Eliana Construction and Developing Group v Assad [2014] VSC 143

1 The Plaintiff company, Eliana Construction and Development Group Pty Ltd ('Eliana') was incorporated in 2008 and carries on business as a builder and developer in the construction of domestic buildings. Magdy Sowiha ('Mr Sowiha') is now the sole director and shareholder of Eliana and is a licensed builder. For a time Mr Sowiha's wife was also a director of Eliana.

2 The Defendant, Dr Sinot Samy Assad ('Dr Assad') is a medical practitioner in active general practice. He regularly pursues other business as a developer of residential properties. Dr Assad is sued in his personal capacity or alternatively in his capacity as the Trustee of the S. Assad Family Trust.

3 Dr Assad and Mr Sowiha became acquainted with each through their membership of the Egyptian Coptic community in the greater Melbourne area and attending church at St Athanasius Church in Springvale, Victoria. Mr Sowiha and Dr Assad met frequently in informal settings, sharing meals after church, and in each others' homes. They became good friends.

4 In May 2008, according to Mr Sowiha, or in September 2008, according to Dr Assad, Mr Sowiha and Dr Assad established a business relationship.

5 In September 2008, Mr Sowiha's company Eliana purchased a property at 231 High Street, Lower Templestowe, Victoria ('the Property'),[1] with the intention of building a block of 11 units ('the Project'). The purchase price of the Property was $999,999.00. Eliana made a 5% deposit upon signing the Contract of Sale and paid $540,000.00, financed by mortgage, at settlement. Dr Assad contributed $350,000.00 at settlement.

6 Dr Assad and Eliana together entered into a loan agreement with the Commonwealth Bank to facilitate the development. Dr Assad and Eliana became registered on the title to the Property as tenants in common in equal shares and entered into a first mortgage over the Property to secure the loan to the bank.

7 Between 3 October 2008 and 13 October 2010 Dr Assad made a series of payments to Eliana totalling approximately $1.27 million ('the Payments'). The Payments were made to enable the construction of the Project to proceed. Eliana also made payments totalling approximately $440,000.00 to be applied towards the construction.

8 None of the transactions entered into between Eliana, Dr Assad or Mr Sowiha were documented.

9 Eliana claims that Dr Assad made these Payments pursuant to a joint venture agreement between the parties. Dr Assad denies the existence of a joint venture between Eliana and himself, and describes the Payments as having been made under a loan agreement.

10 Eliana built 11 units on the Property with works continuing over the period between August 2009 and May 2011. In October 2010, mid-way through the Project, the parties together refinanced the Project with the ANZ Bank.

11 In the period between early 2009 to late July 2011, 7 of the 11 apartments were sold, either 'off-the-plan' or as completed units. The Plan of sub-division was registered on or about 26 July 2011, resulting in the Property being divided into 11 separate lots. The apartments left unsold were apartments 2, 3, 4 and 11.

12 The solicitor acting for both Dr Assad and Eliana throughout the Project was Ellen Assad, Dr Assad's wife.

13 At some stage during the completion of the Project, Mr Sowiha signed incomplete transfer of land forms on behalf of Eliana and gave these signed forms to Ellen Assad. Mr Sowiha gave evidence that he did this at the suggestion of Dr Assad and Ellen Assad in order to expedite paperwork relating to the sale and registration of title to the individual units once they were sold.

14 Mr Sowiha also signed contract of sale documents in or around June 2011 which were back-dated to 3 October 2009. These contracts provided that:

a. Apartment 2 was to be sold to Dr Assad, with the contract price of $635,000 shown as already having been paid.

b. Apartment 3 was to be sold to Dr Assad, with the contract price of $590,000 shown as already having been paid.

c. Apartment 4 was to be sold to Dr Assad, with the contract price of $635,000 shown as already having been paid.

d. Apartment 11 was to be sold to Eliana, with the contract price of 845,000 shown as already having been paid.

15 In approximately July 2011, disputes arose between Dr Assad and Mr Sowiha over the money advanced by Dr Assad to Eliana for the Project. Dr Assad sought repayment of amounts that he characterised as having been loaned to Eliana. Mr Sowiha maintained that no money was owed, pursuant to their joint venture arrangement. Attempts were made by the parties to settle the matter between themselves.

16 After 26 July 2011, the mortgage with the ANZ bank was paid out. Settlement of the 7 apartments which had already been sold took place, and the remaining 4 titles (to apartments 2, 3, 4 and 11) remained in the custody of Ellen Assad, who was acting for both Eliana and Dr Assad in respect of the Project.

17 Ellen Assad then inserted the relevant title details into the incomplete transfer of land forms she had previously received from Mr Sowiha for apartments 2, 3 and 4 and apartment 11. On 9 March 2012, Dr Assad registered the transfer of title forms for apartments 2, 3 and 4 at the Land Titles Office.

18 Mr Sowiha claims that this registration was undertaken without his approval or knowledge. He claims that the signed, incomplete, forms were taken by Ellen Assad prior to Dr Assad and Mr Sowiha discussing and attempting to settle their dispute. Mr Sowiha says that Ellen Assad was given the forms on the basis that she was Eliana's solicitor at the time, and on the assurance from both Dr Assad and Ellen Assad that the forms would not be lodged unless and until a settlement had been reached, and Mr Sowiha's authorisation obtained.

19 Dr Assad however, maintains that he and Mr Sowiha never agreed that the transfer of title forms would not be registered. Dr Assad claims that he and Mr Sowiha, on behalf of Eliana, signed Contracts of Sale and Transfer of Title forms as a form of settlement - by which apartments 2, 3 and 4 were to be transferred to Dr Assad and apartment 11 was to be transferred to Eliana.

20 Eliana accepted the transfer of apartment 11, by letter dated 16 March 2012 to Dr Assad's solicitor, but stipulated that its acceptance was on the basis that 'it did not agree there was any agreement and it reserved its rights to take legal action for the conduct committed'. Mr Sowiha asserted in evidence that he accepted the transfer only as a way to mitigate his losses.

21 On 22 March 2012, Eliana lodged the following caveats ('the Caveats'):

22 On 7 January 2013, Eliana registered an executed transfer of land form for Apartment 11 with the Land Titles Office, and at the same time registered a mortgage held by the Commonwealth Bank of Australia.

23 Eliana commenced proceedings by Writ and Statement of Claim on 18 May 2012, seeking, by way of summary:

h. a declaration that Dr Assad holds apartments 2, 3 and 4 on trust for himself and Eliana;

i. orders effecting a transfer of apartments 2, 3 and 4 to Dr Assad and Eliana as tenants in common in equal shares;

j. a declaration that there is a joint venture agreement between Eliana and Dr Assad; and

k. an account or inquiry as to Eliana's and Dr Assad's respective contributions to the joint venture.

24 Eliana further claims that Dr Assad acted fraudulently, dishonestly unconscionably or wrongfully. In the course of his final address, counsel for the plaintiff Eliana withdrew the allegation of fraud, saying that '...my instructions are that the fraud allegations levelled at the plaintiff are withdrawn.' From that I take it to mean that the fraud allegations levelled at the defendant were withdrawn.

Parties' Characterisations of their Finance Arrangement

25 The fundamental issue in dispute is the character of the arrangement between the parties in entering their business relationship to develop the Project. Specifically, it is disputed whether or not the financial arrangement between Eliana and Dr Assad, by which Dr Assad advanced funds to Eliana in respect of the Project, was a loan or series of loans, or whether this was undertaken pursuant to a joint venture between the parties.

26 Whatever it was, the arrangement was never formalised by any written agreement between the parties, prior to the funds being advanced. Dr Assad and Mr Sowiha both deposed that their discussions of finance matters took place mainly in person at informal meetings between them, over meals or over the telephone.

27 Each party denies the other's characterisation of the type of agreement or arrangement underpinning the financing of the Project.

Mr Sowiha's Account of Financial Arrangement of the Project as a Joint Venture

28 Eliana, through Mr Sowiha, claims that from the beginning of their involvement together in the Project, his company Eliana and Dr Assad were parties to a Joint Venture Agreement which was partly oral and partly to be implied.

29 According to Eliana's Statement of Claim, the oral Joint Venture Agreement was the product of conversations between Mr Sowiha, as director and sole representative of Eliana, and Dr Assad which took place at Mr Sowiha's home. Some conversations may have taken place at St Athanasius Church in Springvale.

30 During these conversations Mr Sowiha says that Eliana and Dr Assad allegedly agreed to terms of their Joint Venture, particularly that:

l. They would jointly develop the Property by subdividing it into 11 separate lots and constructing 11 apartments, with a view to making a profit upon sale;

m. That upon subdivision, each lot was to be registered in the names of both Dr Assad and Eliana as tenants in common in equal shares and that this would remain the position in respect of each lot until it was sold;

n. They would both make contributions towards the cost of the development:

i. Dr Assad would contribute payments towards development costs as they arose and would undertake liability under a mortgage jointly with Eliana to fund development. Dr Assad would also take care of conveyancing arrangements through his wife Ellen Assad;

ii. Eliana's contribution would be the deposit it paid in the purchase of the Property, it would make further contributions towards development costs, it would undertake liability under a mortgage jointly with Dr Assad, and it would undertake the construction work at cost only, foregoing any profit margin in the construction;

o. Any profit or loss would be shared in proportion to Eliana's and Dr Assad's respective contributions throughout the Project.

31 Insofar as a Joint Venture Agreement was to be implied, Eliana asserts that it was to be implied by the conduct of both Eliana and Dr Assad. The relevant conduct giving rise to a Joint Venture Agreement is said to include:

p. The conversations during which the Joint Venture Agreement and its terms was discussed between Mr Sowiha and Dr Assad;

q. The making of payments by both Eliana and Dr Assad towards the purchase price for the Property in accordance with their Joint Venture Agreement;

r. The joint liability of Eliana and Dr Assad under the mortgages acquired to finance development of the Property, initially with the Commonwealth Bank and subsequently with the ANZ Bank; and

s. That the terms on which the Joint Venture Agreement was conducted were those reasonably necessary for the business efficacy of the Project and the Joint Venture, and were normal incidents of this type of agreement.

32 Mr Sowiha's account of the falling out between he and Dr Assad is that a dispute arose when Dr Assad changed his mind about the extent of his involvement and exposure in the Project, and demanded more return on his investment.

33 Mr Sowiha also claims that Dr Assad sought to re-characterise his position in relation to the Project from a joint venture developer to a financier in order to avoid GST obligations to the State Revenue Office and the Australian Tax Office.

34 There were substantial contradictions and inconsistencies in the account given at trial by Mr Sowiha regarding the precise nature and content of the agreement in dispute.

35 Mr Sowiha also claimed during the trial that the sum of $420,000 is owing to Eliana, or to himself, by Dr Assad arising from the Project, although no such claim is made in the pleadings.

Dr Assad's Account of the Financial Arrangement of the Project as a Loan Agreement

36 Dr Assad does not deny that an agreement arose between himself and Eliana in respect of the Project, which was the product of a series of conversations. However, Dr Assad disputes that his involvement in the Project was that of a joint venturer.

37 Dr Assad's evidence is that in or around September 2008 he agreed to advance the initial sum of $350,000 to Eliana, as an investment in the Project, on terms. Dr Assad's formal defence and submissions refer to this first payment as 'the Loan', or the 'Loan Agreement', the terms of which were entirely oral.

38 The terms of the Loan Agreement allegedly included express oral terms that that the money was to be repaid with interest and that the loan was to be secured by registering Dr Assad's name jointly on the title to the Property, along with Mr Sowiha's company Eliana. The joint registration, according to Dr Assad, was effected for security, and was not done pursuant to any joint venture agreement.

39 Dr Assad asserts that in approximately January 2010, Mr Sowiha asked for further funds to complete the project. Dr Assad claims he agreed to invest more solely because he was concerned that if he didn't, and the Project fell over, he would not recover his initial loan to Eliana.

40 A further sum of $920,000 was paid by Dr Assad to Eliana, characterised in Dr Assad's Defence and submissions as the 'Further Loan' or 'Further Loan Agreement'.

41 Dr Assad claims that the terms of the Further Loan Agreement again were entirely oral, and were arrived at in discussions between Dr Assad and Mr Sowiha in January of 2010. Dr Assad claims that he agreed to advance the Further Loan on the same terms upon which his first loan had been made, with the exception that half of the Further Loan was to be repaid as soon as Mr Sowiha received additional funding for the Project from his own bank.

Whether the Agreement was a Loan or Joint Venture

42 As submitted by the Plaintiff, the principal issue to be determined is whether or not the agreement between the parties was that of a loan or a joint venture.

43 The documentary evidence, such that it is, points very strongly towards Dr Assad, from the outset, accepting and acting upon the basis that his commercial relationship with Eliana was that of a joint venture.

44 In a hand written note which Dr Assad acknowledged was in his hand writing, he set out 'Sam's share' (which I interpret to refer to Dr Assad, whose middle name was Samy, and who was known as 'Dr Sam') as '68.1%'. He also noted 'Sam's share profit = 68.1% - $' and calculated his entitlement to be '$1,809,416'. These notations are inconsistent with the transaction being that of a loan and do not reflect an interest rate of 16%, which he claimed was due on his alleged loan.

45 There is no reliable evidence which I accept that any interest rate was discussed at the outset, let alone a compound rate of 16% or anything like this rate, as later claimed by Dr Assad. Further, in his pleadings, no specific interest rate was claimed by Dr Assad to found any claim for interest.

46 Ellen Assad, in her evidence, was very vague about the rate of interest to be charged under the alleged Loan Agreement from the S. Assad Family Trust to Eliana. In her witness statement she gave evidence as to a discussion between Mr Sowiha and Dr Assad which made mention of a 16% interest rate, however she was unable to go into details about the final alleged agreement on this issue because, as she said, 'most of the discussions in depth were done between both of them. I'm not a mathematical person, I'm sorry'.

47 Significantly, tax returns of the S. Assad Family Trust were adduced, and Dr Assad was cross examined upon them. Dr Assad and his wife Ellen Assad were the trustees of the S. Assad Family Trust.

48 Copies of Trust tax returns and financial account documents for the Trust for years 2009, 2010, 2011 and 2012 were put into evidence. In each case, under the heading 'Land and buildings', the following is recorded in the financial accounts for the Trust: 'Land - 231 High Street, Lower Templestowe (50% Share)', and the sum of $586,396.00 is recorded against that description.

49 In the 2009 financial accounts for the Trust, the only loan recorded under 'Non-Current Liabilities' in favour of Eliana Construction and Development Group Pty Ltd is in the amount of $5,091, which is reduced to $791 in the year 2010 and disappears entirely in the years 2011 and 2012.

50 Dr Assad sought to distance himself from these records, saying that they had been prepared by his accountant and that they were 'not accurate.'

51 However, I am satisfied that Dr Assad gave instructions to his accountant in relation to these financial accounts, and in any event he adopted the accounts as the true records of the Trust.

52 Dr Assad's wife, Ellen Assad, said that her husband handled the family finances and even though she was a beneficiary of the S. Assad Family Trust she gave evidence that she herself was not familiar with the operations of the Trust. Further and importantly, she said that her husband and only her husband, Dr Assad, was the person who gave instructions to the accountants for the Trust.

53 The credit of Dr Assad in maintaining his position that his involvement in the Project took the form of a loan from the outset is significantly challenged by the financial accounts of the of the S. Assad Family Trust, which tell a very different story. I reject the position advanced by Dr Assad that the matters recorded by the accountant for the Trust were materially inaccurate as he described.

54 Ellen Assad also maintained the position that the financial position between the S. Assad Family Trust and Eliana was that of lender to borrower, not that of a joint venture.

55 However, this position did not sit happily with the terms of the Planning Agreement made under s 173 of the Planning and Environment Act 1987 (Vic), which Mrs Assad earlier prepared and eventually lodged with the Registrar of Titles on 16 March 2011 in relation to the Property. The Planning Agreement was between the Manningham City Council and the 'Owners' of the Property. The document described the 'Owners' of the Property as Eliana and Dr Assad. Under the Planning Agreement, both of the owners assumed a variety of specified obligations. The assumption of these obligations was inconsistent with Dr Assad being a mere lender to the Project, or acting as the agent of the S. Assad Family Trust as lender to the Project,.

56 I am satisfied that from its inception, the Agreement and transaction between the parties was not that of a loan but was a joint venture between Eliana and the S. Assad Family Trust.

Attempted Settlement of the Joint Venture Disputes

57 I am also satisfied on the evidence that the Joint Venture continued between 2008 and 2011, when in about July 2011 disputes arose between Dr Assad and Mr Sowiha over the money advanced by Dr Assad to Eliana for the Project.

58 Apart from agreeing that the Joint Venture had come to an end, the parties did not come to clear agreement as to any terms on which the matter would be settled. Certainly there was no agreement as to what, if anything, was owing from one party to the other in regards to a settlement.

59 Accordingly, a declaratory order should be made in the following terms: that between 1 September 2008 and 30 June 2011, a joint venture existed between Eliana and Dr Assad and the S. Assad Family Trust for the purchase of the Property and its development, with the construction of 11 apartments thereon and the sale of those apartments (the 'Joint Venture').

60 The percentage of ownership of the joint venture, and hence the entitlement to profits or the incurring of liabilities, was governed by the relative percentages of the contributions made by the parties to the Joint Venture.

61 On 8 September 2011, Mr Sowiha sent to Ellen Assad, whom he said acted as his lawyer, a draft loan agreement by email. The draft agreement was dated as having been made on 'the ... day of ... 2008'. The origin of this email and the draft loan agreement is confusing, and the oral evidence given about it I find to be unreliable.

62 Dr Assad sent an email to Mr Sowiha dated 9 September 2011. A relevant part of the email read:

Further to our Discussion on the Tuesday the 30/08/2011, I confirm that S Assad Family Trust total loan amount to Eliana Construction and Developing group P/L is $1,275,000 in addition to agreed interest of $180,000 which totals $1,455,000.

I would like to draw your attention that that figure is calculated up til 30/8/2011.

63 I accept Mr Sowiha's evidence that it was about this time that he first heard Dr Assad seek to characterise his investment from its inception as a loan. I also accept that the parties at this time also attempted to resolve their differences by negotiating towards entering into a loan agreement.

64 However, no loan agreement was in fact arrived at between the parties in September 2011. By a further email of 9 September 2011, Mr Sowiha did not agree to the terms of the loan agreement in fact put forward by Dr Assad. Mr Sowiha said, amongst other things, that:

We did not agree or even discuss at all any interest payment to you and would like to make it very clear I'm not accepting any charge for interest as per our initial agreement.

65 Eliana claimed in its statement of claim that the following occurred in relation to the contracts and transfer of land forms in respect of apartments 2, 3 and 4.

66 By early or mid-August 2011, a dispute existed between Eliana and Assad in relation to the Joint Venture Agreement and the development (the 'Dispute'). At or around this time, in anticipation of a settlement of the Dispute, a meeting took place between Mr Sowiha, Dr Assad and Ellen Assad at Eliana's offices located at Suite 9, Manningham Road, Bulleen, Victoria where:

t. Dr Assad and his then-solicitor, who was his wife Ellen Assad, requested Mr Sowiha to sign 4 incomplete transfer of land forms on behalf of Eliana; and

u. Dr Assad and Mrs Assad and informed Mr Sowiha that if he signed the 4 incomplete transfer of land forms they would not be altered or used unless and until an agreement was reached as to the settlement of the Dispute; and

v. pursuant to the request of Dr Assad and Ellen Assad, Mr Sowiha signed the incomplete transfer of land forms (the Signed Forms), handed them to Ellen Assad, and informed Dr Assad and Ellen Assad that the Signed Forms were not to be altered or used unless and until an agreement was reached as to the settlement of the Dispute.

67 It is then said by Eliana that it and Dr Assad did not, and have not to date, reached an agreement as to the settlement of the Dispute.

68 Eliana says further that during the period between about September 2011 and March 2012, Eliana repeatedly requested that Dr Assad not alter or use the Signed Forms. The requests are said to have been made by:

w. numerous oral requests made by Mr Sowiha to Assad and Ellen Assad during telephone conversations and meetings which occurred during the period between about September 2011 and March 2012; and

x. in a letter dated 16 December 2011 sent by Eliana's solicitors to Dr Assad's solicitors.

69 Further, during the period between about September and March 2012, Eliana says that it repeatedly requested that Dr Assad return the Signed Transfer Forms to Eliana, resulting in a letter dated 24 October 2011 sent by Eliana to Ellen Assad (the '24 October Letter').

70 The 24 October Letter requested that the contracts and the transfers be 'cancelled', which I take to mean that Mr Sowiha was instructing Ellen Assad not to proceed with the transactions or have the transfers registered at the Land Titles Office. Mr Sowiha said in this letter:

As you were acting to conveyance the whole building at 231 High Street, please remember to send us the cancelled 2 sets of contracts and transfer of land which are related to the apartments 2, 3, 4, and 11 of 231 High Street lower Templestowe, we signed them before in two different occasions with two different prices (if you didn't cancel them yet, please cancel them immediately). Therefore we should receive them ASAP. You promised many times that you will send them to us.

71 It is then said that in or about early March 2012, Dr Assad caused to be entered the missing details, namely the volume and folio details of Apartments 2, 3 and 4, on the executed but incomplete transfer forms, and on or about 9 March 2012 caused the documents to be lodged with the Registrar of Titles and thereby became the sole registered proprietor of each of apartments 2,3 and 4.

72 It is further said that when Dr Assad carried this out he knew, or was wilfully blind as to the fact that:

y. Dr Assad and Eliana had not reached an agreement as to the settlement of the Dispute;

z. Dr Assad had not been authorized by Eliana to alter or use the Signed Forms

aa. Eliana had requested that he not alter or use the transfer forms;

bb. Eliana had requested the return the transfer forms; and

cc. the signatures on the transfer forms had, in circumstances, been improperly obtained.

and therefore Dr Assad's actions were carried out wrongfully.

73 In the premises, by operation of section 44(1) of Transfer of Land Act 1958 (the Act), Eliana claimed that:

dd. the amendments to the register procured by the transfer forms lodged with the Registrar of Titles were void as against Eliana; and

ee. Dr Assad is precluded from taking any benefit from the said amendments to the register.

74 Section 44(1) of the Act provides:

1. Certificate etc. void for fraud
   1. Any folio of the Register or amendment to the Register procured or made by fraud shall be void as against any person defrauded or sought to be defrauded thereby and no party or privy to the fraud shall take any benefit therefrom.

75 Alternatively, Eliana claimed that by operation of s 42(1) of the Act, Dr Assad is not entitled to rely on his registration as sole proprietor of apartments 2, 3 and 4 as against Eliana.

76 Section 42(1) of the Act provides:

1. Estate of registered proprietor paramount
   1. Notwithstanding the existence in any other person of any estate or interest (whether derived by grant from Her Majesty or otherwise) which but for this Act might be held to be paramount or to have priority, the registered proprietor of land shall, except in case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Register but absolutely free from all other encumbrances whatsoever, except -

(a) the estate or interest of a proprietor claiming the same land under a prior folio of the Register;

(b) as regards any portion of the land that by wrong description of parcels or boundaries is included in the folio of the Register or instrument evidencing the title of such proprietor not being a purchaser for valuable consideration or deriving from or through such a purchaser.

ff. it would be unconscionable, unjust and inequitable for Dr Assad to rely on his registration as the sole proprietor of Apartments 2, 3 and 4 as against Eliana; and

gg. therefore by reason of Eliana's in personam rights as against Dr Assad, he is not entitled to rely on his registration as the sole proprietor of Apartments 2, 3 and 4 against Eliana.

78 Further or alternatively, Eliana claimed that Dr Assad holds each of the apartments 2, 3, and 4 on trust for himself and Eliana as tenants in common in equal shares pursuant to a constructive trust.

79 A difficulty for Eliana is that its counsel on instructions abandoned the fraud allegations levelled at the defendant.

80 This therefore removed from consideration any reliance on s 44(1) and s 42(1) of the Act, which create exceptions to indefeasibility of title in the case of fraud.

81 Further, in opening and closing submissions, counsel for Eliana made no mention of any claim founded upon any in personam rights which may lie as against Dr Assad, and which could operate as an exception to indefeasibility of title, and did not develop this issue. I take it therefore that any such claim was not pressed.

82 In the same vein, counsel for Eliana made no mention of any claim founded upon any alleged constructive trust as against Dr Assad and did not develop this issue. I take it therefore that this claim was also not pressed.

83 Accordingly, although there was unsatisfactory professional conduct on the part of Ellen Assad in acting as lawyer for both parties, which placed her in a conflict of interest, ultimately the matter as pleaded relating to the signed contracts and transfers give rise to no basis for any relief in the proceeding, given the way in which the case was conducted.

84 I find that the evidence of Ellen Assad, when assessed overall, was very confusing and ultimately of little weight.

85 I accept that Ellen Assad commenced her engagement in 2008 acting as a lawyer for the parties in good faith, not realising there was a conflict of interest. However, as events unfolded with blossoming disputation, by about May or June 2011, she found herself in a position of obvious conflict of interest between the parties which coloured her version of events. Even then, Ellen Assad failed to disclose her conflict in writing as required by Rule 8.5 and acted in apparent contravention of Rule 8.7 of the Professional Conduct and Practice Rules 2005, although she said that she verbally disclosed the position to the parties. Ill-advisedly, she acted for both parties because as she said, 'Mr Sowiha and my husband [they] both were very close friends' ...'We are Egyptians. We have cultural [s] [ties?] - we are very warm. We trust each other. We help each other and Mr Sowiha gave me his, his OK to do this work.'

86 At about that time Ellen Assad, recognising that she was in a position of conflict, gave the file to another solicitor, Seoud Solicitors. Seoud Solicitors also acted for Dr Assad. However, I do not accept her evidence when she said that in taking this step she had the permission of Mr Sowiha or his company Eliana. When Ellen Assad was asked whether she had advised Mr Sowiha that his file had been given to another solicitor, she answered: 'Yes, he was aware', and that this was done: 'Ah, by phone ... He's a - he was always aware that ah Dr Assad was taking separate legal advice, because Dr Assad didn't wanna do anything wrong by anyone.'

87 This is an inadequate explanation by a solicitor for taking the important step she took in relation to Mr Sowiha's file, without obtaining his express instructions to do so.

88 Ellen Assad could give no satisfactory explanation for this conduct, saying that, 'I didn't know what to do.' Further, she said that thereafter her husband, Dr Assad, gave instructions to the new solicitors.

89 Mr Sowiha maintained the position at trial, and gave some evidence to the effect that he or his company Eliana is presently owed $420,000 by Dr Assad or his family trust. However, his pleadings make no such specific claim.

90 Eliana, in its Statement of Claim, seeks an account or inquiry as to its and the Defendant's respective contributions to the Joint Venture, the profits or losses arising from the Joint Venture and consequential orders in relation to the respective rights and liabilities of the parties arising therefrom.

91 If this remains as an issue in the proceeding, I am satisfied that an account or inquiry is necessary to determine the percentage of ownership of the Joint Venture, and hence any entitlement to profits or liability for any losses of the Joint Venture. Such entitlement or exposure to liability will be determined by the relative percentages of the contributions which are found to have been made by the parties to the Joint Venture.

92 Such a procedure will also be necessary to determine the quantum of total profits or losses, and whether or not Eliana is entitled to the sum of $420,000 or any other sum, as claimed by Mr Sowiha, or there is money owing by Eliana to Dr Assad.

93 If any amount is claimed to be owing one to the other arising from the Joint Venture and remains as an issue between the parties, and if either party presses such a claim to determine the issue, I will order that the two questions, namely:

(a) the percentage of ownership of the Joint Venture between the parties determined by the relative percentages of the contributions which are found to have been made by the parties to the Joint Venture; and

(b) the amount (if any) presently owing by one party to the other arising from the Joint Venture;

be referred to a special referee pursuant to Order 50 of the Supreme Court (General Civil Procedure) Rules 2005 to decide the questions.

94 Given the nature of the questions to be decided, the special referee shall be a suitably qualified forensic accountant.

95 Further, given the level of risk involved in this exercise by reason of the paucity of documentary evidence, the costs, fees and expenses of the special referee and the production of his or her report, shall in the first instance be paid to the special referee by the party who presses the claim, and if both parties seek to press claims or make counterclaims, those costs, fees and expenses shall, in the first instance, be paid by the parties in equal shares.

1. It is declared that between 1 September 2008 and 30 June 2011 a joint venture existed between Eliana on the one part, and Dr Assad and the S. Assad Family Trust on the other part, for the purchase of the Property and its development with the construction of 11 apartments thereon, and the sale of those apartments.

1. Within the 30 day period either or both parties shall be at liberty to apply to the Court, on reasonable notice to the other and by arrangement with the Court, for a directions hearing to be conducted in relation to the appointment of a special referee to conduct an account or inquiry into the Joint Venture and report thereon, which is to be conducted on the terms stated in paragraphs [93] to [95] these Reasons, if that is sought by either or both parties.
2. If no account or inquiry is sought by either party, the profits and losses of the Joint Venture shall fall where they presently lie, with no money owing by one party to the other, and a further declaration will be made accordingly.
3. Within the 30 day period either or both parties shall be at liberty to apply to the Court, on reasonable notice to the other and by arrangement with the Court, for a hearing to be conducted in relation to the costs of the proceeding in the event that it is determined by both parties that no account or inquiry is to be conducted, and that the trial of the proceeding has concluded.

6. I will otherwise reserve the costs of the proceeding to this point.

[1] The property is described in Certificate of Title 08079 Folio 320 and Lots 1 and 2 on title plan 677283T.