21 August 2017, Joe amended his reply and admitted that his total contributions were $1,263,337.50. BI Constructions had made a partial repayment of $851,339.70, being two payments of $150,000 and one payment of $551,339.70. (Reply to Amended Defence, 22 August 2017, [1]). The cross claim was also dismissed with costs.

The pleading framework

1. Joe alleges that between February 2003 and April 2003, he entered into an oral loan agreement with BI Constructions, Samir and Sam to borrow approximately $933,000. These funds were to be on-lent to BI Constructions to enable it to meet its obligations to Chikal under the joint venture deed.
2. Joe alleges that it was an express term of the loan agreement that he, Samir and Sam would, until the project was completed, contribute equally to the interest payable under the two loans.
3. Joe alleges that it was an implied term of the loan agreement that: 1. BI Constructions would indemnify: 1. Joe and keep him harmless in respect of the principal, interest and all other expenses incurred by him under the bank loans; and 2. Samir and Sam and keep them harmless in respect of contributions made by them towards discharging Joe's liability under the bank loans; and 1. BI Constructions would meet its liabilities under (a) when it was in receipt of funds following the completion of the project, and would do that by way of repaying the bank loans in full and by reimbursing Joe, Samir and Sam the amount of the contributions made to each of them. (FASC, [21A]).
4. I have checked this pleading a number of times and the above pleading does use the word "harmless". Joe's submissions also refer to "harmless".
5. In May 2003, Joe alleges that there was an oral variation of the agreement between the parties. I shall refer to the alleged variation in more detail later in this judgment.
6. Joe seeks damages against Samir, Sam and BI Constructions for breach of the alleged loan agreement. Alternatively, Joe claims that Samir and Sam have been unjustly enriched at his expense by their failure to repay any interest on his bank loans. Joe further pleads estoppel and misleading or deceptive conduct on the basis that Samir and Sam represented to him that if he applied for a loan of approximately $933,000, they would contribute equally with Joe to the repayment of the interest on his bank loan ("the representation").
7. Samir, Sam and BI Constructions deny that the loan agreement and/or variation of the agreement exist. They deny making the representation and raise limitation defences. Joe denies that the claims are statute barred.
8. These proceedings involve factual disputes in circumstances where the agreement and variation are oral and each party's credibility is seriously in issue.

Common ground

1. As previously stated, there are no written documents evidencing a loan agreement or a subsequent variation of that loan agreement. However, there is a written joint venture agreement between Chikal and BI Constructions.
2. It is common ground that BI Constructions was incorporated on 7 November 2002. This is supported by the ASIC historical search attached to Joe's affidavit. (Aff, El Bayeh 17 February 2015, Ex YEB-1, 1; Aff, Bayeh 7 August 2015, [3]; Aff, Issa 7 August 2015, [2]). Joe ceased being a director of BI Constructions on 30 May 2012. (Aff, El Bayeh 17 February 2015, Ex YEB-1, 1-6).
3. It is further agreed that BI Constructions entered into a joint venture with Chikal in about December 2002. (Aff, El Bayeh 17 February 2015, [7]; Aff, Bayeh 7 August 2015, [6]; Aff, Issa, 7 August 2015, [5]). The relevant terms of the joint venture deed with Chikal are as follows (Aff, El Bayeh 17 February 2015, Ex YEB-1, 7-12): 1. Chikal and BI Constructions had acquired property known as 30 Raymond Street and 35 Stanley Road, Bankstown ("the initial properties"); 2. Joe Touma had acquired from Bankstown City Council a development approval for construction on the property ("the development project"); and 3. Chikal desired BI Constructions' involvement as a joint venture partner in the development project; 4. Chikal and BI Constructions agreed to contribute equally for both the purchase of the property, being the total sum of $4,240,000 and construction costs of the development project; 5. any further capital contribution that may be necessary shall be made equally by BI Constructions and Chikal (Clause 3); 6. only upon the sale of the units will BI Constructions and Chikal be entitled to retrieve 100% of its capital outlay (Clause 5); 7. the profit of the business is to be equally distributed between BI Constructions and Chikal (Clause 4); and 8. The parties agree that it is their intention to continue together in the business of developing real estate in NSW under separate joint venture arrangements for each subsequent development but not as partners as envisaged by the Partnership Act. Each subsequent development shall require the parties hereto to enter into a separate joint venture deed upon terms and conditions mutually agreed upon by the parties hereto and not otherwise. (Clause 19).
4. On 2 November 2002, the initial properties at 30 Raymond Street and 35 Stanley Road, Bankstown settled. Chikal paid the entire purchase price.
5. The parties have also agreed that their overall contributions to BI Constructions were: 1. Joe - $1,261,382; 2. Sam - $691,972; and 3. Samir - $600,000
6. These payments are consistent with the findings of the chartered accountants, Maynard Kearns, who undertook an audit in relation to the development project pursuant to the instructions of Cambridge Law (a firm acting for BI Constructions). (Aff, El Bayeh 14 March 2016, Annexure B, 5). On 15 October 2010, the audit report was adopted by the Board of BI Constructions by way of resolution. (Aff, El Bayeh 17 February 2015, Ex YEB-1, 111). As I have previously said, Joe has admitted that BI Constructions has made partial repayments on his contribution in the sum of $851,339.70. (Reply to Amended Defence, 22 August 2017, [1]).
7. The contract for the sale of land over the initial properties at Bankstown was dated 30 August 2002 and recorded a purchase price of $4,078,000 with a deposit of $212,000. On about 2 December 2002, settlement of the initial properties took place.
8. On about 6 December 2002, Chikal and BI Constructions entered (as purchasers) a contract for the sale of land for the purchase of two additional properties on the same block of land at 34 Raymond Street, Bankstown. The contract recorded a purchase price of $1,200,000 and deposit of $60,000. It is common ground that the additional properties adjoined the initial properties and became part of the land purchased for the project. This additional purchase allowed an increase of the development of the units to 71. (Aff, El Bayeh 17 February 2015, YEB-1, 20). On 15 February 2003, settlement took place on the additional properties. (Aff, El Bayeh 17 February 2015, YEB-1,18).
9. It is also common ground that in about May 2006, BI Constructions borrowed the sum of $230,000 from Chikal, from which Joe received $150,000 and Samir received $80,000. Joe executed the mortgage, loan and guarantee documents for that loan.
10. In about 2007, the construction phase of the project commenced.
11. In about March 2009, a further $150,000 was paid to Joe.
12. In about 2009, the project's construction phase reached practical completion.
13. In about 2009, Folio 100 DP XXXXX was cancelled and SP 8XXXX was established. After the practical completion of the project, several disputes arose between Joe, Samir and Sam regarding the financial affairs of BI Constructions. That resulted in later proceedings in this Court. These will be referred to later in this judgment.

Credibility of Joe, Samir and Sam

1. I carefully observed Joe, Samir, and Sam while they gave evidence and during cross examination. I have serious reservations as to the truthfulness of each one's evidence. It is convenient that I record my observations here.

Credibility of Joe

1. Joe was asked whether it was the case in the prior proceedings that the allegation against him was that he had forged loan and mortgage documents. Joe accepted that in those proceedings a finding was made against him that he forged loan and mortgage documents. He said: "Yes, but it was wrong". (T52.35-41).
2. In relation to the previous decision's finding of fraud, counsel for Joe referred to s 91(2) of the Evidence Act 1995 (NSW) that says that evidence under this Part, is not admissible to prove the existence of a fact may not be used to prove that fact even if it is relevant for another purpose."
3. However, as Joe has admitted that a finding was made in the Supreme Court regarding his forgery of loan and mortgage documents, this admission has a serious adverse impact upon his credibility in these proceedings.
4. During cross examination, Joe was asked about his ability to recall events 15 years after they occurred. The following exchanges took place (T26-30; T26.37-40); T46.25-31; T47.15-16; T48.43-44; T50.22-25; T51.37-40): "Q. Do you accept that your recollection of the words actually spoken in that conversation took place more than 15 years earlier than you made the affidavit could be faulty? A. WITNESS: I still remember this from this. A. INTERPRETER: I still remember … Q. If I ask the question again, do you accept that your recollection of the words actually spoken in that conversation that took place more than 15 years earlier could be faulty? A. INTERPRETER: Maybe. … Q. In the joint venture you were to provide 4.1 million. The amount that you've gone through, that everyone is going to contribute, costs 1.65 million and then where were the other funds to complete the joint venture - what were you planning there? By "you", I mean the three partners. A. WITNESS: I don't remember at that time what was happened but far I know, later on they ask me they need some more money and if I can get on my two houses. … Q. Do you remember when construction commenced? A. WITNESS: I don't remember, I don't remember. … Q. So you would accept that construction commenced some time after that? A. WITNESS: I don't remember what year exactly. … Q. Is it the case then that you have no real recollection of when the conversation took place other than it was sometime before construction commenced? A. INTERPRETER: Dates, I don't really remember dates. … Q. I think you were asked that you made this affidavit 15 years after the events occurred and would you accept that your recollection may have been faulty? A. WITNESS: Could be something, yeah. It could be something, yeah."
5. While the reliability of Joe's evidence may be affected by the passing of a significant passage of time (15 years), I do not consider this alone to be sufficient reason to undermine his credibility.
6. Joe says that he cannot read written English and repeatedly asserted that he never checked any document before signing and wholly relied upon his trust of Samir and Sam despite the significant sums of money involved in the development project.
7. In his written submissions, Joe's counsel portrayed Joe as a simple, unsophisticated man with a basic level of education in Arabic. However, I carefully observed Joe when he was giving evidence and during cross examination, I formed the view that he generally possessed business acumen, particularly when he spoke about his previous development project. Joe had bought land in Huntingwood, New South Wales and constructed a warehouse and offices with the help of Samir, who managed the construction. While I do believe that Joe had and continues to have some difficulty with sophisticated English, he well understands everyday spoken English. I do accept that he has difficulty with complicated written English.
8. Joe also gave evidence that he was a pensioner, a carer for his parents and that he did not earn an income but owned properties. He also gave evidence that he had informed Michael Saadie that this was the case in their meeting in early 2002/2003. However in cross examination, Michael Saadie gave evidence that Joe never said words to that effect at this meeting. (T273.35-38). In his NAB loan application dated 10 December 2002, Joe answered that he was self-employed and worked as a full time property development consultant at Bayeh Property Consultants. (Ex 8, 3). In his Westpac loan application dated 24 May 2006, Joe also described his business as a property development business and that he was self employed in property management. (Ex 8, 35).
9. Joe gave evidence that before signing any document, he had either Samir or Sam read and explain the documents in Arabic or simple English. (Aff, El Bayeh 17 February 2015, [17]). However, in relation to later meetings that occurred between himself, Samir, Sam, Michael Saadie and Kamil (an accountant), Joe gave evidence that he signed the documents at the Kamil, Samir and Sam's request without reading any of the documents. Nor did he have the nature of effect of the documents explained. (Aff, El Bayeh 14 March 2016, [48]). Michael Saadie also gave evidence that he had a practice in place in 2002 and 2003 to read and explain documents to customers before asking them to sign, and that his employees would have done so. (T274.34-36). I believe that Joe was not attempting to give truthful evidence when he said that the later documents were not explained or read to him.
10. Overall, during these proceedings Joe sought to portray himself as either an unsophisticated pensioner in a vulnerable position; or alternatively, an astute businessman depending on which persona best reflected the evidence he was giving. The combination of Joe's conduct and in particular his admission that he forged documents, in my opinion, creates a very unfavourable view of his credibility.

Credibility of Samir

1. In cross examination, Samir did not agree with Joe's version of events. He denied that any meeting had occurred with Joe in which either he (Samir) or Sam agreed to assist with repaying the interest on Joe's two loans.
2. I have reservations as to the truthfulness of Samir's evidence as to whether he or Sam knew that Joe was borrowing the money against two of his properties. Putting aside the significant sum of moneys involved ($1.261 million); there are inconsistencies in Samir's evidence. Samir gave evidence that neither he nor Sam knew that Joe had borrowed the money and that they believed "he had used his own money". (T113.20-50). Samir's evidence is that he was not aware of any mortgage taken out by Joe for the development project. (T114.14-17). However, Samir later admitted that there was a discussion that Joe could not afford the interest on his loan and that everyone (Joe, Samir and Sam) will borrow and the initial contribution would be borrowed (T134.41-42). Then he immediately retracted this version. (T135.12).
3. Sam also provided conflicting evidence to Samir's evidence when he (Sam) says that a conversation took place in 2002/2003 in which Joe stated that he could pay about $300,000, but that he could also borrow more against his unencumbered properties. (Aff, Issa 7 August 2015, [19]). Joe also provided NAB statements of his loan account which highlight the existence of two loans. (Aff, El Bayeh 17 February 2015, Ex YEB-1, 30). In my view, Joe and Sam's account is more logical and that raises serious doubt as to the truthfulness of Samir's version of events.
4. Samir's evidence over the sourcing of Joe's funds also reflects badly on his credibility. Samir says that on 25 February 2003, Joe paid $799,720 by bank cheque in respect of one of the initial properties (35 Stanley Street, Bankstown); on 26 February 2003, Joe drew $398,305 from his smaller loan, and on 27 February 2003, he drew $402,000 from his larger loan. These loan moneys were transferred into a bank account not associated with either Samir or BI Constructions. (Aff, Bayeh 7 June 2016, [27]). In cross examination, Samir agreed that he was attempting to raise doubt over the source of the monies which he had used to complete the purchase. (T107.4-12). This appeared to be based on the few days delay between the completion of the purchase additional properties on 25 February 2003 and the small and large loan accounts being debited on 26 and 27 February 2003. (T107.21-23). Samir agreed that he was suggesting that Joe's payment of $799,720 came from another source and not the loans, although he had "no idea" what the source was. (T107.49-50; T108.1-20). Samir deliberately raised doubt over Joe's sourcing of the funds when he had no apparent evidence to ground such an assertion. In my opinion, it suggests a willingness on Samir's behalf to give evidence which would harm Joe's case even in circumstances where he has no reason for believing it to be correct.
5. Samir also gave unsatisfactory evidence as to his calculations as to the amount owing to Joe. In cross examination, Samir agreed that Joe was not entitled to seek interest as this was not agreed upon. (T138.40-49). He was then shown a fax dated 16 March 2009 sent by him to Sam. This fax provided his draft calculations as to what was owed to Joe, Sam and himself. These calculations specifically provided for "interest over 6 years @ 7%". (Ex B, 4-5). While Samir agreed these were his calculations and they were mathematically correct in including the interest (T147.30-37; 148.10-17), he gave evidence that the basis of these calculations was incorrect. His gave evidence that he was unaware of the purpose of the calculations and denied that he had an understanding that interest was owed to Joe by Sam or himself. (T146.46-50; T147.1-2; T148-28-29; T149.21-27). Samir gave evidence that the purpose of these calculations was to check the liability of Chikal under the joint venture. (T149.26-46), but later conceded that the top table of entries on the calculations page had nothing to do with any interest on any liability to Chikal. (T150.15-28). It is my view that Samir did not give truthful evidence in relation to entries on the "interest calculation" document he prepared which he believed would undermine his case.
6. More importantly, Samir also denied that he attended a meeting in early 2002/2003 with Joe and Michael Saadie. However, both Joe and Michael Saadie's evidence is that Samir attended that meeting.
7. For these reasons, Samir's credibility is in serious issue. Overall his answers were often difficult to understand and evasive. I have reluctantly come to the conclusion that unless his evidence is corroborated by another witness or by written documents, or alternatively, his evidence reflects the most logical version of events, I do not accept his evidence.

Credibility of Sam

1. Sam's credibility is also in issue. Sam gave conflicting evidence as to the interest rate to be paid under the agreement. Sam deposed that there was an agreement that any contributions made by Joe, Samir or himself to Chikal on behalf of BI Constructions would accrue interest at a rate of 7% per annum. (Aff, Issa 7 August 2015, [18]). However in cross examination, Sam gave evidence that there was no agreement because they would frequently agree and then disagree. (T193.24-25). When asked to explain this inconsistent evidence, Sam stated that there was "no formalised agreement" as they would back out of such agreements the next day. (T194.21-23). This was a critical issue in this case and regrettably Sam's change in evidence causes difficulty in accepting him as being entirely truthful.
2. Sam also deposed that he did not recall being a witness to the signing of any loan documents and that he did not have any direct dealings with Joe in relation to his loans. (Aff, Issa 7 August 2015, [21]; Aff, Issa 21 September 2016, [13]). In cross examination, he gave evidence that he did not know where this loan money was coming from. (T167.15-20). However, Sam's evidence does not appear to be truthful as he had witnessed two loan agreements dated 14 February 2003 and 25 February 2003. (Ex 8, 50, 51, and 58). I will cover this in more detail later.
3. In cross examination, Sam was shown a Directors' Resolution of BI Constructions dated 24 July 2009 which set out the formulas for calculating what would be paid to the shareholders in the event that the development project either made a profit or a loss. Sam became argumentative when he was asked about the distinction between total directors' contribution and total individual contribution, and whether he was trying to give a different meaning to the formula (T203.5-17): "Q. I would suggest to you that this is a very simple formula and you're now seeking to give it a completely different meaning to what you well know that it meant, that's the case, isn't it? A. No, no, it's not the case at all. It's quite clear what - why, why there's a distinction between total directors' contribution, total individual contribution. I mean, why would we have total directors' contribution? Why would we say that? This is the, this is the issue, you're not understanding the issue or you're, you're ignoring the issue, that when we put in - I put in 690 or 700 plus my losses, that's got to be factored in. Samir put in 600 plus his contribution, that's got to be factored in. Q. Now, we're talking about a fraction at the start so we've got a fraction and then we've got to multiply it by a figure that we don't know yet, the net profit. Now, you say the numerator or the top figure of the fraction, that's set, that's the total individual contribution. A. Are you, are you purposefully ignoring total directors' contribution? HER HONOUR Q. You shouldn't be getting into an argument, it's a nebulous term, as far as I know, I mean, I can only read it, I don't know what it means so that's why we're asking you and I guess that's why you're being cross-examined."
4. In regards to this formula, Sam gave evidence that the formula and the resolution were both "tentative" as the "director's individual contributions" and the "total directors contribution" were yet to be calculated. (T206.35-41). Sam then became evasive when he was asked about the calculation of the total individual contributions and gave evidence that this calculation was intended to include both monetary and non monetary contributions. His evidence was as follows (T206.45-50; T207.1-8): "Q. Whatever the total directors' contribution was, under this formula the total individual contribution of Yousseff was $1.25 million, which was significantly larger than either of the two of you, right? A. In, in terms of monetary contribution, I would agree, yes. Q. That's the top line, the numerator on the fraction. A. We can argue about this all day, this is the way you want to see it, obviously, this is not the way it was intended, this is the way - wasn't the way that I - how I, I viewed it at the time. Q. Whatever those other variables, this-- A. My contribution, including all my losses, was simply a factor and always have been a factor and Samir's contributions, including his contributions to the project, were always going to be a factor."
5. Sam gave evidence that his objections to these calculations were "two-fold". Firstly, the calculations were too favourable to Samir. Secondly, Sam's alleged loss of $90,000 and the interest on that money "was not factored in" and this was "totally unfair" (T229.40-43; T230.35-38; T237.29-33; T238.1-5). While Sam did raise his objection that the calculations were too favourable to Samir in 2009, he did not raise any objection over this alleged loss of $90,000 not being included at that time. Nor did Sam raise this $90,000 loss in the affidavit he prepared in 2010 for different proceedings. (T237.35-42). However, the $90,000 loss arose from a different project at Pendle Hill. This money was the deposit of the property and associated costs that Sam elected to give up in order to pursue the opportunity to make a profit in the development project in the current proceedings. His failure to object to the calculations at the time appears to be based upon Sam's belief that he would earn a greater overall profit in the future. (T191.14-48). It is therefore difficult to see why Sam decided to raise this $90,000 loss in the current proceedings as being for any reason other than that he believed it would support his case.
6. I do not consider that Sam was a truthful witness. I have serious reservations about accepting his evidence unless his evidence is corroborated by another witness or by written documents, or alternatively, his evidence reflects the most logical version of events.

Conclusion on Joe, Samir and Sam's credibility

1. In summary, I have great difficulty relying upon any of the parties' version of events unless it is corroborated by documents or, where oral conversations are concerned, it is corroborated by another witness or is the explanation that reflects the most logical version of events. I will deal with the factual disputes in chronological order.

The initial conversation - late 2001 or early 2002

1. There is some dispute over the initial conversation that took place in relation to the development project. Joe and Sam agree that in about late 2001 or early 2002, Joe, Samir and Sam had a meeting at Sam's office over coffee. Joe says that Samir discussed with him and Sam the prospects of a new development project in Bankstown valued at around $5,000,000 to $5,500,000. (Aff, El Bayeh, 14 March 2016, [24]-[25]).
2. According to Joe, the project had come to Samir's attention from a work colleague, George Dannaoui, who was looking for a partner to help finance the purchase and redevelopment of a block of land at Raymond Street, Bankstown as it was too much for him to do on his own. Samir suggested to Joe and Sam that they all contribute to the initial properties and the parties agreed to enter into the project together. (Aff, El Bayeh, 14 March 2016, [25] and [27]).
3. Sam recalls this meeting slightly differently. He recalls that in and around late 2001 or early 2002, Joe introduced him to Samir in his (Sam's) office for the purpose of engaging in the development project. Sam says that a conversation took place where Joe suggested that the parties buy a large development property and make a huge amount of money. It was suggested that they form a company and that they all become directors with an equal shareholding. (Aff, Issa 21 September 2016, [4]).
4. Samir disagrees with Joe and Sam's version of events. Samir says that neither the meeting at Sam's office nor Joe's version of the conversation occurred. (Aff, Bayeh 7 June 2016, [5] and [6]). Samir says that he did not work with George Dannaoui but first met him on a construction site on or around September 2002 while performing concrete work for Chikal. (Aff, Bayeh 7 June 2016, [6]). While Samir says he could not recall who suggested the idea of establishing BI Constructions, it was evidently agreed between Joe, Sam and himself that it should be formed in October 2002. (Aff, Bayeh 7 June 2016, [7]).

Findings as to the meeting in late 2001 or early 2002

1. Joe and Sam both agree and I accept that a meeting between Joe, Samir and Sam took place at Sam's office in Parramatta in about late 2001 or early 2002. I also accept that at this meeting, an initial conversation was had about the development project in relation to the initial properties and the parties agreed to form a company for the purposes of entering a joint venture with Chikal. Contrary to what Samir says, it is my view that the impetus for this conversation was that George Dannaoui was looking to enter into a partnership in order to help him finance the purchase the initial properties at Raymond Street and Stanley Road, Bankstown. I also find that at this stage, as Joe says, the parties anticipated that they would make a huge amount of money. This was most accurately described by Sam in cross examination when he stated (T239.35-38): "At - like I said, at the incipient period when we first started this project it wasn't about interest, it was about how much money can we make. We can put in anything we can - let's just make money, money, money, all we saw was dollar signs in our eyes."

Meeting after 7 November 2002 before settlement of initial and additional properties

1. Joe gave evidence of an additional meeting where the parties discussed the manner in which BI Constructions would be able to raise the moneys required to meet its joint venture obligations to Chikal. They also discussed the funds they had available to contribute to the project. Joe says that Samir said that he could contribute about $500,000 and that Sam said he could contribute about $600,000. As Joe had $450,000 immediately available, he agreed to pay the 5% deposit on the purchase of the initial properties. This amount was around $106,000. He paid the deposit by cheque directly to Chikal. (Aff, El Bayeh 14 March 2016, [30]).
2. Sam's evidence is that the discussion of funds occurred at an additional meeting at his office in Parramatta following the incorporation of BI Constructions on 7 November 2002.
3. Sam's version of this meeting is that he said that he could contribute $700,000 ($100,000 more than Joe says) and that Samir could only contribute $600,000, the same amount as Joe says, but that Joe said he was happy to invest any amount. Sam also says that Joe did not want to limit the business to $600,000-$700,000 each, that he was happy to invest more, and that he only wanted back the principal he invested and one third of the profits. (Aff, Issa 21 September 2016, [7]).

Settlement of properties

1. By early December 2002, settlement of the initial properties had taken place. (Aff, El Bayeh 17 February 2015, Ex YEB-1, 15-17).
2. Joe gave evidence of an additional meeting between the parties that occurred several months before construction began. During this meeting, Samir alerted him and Sam to the property next door at XX Stanley Street, Bankstown had DA approval for 10 units. Samir suggested that they buy the additional property and develop it together with the initial property to build a total of 71 units. (Aff, El Bayeh 14 March 2016, [36]; Ex YEB-1, 20).
3. In December 2002, the parties agreed to go ahead and purchase the additional properties. The property transfer was signed and completed in around February 2003. (Aff, El Bayeh 14 March 2016, [38]; Ex YEB-1, 18; T46.35-50).
4. The initial properties had a purchase price of $4,078,000 and the additional properties had a purchase price of $1,200,000. The total purchase price being $5,278,000. BI Constructions was obliged under the joint venture deed with Chikal to pay 50% of this amount, being $2,639,000. Chikal had paid the whole of the purchase price of the initial properties. The evidence did not disclose who paid the settlement moneys in relation to the additional properties.

Joe's payments in relation to the additional properties

1. Between the end of 2002 and early 2003, Joe says that he made payments to BI Constructions of approximately $330,000 by cheque as a capital contribution to assist the company in meeting its obligations. Joe also says that Samir filled out the details on the cheque and then he (Joe) signed it. Joe says he was only aware he was paying $330,000 initially to assist BI Constructions with the purchase of the initial properties. (Aff, 14/3/2016 [13], [33] and [34]).
2. Samir's version is that that Joe paid a part deposit payment of $30,000 on 6 December 2002 towards the additional property four days after the settlement of the initial property on 2 December 2002. It was unchallenged that Joe paid $799,720 by cheque in or around 25 February 2003 to complete the purchase of the additional properties. (T106.39-44; Aff, Bayeh 7 June 2016, [15] and [27]). Neither Samir nor Sam made any contributions towards the additional properties.
3. I accept Joe's and Samir's evidence that Joe paid the deposit of $30,000 and $799,720 by cheque to complete the purchase of the additional properties, a total of $829,720.
4. There is a dispute between Joe and Samir as to whether the money went directly to Chikal or was initially paid to BI Constructions and then paid to Chikal. Samir says that Joe contributed these payments directly to Chikal and not BI Constructions. Samir says that Chikal had paid for the whole of the purchase price of the initial properties and that the following repayments were made by Joe on behalf of BI Constructions to the sum of $433,632. (Aff, Bayeh 7 August 2015, [17]). Samir says he did not sign the cheques but he knew that the payments were made directly to Chikal. I do not accept his evidence because if he did not sign the cheques, it is most likely he would not have known to whom the cheques were made out to. I accept and prefer Joe's evidence that Samir wrote Joe's cheques and therefore would have been aware to whom the cheques were addressed. I find that these payments were made by Joe to BI Constructions and then BI Constructions paid those sums to Chikal. Joe's funds reduced the amount owed to Chikal in respect of the initial property in compliance with the joint venture deed. (Aff, Bayeh 7 June 2016, [11]).

Conversation in late January or early February 2003 - formation of oral agreement

1. Joe pleads that in late January or early February 2003, an oral agreement was formed between the parties. The alleged agreement was to the effect that Samir and Sam would assist Joe in making the repayments on two additional loans totaling approximately $933,000. (ASC, [19]). There is no written evidence of such an agreement and therefore Joe's assertion is largely based upon his own evidence. Once again, Joe, Samir and Sam do not agree.

Joe's version

1. In late January or early February 2003, Joe says he had a meeting at Sam's office with both Samir and Sam in attendance. The purpose of the meeting was to discuss how BI Constructions was going to raise the balance of the moneys required to be paid by it pursuant to the joint venture agreement. All the parties were aware that Bl Constructions was short of the amount that it was required to contribute to the joint venture. As previously stated, the precise amount of the contribution that was required on the part of Bl Constructions was either $2,550,000 (FASC, [13]) or $2,780,000 plus GST.
2. Joe alleges that in or about early 2003, he entered into an agreement with BI Constructions, Samir and Sam pursuant to which he agreed to borrow the sum of $933,337.50 through two loans. This money was then on lent to BI Constructions to enable BI Constructions to meet its obligations. (FASC, [19]).
3. Joe submitted that it was an express term of the agreement that Joe, Samir and Sam would, until the project was completed, contribute equally to the interest repayments payable under the two loans. (FASC, [21]). It was also submitted that it was an implied term of the agreement that, firstly, BI Constructions would indemnify Joe and keep him "harmless" in respect of the principal, interest and other expenses incurred by him under the loans, and Samir and Sam would keep them "harmless" in respect of contributions made by them towards discharging Joe's liability under the loans; secondly, BI Constructions would meet its liabilities when it was in receipt of funds following the completion of the project by repaying the loans in full and reimbursing Joe, Samir and Sam the full amount of their contributions. (FASC, [21] and [21A]).
4. Joe submitted that pursuant to this oral agreement, between February 2003 and April 2003, he applied to NAB and was granted two loan facilities secured over his two unencumbered properties. (FASC, [20]). A total of $997,337.50 was taken out and on lent to BI Constructions to enable it to meet its obligations to Chikal under the joint venture deed. (FASC, [22]). The evidence establishes that Joe did apply for the loans and on lent $997,337.50 to BI Constructions. (Aff, El-Bayeh 17 Feb 2015, [18]-[19]).
5. According to Joe, the conversation occurred as follows (Aff, El Bayeh 17 February 2015, [17]): "Joe: It does not look like we can make it. Sam: I don't have any more money, I have borrowed against my properties, I cannot borrow any more. Samir: I am out of money too. What about you Joe? Joe: I don't have any more cash, if we need more money and don't have it, we can't do this. Sam: Well, why don't you borrow against your properties and we can make up BI's share. This is a very good investment. It will only be for one or two years and then we will each make a lot of money. If you can raise the money Issam and I will help you make the repayments. Joe: How much do I need to borrow? Sam: We need $932,000.00. Why don't you borrow it against the properties and we will pay back the loan by each of us contributing one third towards your monthly repayments. Joe: No I can't do that, I am not working anymore and couldn't afford to put mortgages on them as I couldn't afford the repayments. How much is that every month anyway? Sam: It would be about $6,000.00/$7,000.00 per month in [for] just over two years Joe. Joe: No way, I can't afford that. Samir: That's alright, we can share that amongst the three of us, each of us will pay one third of the repayments every month. Sam: Yes, we could do that. That way you can afford it as you would only have to pay about $2,000.00 to $2,500.00 per month. Joe: I can't afford anything. I don't know. I have worked my whole life to pay off those properties, I don't want to lose them. Samir: You won't lose them, we will help you pay the repayments and you will be fine. What do you say? Joe: Ok, only because you are my cousin. I trust you Samir and you are a solicitor Sam, I will do it. I should be able to borrow from my friends but as long as you guarantee me it will only be for two years and you will help me with the repayments on an equal basis."
6. Joe's version of the conversation does not specify whether the "repayments" referred to were repayments of the principle and interest or repayments of the interest alone. In cross examination, Joe gave evidence that the $6,000 or $7,000 repayments per month referenced in his version of the above conversation were interest payments on both the larger and smaller loans. (T36.37-50; T37.1-6).
7. If Joe's evidence is accepted, Samir and Sam agreed that each would contribute one third of the interest repayments.
8. Joe also gave evidence that at that time he trusted Samir and Sam wholeheartedly and that he trusted they would do everything they said they would do. Joe says that because he did not read English, he signed every document they asked him to sign based upon that trust. However, before signing any document, he had either Samir or Sam read and explain to him the effect of the document in Arabic or simple English. (Aff, El Bayeh 17 February 2015, [17]). As I have previously stated in regards to Joe's credibility, Joe has given conflicting evidence over whether he always had documents explained to him.
9. Samir and Sam say that this conversation never occurred. Both Samir and Sam say that in early 2003, Joe portrayed himself as having a lot of money. (T133; T162).

Samir's version

1. Samir's evidence is that "it was never resolved between the directors and shareholders of BI Constructions that interest be payable by the shareholders personally". (Aff, Bayeh 7 June 2016, [19]).
2. Samir says that Joe knew what each director had contributed to the project. Each shareholder contributed what he was able to contribute financially. Samir says that Joe, Sam and himself had many conversations and that Joe was willing to contribute much more to the project because he could afford it and was in a much better financial position than him (Samir) and Sam. Samir says that he was also able to contribute his expertise in the construction industry as an engineer and project supervisor. (Aff, Bayeh 7 August 2015, [21]).
3. So far as this alleged agreement is concerned, Samir gave the following evidence (T118.21-50; T119.1-8): "Q. There was no income? I'd suggest to you that you didn't make the payments not because you hadn't agreed to but because you couldn't afford to? A. Which payment, sorry? Q. The payments towards Yousseff's-- A. Never been requested. Q. I'd suggest that after a couple of months of repeated requests and complaints you've had a conversation with Yousseff and with Mr Issa [Sam] about the interest payments that Yousseff was making? A. Never discussed. Q. You dispute that? I'd suggest that he said to both of you, "You guys have been telling me each month that I should wait for the next month to receive your share of interest on the loans. I don't know what is going on. I've been borrowing money from people at really high interest so that I can meet these repayments for the loan. What is happening?" A. Not true. Q. Then you said, "Look, Yousseff, I don't have the money. Sam is in the same position. You are going to have to wait for now until we have money to pay you. We can't pay you each and every month this amount. We don't have a cent to give you now, you'll have to wait." Do you dispute that? A. Not true, yeah. Q. I'd suggest that Sam then or Mr Issa said, "I agree with Samir. Yousseff, you need to wait until the end of the construction. We will make sure that you are paid everything that you have paid on our behalf for the interest we owe you and the interest on top of that." A. Not true. Q. I suggest you said, "You will get not sugar but honey back when we are finished." A. Not true. Q. That's an expression that's common-- A. Never heard it before-- "
4. This line of questioning focuses on the payment of interest only, not repayments of principal and interest.
5. On the issue of Samir and Sam's knowledge of Joe servicing a loan, Samir gave the following evidence (T113.41-50; T114.1-17): "Q. You're not suggesting that he told you that he had that, that he had $1.261 million? A. He said he's got a lot of money. Q. You say that he didn't tell you that he was having to borrow it? A. We never heard. Q. Never? Yousseff never mentioned to you that he had to borrow money in relation to this project? A. He said, as I repeat, he said he's got a lot of money. Q. He'd never complained to you afterwards about what it was costing him to service his debt that he had borrowed to contribute to the venture? A. At what time? Q. Afterwards? A. When? Q. I'm asking you, ever? Are you saying that he never complained about the cost? A. We had discussion. We had discussion later on about, about he's, he's saying that he's - he cannot afford interest on his loan. Q. His loan. I would suggest that you were well aware even before he made the payments in relation to the purchase of the second [additional] property that Yousseff had to borrow that money? A. We are not, we are not aware. We thought he used his own money."
6. Samir's evidence that he was never made aware that Joe was borrowing the money is more than spurious as Samir accompanied Joe to obtain the loans by attending a meeting with Michael Saadie in 2002 or 2003 for this purpose. Joe's evidence here is corroborated by Michael Saadie's. (Aff, Saadie 22 August 2017, [6]-[8]). This will be discussed more fully later in this judgment.

Sam's version

1. Sam denies that an agreement was reached as to how interest was to be paid. Like Samir, he recalls that it was up to each of the shareholders individually to arrange their finances in order to contribute financially to BI Constructions. (Aff, Issa 21 September 2016, [9]).
2. Sam says that there were many meetings between Joe, Samir and himself but the conversation as set out by Joe did not take place. During cross examination, Sam was taken line by line, sentence by sentence through Joe's version of the conversation that occurred in late 2002 or early 2003. Sam denied each and every sentence of Joe's version of the conversation and reiterated that it did not actually occur.
3. In cross examination, Sam gave evidence that he agreed Joe made an initial contribution of about $330,000. He agreed that the money contributed by Joe, Samir and himself were a shareholder's loan to BI Constructions that was to be repaid by BI Constructions when it was in funds following the completion of the development project. (T155.4-23; T146.39-45). These loans were to accrue interest at a rate of 7%. (T157.1-5). He denied the assertion that he or Samir had persuaded Joe to contribute substantial sums of money to ensure the development project went ahead. (T157.50; T158.1-12). However, he accepted the possibility that the lack of money for funding the development project would have been discussed as a theme at least at one of the early meetings. (T158.30-50). Sam also accepted the result of that meeting or meetings was Joe agreeing to borrow some more money in excess of $900,000. (T159.50; T160.1-2).
4. In relation to Joe agreeing to contribute more funds to the project, Sam gave the following evidence (T160.4-34): "Q. Now, I'd just suggest that at one of these meetings - I think you've agreed somebody would have said, "Look, it doesn't look like we can make it," you would have all talked about - this is right, isn't it, you would have said, "Well, I don't have any more money, I can't put any more money up.' A. That's correct, yes. Q. Samir would have said something similar, that's right, isn't it? A. Yes. Q. Yousseff, he said, "Look, I don't have any more cash." He had told you how much cash he'd had and he'd made that available, he didn't have any more cash, did he? A. Yes, that's correct, yes, yes. Q. You suggested to him, didn't you, that he - you knew he had some properties, didn't you? A. No, I didn't know he had properties. Q. Did you learn this at one of these meetings? A. Yes. Q. After you learned that Yousseff had some properties, did you suggest - well, I put to you that you did suggest to him that he borrow some money against his properties and get some more money for BI Constructions? A. No. Q. Do you say that perhaps it wasn't you, it was Samir who said that? A. No. Q. Neither of you said it? A. No."
5. Here, Sam's evidence corroborates Joe's account of the conversation in which he (Joe) informs Samir and Sam that he does not have any more funds. It also suggests that Samir and Sam's claim that they were unaware Joe had properties is incorrect. It is my view that Joe's account of the conversation is a more logical one. If Joe, Samir and Sam were discussing the lack of further funds that each was obliged to contribute to BI Constructions, it is most likely that Joe would have said that he had two unencumbered properties. It seems highly unlikely that if Samir and Sam were both aware that Joe did not have further funds to contribute, then his later agreement to contribute more would have raised a question over where he was sourcing this money. At the very least, it is more than likely that Joe would have raised his two unencumbered properties at some stage and that the three agreed that Joe would contribute more to ensure the development project went ahead. This is supported by Sam's later evidence that Joe had stated he could "get lots of money". (T162.30-32). Sam also admitted later in evidence that Joe had said he was borrowing money in early 2003 and that the money was going to be loan funds. (T166.48-50; T167.1-20).
6. As I have previously stated in this judgment, Sam provided inconsistent evidence that the contributions made by him, Joe and Samir to Chikal and on behalf of BI Constructions were a loan to BI Constructions by them which would accrue interest at a rate of 7% per annum and that interest was always payable by BI Constructions and not by any shareholder personally. According to Sam, that interest rate was determined during a conversation between Joe, Samir and himself in around 2003, when they had a conversation to the following effect (Aff, Issa 7 August 2015, [18]): "Sam: Will we be paid interest for the money we contribute to BIC? Samir: Yes, we should. Joe: Yes. Sam: It should be at an agreed rate of 7% per annum."
7. However, in cross examination, Sam was asked what he meant by his statement: "that was agreed and the next day they disagree and agree again and disagree and counter-agree." (T193.24-25). Sam answered (T194.21-23): "No I'm - no, I'm saying then flowing from that there was no formalised agreement on that."
8. However, he conceded that his evidence went further than no formalised agreement in the answer to the next question (T194.31-33). "Q. It wasn't just it wasn't formalised; you've suggested that those who had come to an agreement then backed out of that agreement the next day? A. Correct, correct, correct."
9. Counsel for Joe submitted that Sam did not say anything to this effect in either of his affidavits, nor did he bring to this Court's attention the change in his evidence, other than through his responses in cross examination. According to Joe, this demonstrates, at the very least, that Sam has not taken care to ensure that his evidence before the Court was truthful in all respects.
10. In further cross examination, the following exchange took place (T161.19-34; T162.39-41; T163.1-8): "Q. I suggest that Yousseff said: "No, I can't do that, I'm not working anymore and couldn't afford to put mortgages on them as I couldn't afford the repayments. How much is that every month anyway?" A. I don't recall that. Q. When you say you don't recall that, is it possible that this was said? A. No, I don't recall that ever having been said. Q. When you say you don't recall, it was a long time ago, is it possible-- A. Yes. Q. Yes, it was a long time ago, yes. A. It was a long time ago, yes. … Q. And Yousseff said, "I can't afford anything. I don't know. I have worked my whole life to pay off those properties. I don't want to lose them." A. I don't recall that conversation. … Q. Samir said, after Yousseff said that he didn't want to lose his properties, I suggest that Samir said, "You won't lose them. We will help you to pay the repayments and you will be fine. What do you say?" A. The only reservations was me. I was the one that had the reservations at that time. Q. You deny that was said? A. Absolutely. Absolutely."
11. Sam gave inconsistent evidence as to whether Joe raised his concern about meeting the loan repayments and losing his properties. His evidence is that he did not recall ever having that conversation with Joe and Samir about either meeting the repayments or Joe losing his properties. Sam later denied "absolutely" that Samir guaranteed to Joe that he would not lose his properties. It is difficult to accept why Sam was so confident in Samir never having made that guarantee when he could not remember whether the topic itself was ever raised. Hence, I do not accept Sam's evidence on these issues.
12. Sam's evidence was that Joe had never raised the issue of loan repayments. Sam deposed that Joe was enthusiastic and not nervous when he borrowed close to a million dollars under the two loans. (T162.17-26; T162.42-49). I find this difficult to believe. While the parties had initially anticipated that they would make a huge amount of money, Joe had contributed the greater amount of money to BI Constructions. It does not make sense that a man of Joe's experience would enthusiastically invest in a development project and expose himself to such enormous financial risk, particularly in circumstances where he has not raised with his co-investors how this money would be attained, how any loan would be serviced; nor the existence of properties against which such loans would be secured.

Findings

1. Notwithstanding my serious reservations about Joe's credibility, it is my view that in late January to early February 2003, some of Joe's version of the conversation did take place. I accept that Joe, Samir and Sam did discuss the need for further cash to ensure the development project went ahead and that Joe agreed he would take out loans to raise this cash. Between February and April 2003, Joe did take out two loans with NAB secured by his two unencumbered properties.
2. However, I do not accept that Sam said "if you can raise the money [Sam] and I will help you make the repayments". As neither Samir nor Sam had any further funds to contribute, it is highly unlikely that they would each be in a position to offer to repay a third of the interest. Samir and Sam also denied that Joe ever made this statement. In my view, the highest Joe's version is corroborated by other evidence or logic is that he made Samir and Sam aware that he was borrowing the loans against two of his properties.

Meeting with Michael Saadie (the broker) in 2002/2003

1. Joe, Samir and Sam disagree as to what occurred at the alleged meeting with Michael Saadie in 2002/2003. Samir and Sam prepared their affidavits and gave evidence before an affidavit was obtained from Michael Saadie dated 22 August 2017. Michael Saadie gave evidence via videolink (with the assistance of mobile telephone) from Dubai. Michael Saadie previously owned CTC Group Pty Limited t/as CTC Finance ("CTC"). CTC was a mortgage brokerage business located in Parramatta.
2. As I have previously outlined, Sam was a witness to two loan agreements, being the Facility Agreement Details dated 14 February 2003 and the Mortgage dated 25 February 2003. While the parties are not clear on the exact date of the meeting with Michael Saadie, a $4,000 fee payable to CTC was included within the Facility Agreement Details. (Ex 8, 56). It follows that the alleged meeting with Michael Saadie must have occurred prior to 14 February 2003.

Joe's version

1. Joe gave evidence that he first met Michael Saadie in 2000. (T285).
2. Joe's evidence is that he had a meeting with Samir and Sam where Sam offered to take him to see a broker, Michael Saadie. A conversation allegedly occurred to the following effect (Aff, El Bayeh 14 March 2016, [39]): "Samir: It will not take more than 2 years to complete the project. Sam and I will pay the interest on the loan equally with you to cover the loan. Joe: I can probably do that if you are going to pay with me. Sam: Okay, great. I know a guy called Michael Saadie, who is a broker at Parramatta. I will take you to see him, Yousseff. Samir: Yes, we will go there together."
3. According to Joe in 2002/2003, Sam and Samir then took him to see Michael Saadie. At that meeting, the following conversation took place (Aff, El Bayeh 14 March 2016, [55]): "Samir: We are going to do a big construction project in Bankstown. We are going to get approval for 72 or 73 units. But they need money to get the project started. Sam: We need to get a loan on Joe's properties so that we can get started. Michael: We need to see if he has any income or not. Joe: I don't have any income. I am a pensioner. I look after my mum and dad as their carer. I have property but I don't have any income. Sam: Well. We need to find someone to give us a paper to say that they are leasing the land from Joe so that we can get this loan through. Sam: My friend Kamil is an accountant. I will call him and ask him. Michael: If you are asking for close to $1 million, then you need to be able to show some income. If you can get me some papers to show that there is income then I can help you out and we can try to get a loan."
4. Joe says that he then met with Kamil, the accountant, whose surname he does not recall. They first met shortly after Joe met with Michael Saadie for the first time and then met a number of times after that initial meeting. Joe recalls that on one occasion he, Samir, Sam, and Michael met at the NAB on George Street in Parramatta. They had a meeting with the bank manager, whose name Joe does not recall, in relation to the loans from NAB. Joe says that he, Samir and Sam attended all the meetings with Kamil. Kamil helped organise the paperwork that was needed for the loan application. During these meetings, Joe signed documents at Kamil, Samir and Sam' request. Joe says that he did not read any of those documents, nor were their nature and effect explained to him. Nor did he retain them. As I have stated earlier in this judgment, this conflicts with Joe's earlier evidence that he (Joe) had Samir and Sam explain documents to him in Arabic or simple English before he signed them.

Samir's version

1. Samir denies that the meeting ever took place and says that he never took Joe to see any mortgage broker. (Aff, Bayeh 7 August 2015, [22]).
2. In cross examination, Samir gave the following evidence (T164.40-50; T165.1-12): "Q. I suggest that you and Samir went in with Yousseff to see Michael Saadie. A. No. Q. On at least one occasion you went in with-- A. No. Q. --you went with him? A. I never went with him at all. Q. Didn't you sit down with Michael Saadie and Yousseff and talk about the loan? A. No. Q. In his office? A. No. Q. Did you sit down with Michael Saadie and Yousseff and Samir and talk about how the loan was going to be serviced? A. No. Q. Did you sit down and talk about how the three of you were going to pay the interest, not just Yousseff? A. No."
3. Samir says that he had borrowed money to make a contribution to BI Constructions, paid the interest on that money himself and it was no one else's responsibility but his own. (Aff, Bayeh 7 August 2015, [23]). He denies that there were ever conversations between himself and Joe whereby Joe asked him to pay interest. He says: "I categorically deny that I ever agreed to repay any interest accrued by Yousseff to service his loans to BIC."
4. Samir's evidence is that he did not sit down with Joe, Sam and Michael Saadie to discuss how the three of them would pay the interest or service the loan. (T165).

Michael Saadie's version

1. In about 2002/2003, Michael Saadie recalled having a meeting with Joe and Samir in the interview room at CTC. Michael Saadie is perhaps the only somewhat independent witness that gave evidence in these proceedings.
2. Michael Saadie gave evidence that he met Joe for the first time at his office. He was walking past his office and saw Joe sitting there. He shook Joe's hand and introduced himself. (T268.18-32).
3. Michael Saadie's evidence is that Sam was not present at the meeting. (T271.30-36). He recalled that during this meeting Joe said that they needed to get a loan to invest in the development project with Samir and Sam.
4. Michael Saadie deposed (Aff, Saadie 22 August 2017, [6] and [8]): "I recall a meeting in about 2002/2003 at the CTC office at Parramatta. This meeting took place in the Interview Room. At that meeting were present:- (i) Myself; (ii) Yousseff El Bayeh (Joe); and (iii) Samir Bayeh (Samir). … I recall that during this meeting there was a discussion as follows:- Youssef said: "We need to get a loan to invest in the Bankstown project that Samir, Sam, and me are investing in. I am going to apply for the loan on my properties." I said: "Youssef, how are you going to service a loan?" Samir said: "He won't have to worry about that because me and Sam are going to pay the interest on this loan with him. We are going to share the interest payments between three of us." Youssef said: "I am going do it because they going to pay the interest with me.""
5. In cross examination, Michael Saadie stated that he wished to correct his affidavit and change the above wording to the following (T262.41-46; T263.42-46): "Youssef said: "I want to get a loan on my property in the name of my daughter." I said: "How's she going to service the loan? Samir said: We're going to help him."
6. Michael Saadie says that he did not personally fill out the loan application but left the interview room and asked one of his employees, Naaman Naaman ("Naaman"), to "please take care of Joe and get this application done." (Aff, Saadie 22 August 2017, [9]).
7. Later that day, Michael Saadie, in the absence of Samir, had a conversation with Joe at CTC's office as follows (Aff, Saadie 22 August 2017, [10]): "Mr Saadie: Joe, why are you doing this? You are getting money and investing it with Sam and Samir. What if something goes wrong and you lose all this money? Joe: I don't think that they will get me in trouble. I trust Samir because he is my cousin and Sam is a good person as well."
8. Michael Saadie recalled a further meeting in 2002/2003, a couple of weeks after the first meeting when he saw Sam in the reception area of CTC's office. Michael Saadie says that a conversation took place to the following effect (Aff, Saadie 22 August 2017, [11]): "Mr Saadie: Hi, Sam. How are you? Sam: I am good. How are you? Mr Saadie: Very good."
9. Shortly after that conversation, Michael Saadie saw Sam walk into the interview room with one of his workers. Michael Saadie later observed Joe walk into the office and enter the same interview room. Michael Saadie did not take part in this meeting and does not know what was discussed. (Aff, Saadie 22 August 2017, [12]).
10. In cross examination, Michael Saadie was asked if he would arrange loans totalling $930,000 for a hypothetical client if that client had told him that he was a pensioner who owned property, had no income and was acting as his parents' carer. He responded "of course not". (T272.34-38). He confirmed that Joe never said words to that effect during the meeting at his (Michael Saadie's) office in 2002/2003. (T273.35-38). This is at odds with Joe's evidence as Joe said that he had told Michael Saadie he was a pensioner. (Aff, El Bayeh 14 March 2016, [46]).
11. In cross examination, Michael Saadie gave evidence that he never said to Joe that he would need to produce documents evidencing an income to get a loan for close to a $1 million. (T273.40-49). Michael Saadie said that he did not ask Joe to sign certain documents as he was not the loan writer (T274.12-19). This confirms what he said in his affidavit that he did not personally fill out the application form but one of his workers, Naaman, did. (Aff, Saadie 22 August 2017, [9]). Michael Saadie also gave evidence that it was his practice in 2002 and 2003 to read and explain documents to customers before asking them to sign, and that his employees would have done so. (T274.34-36). This is irreconcilable with Joe's evidence that he had not had the nature and effect of these documents explained to him. (Aff, El Bayeh 14 March 2016, [47]).
12. Michael Saadie also gave evidence that contrary to Joe's evidence, he (Michael Saadie) did not attend the NAB in Parramatta with Joe, Samir and Sam. (T274.38-41).

Sam's version

1. Sam denied that he ever took Joe to a mortgage broker and that it was Joe's sole responsibility to obtain funds to contribute to the project. His evidence is that he had no direct dealings with Joe in relation to his loans. (Aff, Issa 7 August 2015, [21]). Sam only recalls seeing Michael Saadie for his own loans, but never for Joe or Samir. (Aff, Issa 21 September 2016, [12]). Nor does he recall having a meeting with the accountant, Kamil, regarding any of their loans. He says that Kamil's involvement was limited to the incorporation of BI Constructions.
2. Sam deposed that he did not recall being a witness to the signing of any loan documents. (Aff, Issa 21 September 2016, [13]). Nor did he have any direct dealings with Joe in relation to his loans. (Aff, Issa 7 August 2015, [21]). In cross examination, Sam said that while he knew that Joe was borrowing the money and that he had two properties, he did not know where this loan money was coming from. (T167.15-20). This evidence is difficult to reconcile as on 14 February 2003 and 25 February 2003, he witnessed the loan documents by signing his name and printing under his signature the name "Sam Issa". (Ex 8, 50, 51, and 58).

Findings

1. Notwithstanding Michael Saadie's admission that he may be mistaken in his recollection as to what occurred eight years earlier (T276.21-23; T277.22-24), I prefer Michael Saadie's version of the meeting in 2002/2003 and I also accept Joe's evidence to the extent that it is consistent with Michael Saadie's. I accept there was a meeting in 2002/2003 where Joe and Samir attended Michael Saadie's office but Sam did not. This is because Michael Saadie corroborates Joe's evidence that the meeting occurred but only with himself, Joe and Samir present.
2. However, it is more difficult to make findings as to subject matter that was discussed at the meeting. Joe and Michael Saadie's evidence differ significantly on this issue. I prefer Michael Saadie's evidence because he is a somewhat independent witness. It is my view that Joe and Samir had a meeting with Michael Saadie to discuss setting up mortgage facilities for Joe against his two unencumbered properties. This is consistent with the nature of Michael Saadie's business, CTC, a mortgage broker business. (Ex 9, [38]-[39]; Aff, Saadie 22 August 2017, [14]). I also accept Michael Saadie's evidence that Samir responded to a question put to Joe over how he would afford the repayments by stating that "we're going to help him". I accept and prefer Michael Saadie's evidence that he did not go to the NAB in Parramatta with Joe, Samir and Sam. The highest support for Joe's contention that Samir and Sam would assist him with the interest repayments was Samir's statement "we're going to help him". There is also no evidence that Sam (distinct from Samir) made any such comment or agreed to Samir making such a comment.

The alleged variation of the agreement in May 2003

1. Joe further alleges that in May 2003, there was a variation of the oral agreement. Samir and Sam deny this assertion.
2. The alleged variation is premised solely on a conversation that Joe alleges occurred in about May 2003 between himself, Samir, and Sam. Joe claims that the loan agreement was varied so that: 1. the time for payment by Samir and Sam of their contributions to Joe's interest expenses would be deferred until the receipt by Samir and Sam of proceeds from the project following completion; 2. the said interest contributions would attract interest pending their payment; and 3. Samir and Sam would also indemnify Joe in respect of BI Constructions liability to him under the loan agreement.
3. Joe claims that the conversation between himself, Samir and Sam occurred as follows (Aff, El Bayeh 14 March 2016, [55]): "Joe: You guys have been telling me each month at that I should wait for the next month to receive your share of interest on the loans. I don't know what is going on. I have been borrowing money from people at really high interest so that I can meet these repayments for the loans. What is happening? Samir: Look, Youssef. I don't have money. Sam is in the same position. You are going to have to wait for now until we have money to pay you. We can't pay you each and every month this amount. We don't have a cent to give you now. You will have to wait. Sam: I agree with Samir. Youssef, you need to wait till the end of the construction. We will make sure that you are paid everything that you have paid on our behalf, the interest we owe you and interest on top of that. Samir: You will get not sugar but honey back when we are finished. Joe: Ok."
4. The reference to "sugar" and "honey" was explained by Joe as being a common saying in Arabic. It means that you will receive something in the end (the honey) that is better than what you initially contributed (the sugar). (Aff, El Bayeh 14 March 2016, [56]).
5. Joe's evidence is not corroborated by any other witness. It is also difficult to reconcile why Joe would accept a deferment in Samir and Sam's alleged obligation to make interest repayments when at an earlier stage his evidence is that he was unable to meet the repayments alone.
6. Samir and Sam deny any such conversation took place. Samir and Sam claimed that the first time they heard this Arabic saying was when Joe referred to it in his evidence during this hearing.
7. In cross examination and in his affidavit, Sam's evidence was that there was no difficulty in saying that the contributions made by himself, Joe and Samir on behalf of BI Constructions were a loan to BI Constructions with an interest accruing at a rate of 7% per annum. (T157.1-5; Aff, Issa 7 August 2015, [18]).
8. As this conversation is only supported by Joe's evidence and it would appear doubtful that Joe would accept a deferment of payment in interest giving the conflicting evidence he gave on his inability to meet the repayments, I do not accept Joe's version of the conversation as having taking place. It follows that even if there were an oral agreement as alleged by Joe, no such variation occurred.

Meeting in Parramatta in March 2006

1. Joe gave evidence that in March 2006, he attended a meeting with Samir and Sam at Green Arcade, Parramatta in which they agreed to take out a loan from BI Constructions to then repay him (Joe) $150,000. Joe's evidence was conflicting over whether the first payment of $150,000 made by BI Constructions following that meeting was a repayment of capital or a repayment on interest.
2. Joe gave evidence that the following conversation took place (Aff, El Bayeh 17 February 2015, [29]): "Samir: "It looks like the project is going to take another two years." Joe: "I can't do this anymore. The project was supposed to be finished in 2004 and we haven't even started. I can't keep maintaining these repayments" Sam: "Samir, why don't you put in an extra $100,000 so that you are closer to putting in as much as me. We can then pay the money to Joe towards the money that we owe him." Samir: "No, I can't get that kind of money. Let's borrow $300,000 from Chikal." Sam: "Ok, that's an idea. We can give it to Joe to pay him back for all the repayments as well." Samir: "No, I won't agree to that. It is not fair that Joe gets money and we don't." Sam: "But the man has been making repayments on his own for years now, on our behalf." Samir: "I owe people money too. I want $80,000.00 to pay my brothers." Joe: "Council and land tax is threatening to bankrupt me. I will lose everything. I owe them $150,000.00 not counting the repayments. I can't afford another cent.""
3. Joe gave evidence that after this conversation, a rowdy argument broke out and he left the table in frustration. He returned at Sam's request where Samir said that he refused to borrow more money until he received some as well. Joe, Samir and Sam then agreed that Samir would receive $80,000 and Joe would receive $150,000 from a loan to be obtained from Chikal. This money was subsequently borrowed from Chikal and Joe received $150,000 in capital. He used this cash to pay the council and the Office of State Revenue. (Aff, El Bayeh 17 February 2015, [30]).
4. Samir's evidence is that in about May 2006, BI Constructions borrowed $750,000 from Chikal against a second mortgage which was taken out against the properties. A sum of $456,000 was to be paid to Chikal as a repayment for their contribution to the purchase price of these properties. Samir said that $150,000 was paid to Joe, $80,000 to himself and the remaining $64,000 was left in BI Constructions' bank account. (Aff, Bayeh 7 August 2015, [27]).
5. While Samir's has a poor recollection of the meeting in March 2006, he accepts that the meeting might have occurred. (T123.32-50; T124.1-27; T126.18-36). However, he nonetheless denies that the conversation regarding borrowing $300,000 from Chikal to pay him (Joe) back ever took place at that meeting. (Aff, Bayeh 7 August 2015, [27]). This is at odds with the evidence provided by Joe (Aff, El Bayeh 17 February 2015, [29]). I find it difficult to reconcile Samir's poor recollection over the meeting with his certainty over what was discussed at that meeting.
6. In about 2006, Sam says that Joe began complaining about the interest he was paying on his loans. Numerous conversations were had on this issue. Sam accepts that around 2006, he suggested that to alleviate Joe's concerns they should provide him with a greater shareholding in BI Constructions. At the time, they had a conversation to the following effect (Aff, Issa 7 August 2015, [25]): "Sam: Joe you are contributing more than us to the Project, maybe you should receive a greater shareholding in BI Constructions to reflect your initial financial contribution. Samir: Yeah Joe, if you are concerned about the extra money you are putting in maybe you should become a greater shareholder. Joe: No way! That would open me up to greater losses if this project goes wrong. Sam: Yousseff was concerned about losing more money than Samir and I, hence why he refused to accept a greater shareholding in BIC."
7. Sam deposed that at the time of this conversation, there was a real likelihood that the parties would not make any profit from the development project and would suffer losses on their capital contributions as the property market had slumped significantly. As the conversation above suggests, Joe was concerned about losing more money than Samir and himself and that is why he (Joe) refused to accept a greater shareholding in BI Constructions.
8. Sam gave evidence that this conversation above is not accurate. BI Constructions borrowed $230,000 from Chikal. $150,000 was paid by BI Constructions to Joe and $80,000 was paid to Samir as repayments on their capital contributions to BI constructions. This was therefore a payment by BI Constructions to reduce its debts and obligations to two of its shareholders. It was never a payment being made by anyone else other than BI Constructions. In about 2006, Sam says that he, Joe and Samir he had the following conversation (Aff, Issa 7 August 2015, [26]): "Joe: I need money urgently; the council wants to bankrupt me. I need BIC to repay me some of my money. Issam: BIC does not have any money at the moment, it will have to borrow. Samir: Let's ask George Dannaoui (of Chikal) if he will lend BIC money. Let's borrow $600,000.00 from Chikal, that way we can repay Chikal the outstanding $300,000.00 that BIC owes to its creditors and the rest we can split between BIC's shareholders. Sam: Yes, that's a good idea, but I think the $300,000 should also go to Joe to reduce BIC's liability to Joe. Joe: That would be good if BIC can arrange this as I need money fast to pay off my council debt."
9. I accept that Joe said "No way! That would open me up to greater losses if this project goes wrong." This, to my mind, supports my view that Joe was not a simple man but an astute, albeit impulsive, business man still looking to make a profit
10. The parties agree that Joe was paid $150,000 and Samir was paid $80,000. These moneys came from a loan that BI Constructions received from Chikal. Samir and Sam say that an additional $64,000 had also been taken out from the Chikal loan and that this remained with BI Constructions. I accept that Joe stated that he needed the $150,000 because of council debts. However, I do not accept Joe's evidence that Samir made the statement: "we can give it to Joe to pay him back for all the repayments as well." This statement is not supported either by Samir or Sam's evidence.
11. I will refer to this first payment of $150,000 later in this judgment under the heading 'Repayments made to Joe'.

Loan repayment calculations sheet dated 16 March 2009

1. In cross examination, Samir gave evidence in relation to his repayment calculations sheet. On 16 March 2009, Samir had prepared two tables of calculation which he sent to Sam by fax (Ex B, 4). He wrote: "SAM Find draft of the calculation for money owed to Joe Bayeh Regards Samir Bayer."
2. The next page contained two tables. The tables were in Samir's handwriting. Table 2 concerned the financial position of Chikal and need not be reproduced here. Table 1 read (Ex B, 5): Samir Sam Joseph Total Original Contribution 600,000 690,000 1,260,000 2,550,000 Each share 850,000 850,000 850,000 Over/under contribution -250,000 -160,000 +410,000 Interest over 6 years @7% -105,000 -67,200 -172,200 Total owed 355,000 227,200 +582,200

1. This table contains the calculations for Joe, Samir and Sam. It included the calculations of their initial contributions and "interest over 6 years @ 7%". Samir agreed these were his calculations. He also agreed that the first table was mathematically correct including the interest (T147.30-37; T148.10-17). However, Samir's evidence was that the basis of the calculation was incorrect, that he was unaware of the purpose of the calculation and he denied having any understanding of the 7% interest owed. (T146.46-50; T147.1-2; T148-28-29; T149.21-27). Samir then gave evidence that the purpose of the second table of calculations was to check the liability of Chikal under the joint venture but he was later forced to concede that the top table of entries on the page had nothing to do with any interest owed to Chikal. (T149.26-46; T150.15-28).
2. Joe did not give any evidence as to whether there was an agreement that BI Constructions pay 7% interest on the shareholder loans. In cross examination, Sam gave evidence that he looked through Samir's calculations when he received the fax and that he has also looked at the calculations again since. (T226.46-50). He was taken line by line through the calculations of the top table and accepted that they were all mathematically correct. (T227-228). However, he disagreed with the table being a fair calculation. (T229.23-38). When asked what his problem was he said that his problem was "obvious" because the table was "totally unfair" for not factoring in his loss of $90,000. (T229.40-43). Sam was asked about evidence he had given in his affidavit dated 9 February 2010 which he had provided for earlier proceedings. It concerned a conversation Sam had with a solicitor from Cambridge Law, Raed Rahal. Sam gave the following evidence (T230-231): "Q. Didn't you have a conversation with him where he said "Look even on this document whether we accept the calculation or not Yousseff would be entitled to at least 520,000 without interest"? A. I don't remember that conversation. Q. Do you think it might have been said? A. May - possibly. Q. I suggest that you said: "We don't agree with these amounts but you're right. The calculations in this paper are the minimum that Yousseff is entitled to without interest and that paper is calculated to benefit Samir, but Yousseff is happy with $300,000 now to avoid any big arguments." Did you say that to him? A. I don't recall that conversation. Q. Do you agree that you took the view that the calculations were the minimum that Yousseff was entitled to? A. No, I didn't take the view at all. I, I was, I wasn't happy with the calculation because as far as I'm concerned I wasn't worried about Yousseff at that time, I was worried about my, my share and I have been dudded with those figures. Q. I'd suggest that you were concerned that Yousseff did have some special entitlements because of his higher contribution? A. He had certainly higher contribution, monetary contribution, but that doesn't - I'm not going to give up my right. I lost 90,000. Where is that factored in? Q. I'll just put this to you as well-- A. Yes. Q. --that Raed said to you "Is this correct Yousseff" - sorry said to Yousseff, "Is this correct Yousseff" and Yousseff said: "I just need some money not to lose my property. $300,000 is good for now and then after that I'll wait until the Court tells me how much I'm allowed to have. If I don't get it soon I'm going to my solicitor to just tell him to sue." Did Yousseff say that? A. I believe Yousseff said something to that effect because he wanted $300,000 and certainly there was a notice of motion filed to get $300,000 to give to Yousseff."
3. Sam then gave evidence that he recalled this being a true conversation at the time. (T234.5-8). Sam admitted that he took issue with the calculations because they were too favourable to Samir. (T234.36-39). He said that at the time he expressed that these calculations were the minimum that Joe was entitled to without interest, but this was when he thought Samir had already taken out $300,000 and was still claiming $600,000. (T234.45-50). Sam also gave evidence that there was an agreement to pay 7% interest, but that this was subject to change.
4. In summary, it is my view that the parties had reached a conclusion that there was to be 7% interest paid on contributions they made as shareholders of BI Constructions. While Joe gave no evidence on this topic and Samir denied that any agreement existed for 7% interest to be paid on the shareholder loans, this agreement is evidenced by Samir's draft calculation table in the fax. Sam did not object to the 7% interest being included in the calculations at the time. Nor do I accept Samir's evidence that he did not understand what the 7% interest was when he had clearly calculated it into the amounts due to be repaid. My conclusion is also supported by Sam's initial evidence that there was an agreement to pay 7% interest, notwithstanding that he later changed this evidence on the basis that the parties would continuously agree and then disagree. However, while there was an agreement that there would be 7% interest paid on any contribution made by Joe, Samir and Sam as a shareholder loan to BI Constructions, this is not the agreement over loan repayments that is alleged by Joe. For completeness, I note that the table also suggests that each share was meant to be $850,000, but it remains unclear how this figure was agreed upon.

Formulas for splitting any profit/loss

1. On 24 July 2009, a resolution was passed by the directors of BI Construction (being Joe and Sam at that time), that included formulas on calculating the repayments on shareholder loans. (Ex B, 11). It relevantly provides: "The Directors of BI Construction P/L hereby resolve the following: 1. Once the net profit/loss has been verified all the shareholders of BI Construction will be repaid in the following manner:- a) If there is a profit the shareholders percentage of the profit will be calculated as: Total Individual Contribution (TIC)/Total Directors Contribution (TDC) X Net Profit (NP) Total Individual Contribution: Y. El Bayeh $1250,000, Sam Issa $690,000), Samir Bayeh ($600,000). a) If there is a loss, then Y. El Bayeh is entitled to be repaid the total loan paid to BI Construction P/L, being $550,000, plus interest (calculated at 12%-being Supreme Court rate- daily accumulated), plus associated costs, including forced disposal costs. After Y. El Bayeh has received all interest and loan amounts, then net losses will be distributed equally amount [sic] shareholders."
2. In cross examination, Sam gave evidence that the formula was tentative and subject to the calculations of "total individual contribution" and "total directors' contribution" being finalised. He stated that these calculations included both monetary and non monetary contributions. (T206.35-50). He disagreed that the figures for Joe, Samir and Sam set out after "Total Individual Contribution" were finalised and stated that these figures only represented monetary contribution. (T207.1-8). Sam said that his objections were two-fold: firstly, the calculations were too favourable to Samir; and secondly, Sam's alleged loss of $90,000 and the interest on that money "was not factored in" and this was "totally unfair" (T229.40-43; T230.35-38; T237.29-33; T238.1-5). However, while Sam did complain that the calculations were too favourable to Samir in 2009, he did not raise any complaint of the alleged $90,000 not being included at that time. Nor did he raise this loss in his 2010 affidavit prepared for different proceedings around that time. (T237.35-42). As I have stated earlier in this judgment in regards to Sam's credibility, the $90,000 loss arose from a different project at Pendle Hill and Sam gave up this money for the opportunity to pursue the development project in Bankstown with Joe and Samir and make a greater profit. (T191.14-48). Overall, I made a finding that his answers to the questions over the formula were evasive and confusing and I did not accept his evidence.
3. In any event, this profit and loss formula does not affect the existence or variation of the loan agreement alleged by Joe. Nor does it affect the 7% interest which was to be paid upon the shareholder loans following the completion of the development project. The formula concerned calculating the splitting of profit (or loss) after all repayments had been made to Joe, Samir and Sam. While the formula does provide that Joe was to be repaid "all interest and loan amounts" in the event of a loss, this does not impose obligations upon Samir and Sam in respect of the alleged loan agreement.

Repayments made to Joe

1. Joe claims that BI Constructions has paid only part of the principal, and it is also liable for the whole of the interest and charges incurred by Joe for his bank borrowings. According to Joe, Samir and Sam are liable for one third each of the interest and charges and they are also liable as indemnifiers in respect of BI Constructions' liability to Joe.
2. Joe has accepted that he was repaid $851,339.70 of the $1,261,382 that he is owed by BI Constructions. He pleads that he is owed the sum of $764,954.21 together with the interest calculated from March 2011. The $764,954.21 appears to have been calculated from the combined interest and charges under the two loans, $352,956.41, plus the payment made by BI Constructions to Cambridge Law of $409,982.30. Putting to one side the payment of monies to Cambridge Law, the evidence does not support Joe's contention that he is owed money from the combined interest and charges from the two loans.
3. Joe's evidence is that Samir and Sam failed to make the agreed contributions to his interest payments. As a consequence, he had a conversation with both of them a couple of months after the meeting with the broker. He says that at that meeting it was agreed that the time for payment of those contributions be deferred pending receipt by Samir and Sam of their proceeds from the project following completion. He said that they also agreed to pay interest on the unpaid interest; and that they would also ensure that Joe would be repaid all the money that he had paid on their behalf (which could only have been a reference to the further moneys borrowed by Joe and on lent to Bl Constructions). Joe says that he ultimately had to sell two properties in order to repay the bank loans. The interest and charges incurred by him under his bank loans are set out at CB, 224-225.
4. As I have previously stated, Joe has agreed that the following partial repayments totalling $851,339.70 were made to him (Reply to Amended Defence, 22 August 2017, [1])): 1. $150,000 - May 2006 2. $150,000 - March 2009 3. $551,339.70 - March 2011
5. In relation to the first two payments of $150,000, Joe gave inconsistent evidence over whether these were repayments of capital or interest. In his affidavit dated 17 February 2015, Joe described these payments as being repayments on his capital contributions. (Aff, El Bayeh 17 February 2015, [30] and [35]). In cross examination, Joe gave evidence that he had been "asking people to contribute to the interest" and so they gave him the money to "repay it". (T62.37-41). When Joe was taken his affidavit where he claimed the payments were by way of return on capital, he claimed that this was a mistake by the solicitor who prepared the affidavit as he had been asking all along for the interest and that he always understood these payments to be for the interest. (T62.43-50; T63).
6. I do not accept Joe's evidence that the first two of these repayments were repayments on interest. His so called understanding that these were repayments of interest is not corroborated by any other evidence and is directly inconsistent with his earlier affidavit evidence. While Samir and Sam do agree these contributions were made, neither gave evidence that these were repayments of interest.

Payment to Cambridge Law

1. In addition to the three payments above, a payment of $409,982.30 was made in March 2011 to Cambridge Law out of the repayment moneys of $1,261,382 owed to Joe. There were two resolutions made by BI Constructions concerning the transfer of repayment moneys owed to Joe to a trust account operated by Cambridge Law.
2. On 15 October 2010, the directors of BI Construction had a meeting. In attendance were Sam, Samir, Betty Boustani (as proxy for Joe) and Andrew Bobb. The resolution provided as follows (Aff, El Bayeh 17 February 2015, YEB-1, 113): "Resolution(s) … 5. From the BI Constructions share of the joint venture proceeds referred to in proposed resolution 2, the following occur: … e. Withhold and pay an amount from the share of Youssef El Bayeh into the trust account of Cambridge Law to be held both pursuant to the indemnity ordered made by the court for the costs payable by Cambridge Law within the proceeding and in compliance with the terms of executed authorities to receive held by Cambridge Law. … Youssef El-Bayeh not agreed. Indicated that the reasoning for not agreeing is in line with non-acceptance of other resolutions. Resolution Passed 2:1"
3. This resolution was then subject to later proceedings in this Court: see Chikal Pty Ltd v BI Construction Pty Ltd [2010] NSWSC 1286; Yousseff El Bayeh v Samir Bayeh & Ors [2011] NSWSC 101. In Yousseff El Bayeh v Samir Bayeh & Ors [2011] NSWSC 101, Joe sought an interlocutory application to stop the release of the money by Cambridge Law being disbursed. This was on the basis that Joe wanted to ensure that Samir, Sam and Cambridge Law would not disburse the money before he could commence his claim against them. Einstein J dismissed the application and found that Joe had not discharged his onus of satisfying the Court that he had a prima facie case, nor that the balance of convenience justified the order being made. (at [30]-[31]). Further proceedings were then brought for cost orders before Slattery J in Chikal Pty Limited & Anor v Youssef El Bayeh & Anor [2011] NSWSC 230. This consisted of four cost applications, three of which were against Joe personally. On 30 March 2011, Slattery J at [31] made these orders.
4. On 1 March 2011, a directors' meeting occurred with Sam, Samir, Raed Rahal and Andrew Bobb in attendance. A second resolution was passed by BI Constructions as follows (Ex B, 43): "Proposed Resolutions: … 2. Provide instructions to Raed Rahal and Cambridge law to: (a) Make payment from the NAB Controlled money account of which Raed Rahal is the sole signatory, in the following manner: … iv. Draw and hand to Youssef El Bayeh a cheque in favor of Youssef El Bayeh in the amount of $551,399.70 being his entitlement to his initial contribution in accordance with the Maynard Kearns Audit report less his obligation of $409,982.30 for current outstanding legal fees and costs orders. v. Draw and hand to Raed Rahal a cheque in favor of Cambridge Law Trust Account (from the share of Youssef El Bayeh) in the amount $409,982.30 to be held on account of legal fees owed and to secure obligations for payment of costs orders. Resolution passed: 2:0 (In absence of Yousseff El-Bayeh's vote)"
5. Joe submitted that BI Constructions was liable for this principal shortfall of $409,982.30, along with interest on that sum calculated from 1 March 2011 to the date of judgment on the basis BI Constructions has not proven that this money was payable to third parties on account of legal costs, or that they were paid on Joe's behalf and with Joe's authority.
6. Samir, Sam and BI Constructions submitted that the payment of $409,982.30 was authorised by a resolution of BI Constructions dated 1 March 2011. While Joe did not attend the meeting of directors, he was present at the meeting by proxy. Joe had an outstanding liability to Cambridge in respect of cost orders made against him personally on 4 August 2010 in Samir Bayeh v BI Constructions Pty Ltd [2010] NSWSC 1286.
7. There is no evidence on the resolution of BI Constructions dated 1 March 2011 that Joe's vote was present by proxy. All the document provides is: "Resolution passed: 2:0 (In absence of Yousseff El-Bayeh's vote)." (Ex B, 14). However, Joe has not provided any other evidence that he did not authorise the payment of $409,982.30 to Cambridge Law. Nor has he provided evidence that the two resolutions passed by the directors of BI Constructions could not be passed without his attendance at the meetings or his express authorisation. It is my view that Joe has not discharged his onus of proving why the resolutions are invalid.
8. So far as Cambridge Law's disbursement of $409,982.30 is concerned, Joe was subject to a number of costs orders in the litigation that followed the completion of the development project in 2009. Joe has not provided any evidence that it was used for any purpose other than to pay out these outstanding orders payable by him personally.
9. It is my view that the payment of $409,982.30 was made to Cambridge Law and this money was used to discharge the cost orders against Joe.

Conclusion on repayments

1. Joe made principal contributions to BI Constructions totaling $1,261,382. Joe was repaid $851,339.70 through the three separate payments set out above. An additional sum of $409,982.30 was paid to Cambridge Law and disbursed by them in order to pay the cost orders made against Joe personally. Together, these sums equate to approximately the total sum Joe was owed from his principal contributions.

Conclusion on factual findings

1. For convenience, I set out a summary of my findings. This summary is to be read with the more detailed findings earlier. They are as follows.
2. In and about late 2001 or early 2002, a meeting between Joe, Samir and Sam took place at Sam's office in Parramatta. At this meeting an initial conversation took place regarding the development project and the purchase of the initial properties. The parties agreed to form a company.
3. After 7 November 2002 but prior to the settlement of the initial and additional properties, another meeting occurred between the parties. The existence of this meeting was corroborated by Joe and Sam. While the exact content of this meeting is unclear, Joe and Sam both agreed that they discussed the funds each party had available to contribute to the development project.
4. In early December 2002, settlement of the initial properties had taken place. A meeting soon followed where Samir brought Joe and Sam's attention to the sale of the properties next door to the initial properties. They agreed to go ahead and purchase these additional properties. The settlement occurred in mid February 2003. Joe paid both the deposit of $30,000 and $799,720 by cheque to BI Constructions to complete the purchase of the additional properties.
5. In late January or early February 2003, a meeting took place between Joe, Samir and Sam. At this meeting, the parties discussed the requirement for more funds to be made available so the project could proceed. I do not accept Joe's version of the conversation to the extent that it alleges Samir or Sam offered to help make the repayments.
6. Between February 2003 and April 2003, Joe proceeded to make drawings of approximately $933,000 under two bank loans with NAB.
7. In early 2002/2003, a meeting occurred between Joe, Samir and Michael Saadie. Sam was not present. During this conversation, Michael Saadie (the finance broker) asked how Joe was going to service the loan. Michael Saadie's evidence is that Samir replied that he and Sam "would help him". On the issue of whether Samir and Sam were going to contribute one third each to the interest repayment of the moneys borrowed, the highest evidence given is by Michael Saadie and it is that Samir and Sam "would help [Joe]".
8. In May 2003, Joe, Samir and Sam did not have a conversation where Joe accepted a variation to the alleged agreement.
9. In March 2006, Joe, Samir and Sam attended a meeting in Parramatta. While the content of the meeting was unclear, Joe made a statement that he owed $150,000 to the council and the parties resolved to take a $300,000 loan from Chikal. Of these moneys, $150,000 was paid to Joe, $80,000 was paid to Samir and $64,000 was kept by BI Constructions.
10. The parties had an agreement that at the completion of the project, interest was to be paid at a rate of 7% on any shareholder loan made by them to BI Constructions. This is supported by Samir's draft calculations made in his fax dated 16 March 2009.
11. Joe was repaid $851,339.70 in cash through the three separate payments set out above. An additional sum of $409,982.30 was paid to Cambridge Law in order to discharge the cost orders made personally against Joe. Together, these add to $1,261,322, being approximately the total sum that was owed to Joe in principal through his shareholder loans to BI Constructions.

Was there a loan agreement?

1. I turn now to consider whether there was a loan agreement and, if so, whether this agreement was breached.
2. In relation to this agreement, the parties have agreed that the following issues are in dispute: 1. Whether, in or about early 2003, Joe entered into the loan agreement with Samir, Sam and BI Constructions. 2. What, if any, express and implied terms existed in the loan agreement, namely: 1. Whether it was agreed that Joe would borrow the sum of approximately $933,000 and on lend the loan proceeds to BI Constructions to enable it to meet its obligations to Chikal under the joint venture agreement; 2. Whether it was an express term that Samir and Sam would, until the project was completed, contribute equally to the interest payments incurred by Joe in respect of his borrowings; 3. Whether it was an implied term of the loan agreement of BI Constructions would indemnify Joe in respect of the principal, interest and other expenses incurred by him in borrowing monies to advance to BI Constructions; and 4. Whether it was an implied term of the loan agreement that BI Constructions' liability to repay the loan moneys would arise when BI Constructions was in receipt of funds following the completion of the project. 1. Whether the alleged loan agreement was varied orally in or about May 2003 to the effect that: 1. The time of payment by Samir and Sam of their contributions to Joe's interest expenses would be deferred until the receipt by the BI Constructions of the proceeds of the project; 2. The interest contributions would attract interest until payment; and 3. Samir and Sam would indemnify Joe in respect of BI Constructions' liability to him under the loan agreement. 1. Whether between February 2003 and April 2003, Joe made drawings under two NAB loan facilities in the sum of $933,337.50 and on lent these sums to BI Constructions. 2. The proper characterisation of the two payments of $150,000 in May 2006 and March 2009; 3. The amount of the payment to Joe by BI Constructions in March 2011; and 4. What (if any) liability exists for Samir, Sam and BI Constructions to Joe?
3. I will deal with these issues in two stages. Firstly, I will consider whether there was an oral loan agreement, and if there is, whether there are any express or implied terms in that agreement and whether there was a subsequent variation of that agreement.

Legal Principles

1. The relevant legal principles are not in dispute.
2. For an agreement, either oral or in writing, to be binding, the parties must manifest an intention to create legal intentions. This requires making an objective assessment of the state of affairs between the parties as distinct from the identification of any subjective reservation or intention.
3. In John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 ("John Holland"), Hammerschlag J summarised the principles relevant to the formation of an oral agreement at [93]-[94]: "[93] A binding agreement is made when a reasonable person would believe that, based on their words and behaviour, the parties intended to contract. This is an objective test, which in most cases can be administered by determining whether there has been an offer by one party to be bound on certain terms accompanied by an unqualified acceptance of that offer communicated by the other party to the offeror. See generally: Paterson, Robertson, and Duke, Principles of Contract Law, (4th ed 2011, Thomson Reuters) at [1.15] and [12.10]; J W Carter, Contract Law in Australia, (6th ed 2013, LexisNexis Butterworths) at [3.06]. [94] Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319."
4. The commercial context and parties' previous dealings are relevant to determining whether a binding agreement has come into existence between the parties. It is also appropriate to consider the object of the transaction between the parties.
5. In the recent decision of Priestley v Priestley [2017] NSWCA 155, the Court of Appeal discussed the circumstances in which a contract may be inferred by the acts and conduct of the parties in the circumstances. Emmett AJA (with McColl agreeing and Macfarlan JJA agreeing in principle) ("Priestley") at [104]-[105] stated: "[104] As a matter of principle, it is possible to infer a real intention, expressed through, or to be found in, a body of conduct, including communications, even if the parties do not consciously advert to, or discuss, some aspect of their relationship, such that they say "we hereby agree to be bound". The essential question is whether the conduct of the parties, including what is said and what is not said, and including the evident commercial aims and expectations of the parties, reveals a manifestation of mutual assent that bespeaks an intention to be legally bound to the essential elements of a contract. [105] A contract may be inferred from the acts and conduct of parties as well as, or in the absence of, specific words of promise. The question is whether the conduct of the parties, viewed in the light of surrounding circumstances, demonstrates a tacit understanding or agreement. However, the conduct of the parties must be capable of proving all of the essential elements of an express contract."
6. So far as implied terms are concerned, in AAP Industries Pty Ltd v Rehau Pte Ltd [2017] NSWSC 390 ("AAP Industries"), Davies J stated at [64]-[66]: "64. In Byrne v Australian Airlines Ltd (1995) 185 CLR 410 McHugh and Gummow JJ (at 442): "Secondly, where the contract is not in writing and is oral or partly oral or it appears that the parties themselves did not reduce their agreement to a complete written form, caution is required against an automatic or rigid application of the cumulative criteria identified in BP. We should proceed on the footing that the present case is to be approached in this way. In such situations, the first task is to consider the evidence and find the relevant express terms. Some terms may be inferred from the evidence of a course of dealing between the parties. It may be apparent that the parties have not spelled out all the terms of their contract, but have left some or most of them to be inferred or implied. Some terms may be implied by established custom or usage, as described above. Other terms may satisfy the criterion of being so obvious that they go without saying, in the sense that if the subject had been raised the parties to the contract would have replied "of course". If the contract has not been reduced to complete written form, the question is whether the implication of the particular term is necessary for the reasonable or effective operation of the contract in the circumstances of the case; only where this can be seen to be true will the term be implied." 65. In County Securities Pty Ltd v Challenger Group Holdings Ltd [2008] NSWCA 193 Spigelman CJ said: "[8] In the absence of a written document or a conversation constituting the Transfer Agreement in the relevant respect, it is necessary for the Court to consider the full range of relevant surrounding circumstances when determining the subject matter and terms of the contract. Principles of law based on the parol evidence rule are not applicable. … [15] There are numerous examples in which extrinsic evidence has been used to identify the subject matter of a written contract. (See Bank of New Zealand v Simpson [1900] 1 AC 182 at 187-189; Gordon-Cumming v Houldsworth supra at 541, 545; R W Cameron & Company v L Slutzkin Pty Ltd (1923) 23 CLR 81 at 87- 87; Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 90; (1937) 59 CLR 348 at 356; White v Australian and New Zealand Theatres Ltd [1943] HCA 6; (1943) 67 CLR 266 at 270-271; Akot Pty Ltd v Rathmines Investments Pty Ltd [1984] 1 Qd R 302 at 303- 304; Wharf St Pty Ltd v Amstar Learning Pty Ltd [2004] QCA 256 at [7]; Kim Lewison The Interpretation of Contracts, 4th ed (2007) Sweet & Maxwell at [11.03] pp 416-420; Gerard McMeel, The Construction of Contracts, (2007) Oxford University Press at [5.46]-[5.49]. … [17] In the case of an oral contract, when the issue is not interpreting words but determining the subject matter of the contract as a fact, the position is a fortiori. In such a case the relevant surrounding circumstances extend to both pre-contractual and post contractual conduct." 66. Although, as Byrne makes clear, it may be easier to imply terms, it is also necessary to look first at the express terms of any informal contract to see if the suggested terms should be implied."

Submissions

1. Joe argued that there was an oral loan agreement and that, pursuant to this agreement, Joe took out two loan facilities secured over two of his unencumbered properties in February 2003 and April 2003.
2. Joe submitted that the oral loan agreement included the following terms: 1. An express term existed that Joe, Samir and Sam would, until the development project was completed, contribute equally to the interest payments incurred by Joe in respect of the bank loans (FASC, 22 August 2017, [21]); 2. An implied term with the following three conditions should be implied in order to give business efficacy to the agreement (FASC, 22 August 2017, [21A]): 1. BI Constructions would indemnify Joe and keep him harmless in respect of the principal, interest and all other expenses incurred by him under the loans; 2. BI Constructions would indemnify Samir and Sam and keep them harmless in respect of any contributions made by them towards discharging Joe's liability under the loans; and 3. BI Constructions would meet its liability under (a) and (b) when it was in receipt of funds following the completion of the development project, and would do this by repaying the loans in full and reimbursing Joe, Samir and Sam for the full amount of the contributions made by each of them.
3. Joe submitted that in about May 2003, this loan agreement was orally varied by Joe, Sam and Samir in three respects: firstly, the time for Sam and Samir's payment of their contributions to Joe's interest expenses would be deferred until the receipt of Samir and Sam of proceedings from the project following completion; secondly, the interest contributions would attract interest pending their payment; and thirdly, Sam and Samir would indemnify Joe in respect of BI Construction's liability to him under the loan agreement. (FASC, 22 August 2017, [21AB]).
4. Joe submitted that, in accordance with the loan agreement, he took out loans of $933,337.50 and on lent these to BI Constructions. Under this loan agreement, Joe incurred the following interest and charges which BI Constructions was liable to indemnify: 1. Interest under the smaller loan incurred February 2003 to December 2007 of $127,228.68; 2. Charges under the smaller loan incurred February 2003 to December 2007 of $2,830; 3. Interest under the larger loan incurred February 2003 to August 2008 of $218,516.58; and 4. Charges under the larger loan incurred February 2003 to August 2008 of $4,481.15.
5. Joe submitted that Samir and Sam failed to make any contributions towards the bank loans and this resulted in Joe suffering loss and damage. Joe incurred additional expenses in borrowing the necessary funds; in about 2007 and 2008, he was required to sell his two unencumbered properties in order to repay the loans in full; and he was deprived of two-thirds of each of the interest and charges from the $933,337.50 loan he made to BI Constructions to the sum of $235,370.93. Joe also claims prejudgment interest on the above sums, calculated on the unpaid balance from time to time up to the time of the judgment.
6. In or about May 2006, BI Constructions in partial performance with the loan agreement paid Joe the sum of $150,000 by way of partial repayment of the interest and charges in respect of the loans. In or about March 2009, BI Constructions made a further partial repayment of $150,000 in accordance with the loan agreement.
7. Joe submitted that when the development project was completed in 2011 and the sum of $2,284,940.95 was received by BI Construction, BI Constructions became liable under the loan agreement in respect of the loans. At that time, Joe submitted that BI Constructions owed him the sum of $1,316,293.91, calculated as follows: 1. An advance of $330,000 made by Joe towards the purchase price of the two properties by way of a shareholders loan; 2. The principal advanced under the loan agreement of $933,337.50; 3. Interest and charges under the smaller bank loan from 26 February 2003 to 12 December 2007 of $130,058.68; 4. Interest and charges under the larger bank loan from 25 February 2003 to 27 August 2008; and 5. Less the payments of $300,000 already made by way of the two advancements.
8. In or about March 2011, BI Constructions made a payment of $409,982.30 to Cambridge Law out of the moneys owed to Joe without either his consent or authority and made a payment to Joe of $551,339.70 for outstanding amounts. Joe submitted that BI Constructions has not made any further payments and is liable to Joe in the sum of $764,954.21 together with interest calculated from March 2011.

Sam, Samir and BI Constructions' submissions

1. Samir, Sam and BI Constructions submitted that there was no loan agreement and therefore no express or implied terms, nor any subsequent variation. They also denied that Joe borrowed the sum of $933,337.50 to on lend to BI Constructions under such an agreement. Samir, Sam and BI Constructions further submitted that there was no liability on the part of BI Constructions to indemnify Joe for the interest and charges. In respect of the two repayments, it was argued that Joe received $151,000 in May 2006 from BI Constructions and $150,000 in March 2009 as an advancement on his share from the construction loan managed by Bidana Constructions. These payments were not to be characterised as acts of partial performance of the loan agreement.
2. While BI Constructions did receive the sum of $2,284,940.95 in March 2011, this did not give rise to its liability under any loan agreement. It was argued that BI Constructions made two payments, $409,982.30 to Cambridge Law and $551,339.70 to Joe directly, and has therefore paid a total of $961,382.00 to Joe. Joe did not consent to the resolution to make the first payment to Cambridge Law and the $409,982.30 was paid out of the moneys payable to Joe by way of return of capital.

Consideration

1. Whether an oral agreement came into existence between Joe, Samir, Sam and BI Constructions requires this Court to be satisfied that a reasonable person would believe that, based upon their objective words and behaviour, the parties intended to contract and enter into binding legal relations: see John Holland at [94]. Or, in other words, whether the parties' conduct and circumstances, including the commercial aims and expectations of the parties, reflects a mutual agreement to be legally bound by a contract: see Priestley at [104].
2. In Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313 ("Pavlovic"), Beazley P stated at [19]; [131]-[134] and [162] that the post contractual conduct of the parties is admissible on the question of whether a contract has been formed so long as it is not equivocal or contrary to an agreement having been entered.
3. The approach I should adopt is to be careful not to readily construe an oral agreement where it would wholly rest upon "inexact proofs, indefinite testimony or indirect influences": John Holland, [94]. This is particularly so where the gravity of the consequences of finding a contract would be serious, as is this case due to the significant obligations it would impose upon Samir, Sam and BI Constructions. As I have previously stated, this is a case where each parties' credibility is in doubt. Nor is there any contemporaneous record or other corroborative evidence that sets out the agreement between the parties. I remind myself of the well known decision of Fox v Percy (2003) 197 ALR 201; [2003] HCA 22, where the High Court of Australia emphasised the importance of contemporaneous records in judicial reasoning. The Court at [31] stated that the reasoning should be, "as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events." This decision was recently adopted by Campbell J in this Court in Winter v Nemeth [2018] NSWSC 644, in which his Honour at [51] concluded that "there is precious little in the present case falling under these three rubrics". It is my view that the present case is also of a kind where there is "precious little" contemporary materials, objectively established facts and apparent logic of events.
4. It is clear from the evidence that the parties did have a common commercial purpose in the development project. This formed the basis of Joe, Samir and Sam's relationship and resulted in the formation of BI Constructions. A commercial purpose alone, however, is not sufficient to find that the parties had manifested an intention to be legally bound. It also depends upon the objective circumstances words and behaviour as viewed by a reasonable person. At its highest, the only evidence corroborating Joe's case is in early 2002/2003, when Samir said to Michael Saadie that "we're going to help him", meaning "we are going to help Joe". It can be implied that by the word "we're", Samir is identifying himself and Sam. There is no direct evidence from Sam that he agreed to "help" Joe. While this conversation did take place during a meeting at CTC, a mortgage brokerage business, and the subject matter of the meeting were the loans that Joe was going to take out to pay additional funds to BI Constructions, that statement alone is insufficient to prove the parties had entered into a binding legal agreement. It is also unclear and imprecise as to what Samir meant by "help". I consider Samir's statement that "we're going to help him" is at best equivocal: see Pavlovic, [19]; [131-134] and [162]. In my view, it is not possible to imply an agreement from Samir's statement even where this statement was made in the commercial context of the development project.
5. Nor does Samir's table of draft calculations which were attached to the fax forwarded to Sam on 16 March 2009 support Joe's contention that there was a loan agreement. (Ex B, 4-5). The table only goes so far as to support the existence of a 7% interest rate that was to be paid on the shareholder loans. However, while there may have been an agreement on this 7% interest, Joe has not pleaded that he is owed this interest on his principal contributions or that this agreement existed.
6. My findings are further supported by the background and circumstances of the development project. When Joe, Samir and Sam entered into the agreement to provide funds to BI Constructions, they all believed that they were going to make a lot of money upon the completion of the development project. This explains why, notwithstanding the clear commercial enterprise that formed the basis of their relationship in the period, they did not appear to reduce any agreement to writing or keep contemporaneous records.
7. For these reasons, my conclusion is that there was no loan agreement. It follows that the express term alleged by Joe in paragraph 21 of his statement of claim dated 22 August 2017, in which Joe, Samir and Sam would be obligated to contribute equally to the interest repayments incurred by Joe, does not exist. However, in the event I am wrong and there was an oral agreement, I will now consider whether the alleged implied terms should be implied into the oral agreement.
8. Joe has pleaded that a term should be implied into the agreement with three conditions. In accordance with AAP Industries, where Davies J cites McHugh and Gummow JJ in Bryne v Australian Airlines Ltd (1995) 185 CLR 410, I accept that the relevant question is whether the implication of the term is necessary for the reasonable or effective operation of the contract in the circumstances of the case. This includes the consideration of both pre contractual and post contractual conduct: see Spigelman CJ in County Securities Pty Ltd v Challenger Group Holdings Ltd [2008] NSWCA 193 at [17].
9. The term that Joe seeks to have implied into the agreement imposes obligations upon BI Constructions to indemnify Joe, Samir and Sam and to keep them "harmless" in respect of any contributions they made towards Joe's liability under the two loans.
10. There are several difficulties that arise with accepting that such a term is necessary for the reasonable or effective operation of the contract in the present circumstances. There is significant uncertainty associated with construing what Joe means by "harmless". It is a vague term that could be construed in a number of different ways. Nor are the three conditions of the alleged implied term consistent with the 7% interest which was agreed to be paid for the shareholder loans to BI Constructions. It is my view that the parties accepted that they would be paid 7% interest on any loans they gave to BI Constructions. At the completion of the development project, BI Constructions would then repay them the principal of their shareholder loan plus the 7% interest. Notwithstanding the caution this Court should take against applying a rigid approach to implying terms in informal oral agreements, the alleged term that Joe contends for is neither necessary for the effective or reasonable operation of the contract. It would be inconsistent with shareholder loan agreement to imply such a term in the present circumstances.
11. It follows that Joe's action for breach of agreement fails.
12. For completeness, I do not accept Joe's contention that there was subsequent variation to the alleged oral agreement. As I have previously stated, this conversation was solely based upon Joe's evidence of a conversation that took place in May 2003. As I have concluded that such a conversation did not take place, there is no factual basis for me to conclude that the variation alleged by Joe occurred.
13. I turn now to consider the Joe's claim for unjust enrichment.

Unjust enrichment

1. The parties agreed that the principal issue here is whether Samir and Sam have been unjustly enriched at Joe's expense by their failure to repay any interest on the two loans obtained by Joe.
2. Joe made no further submissions on this issue.
3. Samir, Sam and BI Constructions submitted that, in the way pleaded, the unjust enrichment claim does not stand alone from the loan agreement claim. If the plaintiff fails on his contract, estoppel and misleading or deceptive conduct claims, the unjust enrichment claim must also fail. This is because unjust enrichment is not a cause of action. It was further submitted that it was BI Constructions and not Samir and Sam who benefitted from Joe's contribution to BI Constructions at his expense.
4. In Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, the High Court of Australia (Hayne, Crennan, Kiefel, Bell and Keane JJ) at [78] affirmed that unjust enrichment is not a definitive legal principle of direct application and therefore it does not form the basis of restitutionary relief. The Court also discussed at [78] the concept of "disenrichment": "Such a "principle" does not govern the resolution of this case because the concept of unjust enrichment is not the basis of restitutionary relief in Australian law. The principle of disenrichment, like that of unjust enrichment, is inconsistent with the law of restitution as it has developed in Australia. Disenrichment operates as a mathematical rule whereas the enquiry undertaken in relation to restitutionary relief in Australia is directed to who should properly bear the loss and why. That enquiry is conducted by reference to equitable principles."
5. It is my view that the claim for unjust enrichment is based upon Joe's primary claim for breach of the alleged loan agreement. As there was no loan agreement, I do not consider that Samir and Sam have been unjustly enriched. The mere fact that Joe contributed more in principal to the development project than Samir and Sam is not enough to ground a finding of unjust enrichment.
6. For these reasons, Joe's claim for unjust enrichment fails.

Estoppel and misleading or deceptive conduct

1. Joe pleads a claim of estoppel on the basis that Samir and Sam made representations to him that, if he applied for the two loans of approximately $933,000, Samir and Sam would contribute equally with Joe to the repayment of the interest on those loans. It was submitted that this representation induced Joe to assume or expect that he, Samir and Sam would contribute equally to the repayment of interest on the loans. Joe then relied upon this representation to take out these two loans and make further payments to BI Constructions of approximately $933,000. Samir and Sam failed to repay any interest on these loans. This has caused detriment to Joe and is unconscionable.
2. In regards to his claim for misleading or deceptive conduct, Joe's claim rests upon the same representation in relation to the two loans totalling approximately $933,000. Joe submitted that Samir and Sam's representation was misleading or deceptive in contravention of s 42 of the Fair Trading Act 1987 (NSW) (as it was then). This was on the basis that, firstly, the representation of Samir and Sam was made in trade and commerce; secondly, Samir and Sam did not have reasonable grounds for making that representation at the time it was made; and thirdly, that contrary to the representation, Samir and Sam failed to repay the interest on the loans. This caused Joe to suffer loss.
3. Samir, Sam and BI Constructions submitted that, in circumstances where Joe's estoppel and misleading or deceptive conduct claims rely upon representations made in the course of conversations between the parties, this Court requires the words alleged to have been spoken to be proven with a degree of precision sufficient to enable the Court to be reasonably satisfied that the representations were made in the terms alleged. Samir and Sam did not make any representations to this effect. Even if the alleged representations were made, it was submitted that Joe did not adopt the assumption pleaded and that this assumption was not induced by either Samir or Sam.
4. For reasons set out in detail earlier in this judgment, Joe's evidence does not establish the representation was made. I am not satisfied that there were any representations made by Samir and Sam to the effect that they would contribute to the interest on the two loans. Even if I am wrong and the representations were made, I do not consider there to be sufficient evidence to prove that Joe relied upon these representations. As I have previously stated, all the parties considered that they would make a significant profit from the development project and Joe appeared willing to take out these funds to ensure the project went ahead. Nor has Joe established by evidence that Samir and Sam induced this assumption.
5. It is my view that the estoppel claim fails on the basis that the representation alleged by Joe has not been made out. As Joe's misleading or deceptive conduct claim is also based upon this representation, it is to be dismissed for the same reasons. It is therefore unnecessary to consider the limitation defences which were raised by Samir, Sam and BI Constructions.

Conclusion

1. For the reasons stated earlier, the plaintiff's claims for breach of the loan agreement and variation thereto, unjust enrichment, estoppel, and misleading or deceptive conduct are all dismissed. The proceedings are dismissed.
2. Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendants' costs of the proceedings on an ordinary basis.

The Court orders that: (1) The proceedings are dismissed. (2) The plaintiff is to pay the defendants' costs on an ordinary basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 May 2018