Europlex Pty Ltd v Unique Living Australia Pty Ltd; Unique Living Australia Pty Ltd v Europlex Pty Ltd

Did the Building Contract govern the parties' rights?

1. Mr Allen submitted that "it was never the mutual subjective intention of the parties for their relationship to be governed by [the Building Contract]".
2. He advanced this argument on two bases: first, that the Building Contract failed for want of consideration; and second, that the document is a sham. I will address each of these in turn.

Was there consideration?

1. First, Mr Allen submitted that "there was no consideration for the written agreement. Europlex had already promised to build and Unique Living had promised to pay $5 million".
2. I do not accept that submission.
3. The email agreement of 8 September 2014 did not specify a price for which Europlex was obliged to complete the work. It merely provided that if "the budget for Terrigal goes over $5 million the extra amount will come off your commission".
4. By the Building Contract, Europlex promised to perform the work for "the fixed lump sum of $4,545,454 (ex GST)", that is $5 million inclusive of GST, and otherwise on the detailed terms of the Building Contract including as to the date by which practical completion be achieved and the payment of liquidated damages if it was not.
5. In turn, Unique Living made the various promises set out in the detailed terms of the Building Contract.
6. Further, the conduct of Europlex and Mr Minarovic shows they accepted that the Building Contract governed the relationship between Europlex and Unique Living.
7. On numerous occasions Mr Minarovic made statutory declarations concerning monies due and payable to Europlex "under the Building Contract".
8. Further, as I have mentioned, on 16 June 2017 Unique Living's solicitors served on Europlex a notice pursuant to cl 39 of the General Conditions of the Building Contract.
9. On 29 June 2017 Europlex's then solicitors, Fielding Robinson, replied to deny Unique Living's entitlement to serve a notice under cl 39.2, but nonetheless affirmed that the parties' obligations were governed by the Building Contract.
10. Thus, Fielding Robinson said: "It is our client's position that it is progressing the works under and in accordance with the [Building] Contract and has not suspended the works under the [Building] Contract as alleged or at all".
11. This shows that the parties agree their relationship was governed not merely by the oral arrangements made on 8 September 2014 as confirmed by Mr Hayek's email sent that day, but also by the Building Contract.
12. Mr Allen did not suggest there is any inconsistency between the two. I see none.

Is the Building Contract a sham?

1. For a document to be a "sham" there must be an intention to deceive (Lewis, [63]). Thus, even if a contract is entered into for an improper purpose, it will not be considered a "sham" unless "intentional deception as to the effect of a document" is also made out (Lewis, [68]-[70]). It is necessary to be precise as to the extent to which a transaction is said to be a sham; particularly because there is a strong assumption against making such a finding (Lewis [63], [65]).
2. Mr Allen submitted that the Building Contract was a sham. He put this on several bases.
3. Only two of them appear to refer to any deceitful intent.
4. They are that: 1. the parties executed another contract later in time which Mr Allen submitted was itself a sham and thus bespoke the parties' earlier preparedness to "create documents that purported to record contractual arrangements" when they in fact did not; and 2. Mr Hayek asked Mr Minarovic to "make up some bullshit" on a curriculum vitae to be provided to a financier of the project.
5. As to the first of these matters, Mr Allen referred to a document executed by Mr Hayek and Mr Minarovic on 5 September 2016. The document purported to be a contract between Unique Living and Europlex for the construction of the five townhouses at the Terrigal property for $1.25 million. It was sent to a home warranty manager at SHC Insurance Brokers the same day.
6. Mr Allen submitted that the 5 September 2016 contract was entered into for the purposes of obtaining home warranty insurance.
7. That may be so, but the contract did no more than specify the consideration for which Europlex agreed to perform part of the work at the Terrigal, namely construction of the five townhouses. There is no suggestion that the amount of that consideration was falsely calculated to deceive the home warranty insurer. It seems likely, as Mr Hayek said, that the document was intended by the parties to be supplementary to their main contract.
8. I do not see how the second matter relied on by Mr Allen, assuming it to be true, is capable of relevance to the status of the Building Contract.

Cross-claim

1. Unique Living brought a cross-claim seeking monies due pursuant to the Building Contract.
2. In his written submissions Mr Roberts put the matter this way: "Unique is entitled to recover from Europlex as a result of its breaches the sum of $5,023,040.53 comprising the following: (a) $2,847,191.74 paid in excess of the $5M contract sum under the Building Contract which was paid during the course of the works on account; (b) $915,000 in liquidated damages calculated pursuant to clause 34.7 of the Building Contract at the contractual rate of $2,500 per calendar day from the date for practical completion (1 August 2016) until the date of termination (2 August 2017). This is now conceded by the plaintiffs. (c) $808,454.54 paid to Phoenix to 27 April 2018 to complete the townhouses together with a further $124,783.73 including GST; (d) $265,121 paid to the purchasers of the townhouses to rescind their sale contracts after the townhouses were not completed by the sunset date specified in those contracts; (e) $31,545 paid to Ideal Maintenance to rectify defects in Europlex's works; and (f) $5,728.25 paid to Europlex's engineer, RGH Consulting Engineers, to release occupation certificates and other approvals."
3. I gave Mr Allen an opportunity to make written submissions about this aspect of the case.
4. On 6 August 2018 Mr Allen sent my Associate a note saying that Europlex did not make any submissions in relation to Unique Living's claim for damages for breach of contract.
5. Accordingly, I propose to enter judgment for Unique Living against Europlex in the amount claimed.

Misleading or deceptive conduct

1. In its cross-claim Unique Living also alleges that Europlex, Mr Minarovic, and Mr Minarovic's co-director, Mr Roman Cerny, made a number of representations concerning works on the Terrigal property which constituted misleading or deceptive conduct.
2. Insofar as Mr Hayek understood any representations made by Mr Minarovic or Mr Cerny to have been made on behalf of Europlex, they take Unique Living's case no further. That is because Unique Living is entitled to contractual damages against Europlex.
3. The significance of Unique Living's misleading or deceptive conduct claim is that it is directed also to Mr Minarovic and Mr Cerny personally.
4. Mr Roberts's submissions in relation to this aspect of Unique Living's case were brief, and barely developed in oral submissions.
5. For the reasons that follow, I am not satisfied that Unique Living has any entitlement for relief against either Mr Minarovic or Mr Cerny on this basis.

First representation

1. The first representation relates to a conversation between Mr Hayek and Mr Minarovic which led to Mr Hayek's email of 8 September 2014.
2. Mr Hayek said that he had a conversation with Mr Minarovic as follows: "Mr Hayek: How much is the construction cost for Terrigal going to be? Mr Minarovic: $4.5 million to $5 million. Mr Hayek: Are you sure? The budget calculation for construction has to be 100 per cent accurate. Mr Minarovic: I have done all my calculations and investigations. The costs will be $4.5 million give or take 10 per cent. This is what I do. You have to trust me on that. Mr Hayek: Ok if the costs are over $4.5 million I want to audit the paper work and you will need to justify how the budget went over. Anything above $5 million [will] be your responsibility and will come out of your pocket and fee. Mr Minarovic: Ok, I know it will be less than $5 million. Trust me on that. Mr Hayek: When will the project be completed? Mr Minarovic: I will have it all finished by July 2016."
3. Mr Roberts submitted that Mr Minarovic thereby represented that he could project manage the work being undertaken by Europlex for a total cost of $5 million and complete the work by 1 August 2016.
4. Mr Hayek may have relied upon what Mr Minarovic said in deciding to commit Unique Living to the agreement evidenced by his 8 September 2014 email.
5. But that email contained a contractual warranty that any costs overrun would come from Europlex's share of the profit and made no mention of a completion date. That was a contractual position with which Mr Hayek was evidently content.
6. I see no basis to conclude that Mr Hayek or Unique Living otherwise placed any reliance on what Mr Minarovic is alleged to have said.

Second representation

1. On 22 April 2016 Mr Minarovic, on Europlex letterhead, sent Mr Hayek at Unique Living a letter in which he said: "Total estimated cost of the project is $6,000,000 including variations".
2. The letter referred to "projected claims" up to September 2016.
3. Mr Roberts submitted that this letter amounted to a representation by Mr Minarovic "that he could complete the development in accordance with the Building Contract for $6 million including GST and variations by September 2016".
4. I see no such representation in this letter. What was said was no more than a statement of the estimated costs of the project and, at most, a projected completion date.

Third representation

1. On 3 September 2016 Mr Hayek sent Mr Minarovic an email stating: "I am hoping [that the] Terrigal construction will be completely finished by early November (by 4th Nov the latest). Please let me know if it is otherwise?"
2. Mr Minarovic replied: "I have no issues with apartment block. We [are] lagging behind with townhouses but I estimate we will [catch] up in this month".
3. In the same email Mr Hayek said: "If we follow all of the above timetable [including occupation certificates by 18 November 2016] I am hoping settlements would finalise by 9th of December!? So we can pay off [Unique Living's financier] by the 16th of December!"
4. Mr Minarovic replied: "Why can't we settle all apartments (no townhouses earlier)"
5. Mr Hayek then asked: "So is two months time frame to finish is reasonable?"
6. Mr Minarovic replied: "Yes it is depending on cash flow".
7. Mr Roberts submitted that these exchanges amounted to a representation by Mr Minarovic that Europlex could complete the development to lockup stage by December 2016.
8. I see no such representation in these exchanges. Mr Minarovic was saying no more than that a reasonable estimate was that the project would finish within two months "depending on cash flow".

Fourth representation

1. According Mr Hayek's affidavit, on 11 January 2017 he had this conversation with Mr Cerny: "On 11 January 2017 I received a telephone call from Roman. He said 'I am here with the purchaser of unit 9. He is going to give us $400,000 as a loan for six (6) weeks if you discount his unit by $25,000. You accept that, and we will finish the construction work.' I said, 'Why would I do that?' Roman said 'You pay us $400,000 now or we will not finish the job and you will go bankrupt as Latrobe's loan is about to expire and you will need to repay all of those millions.' I said, 'So if I pay you the $400,000 that's it, you will finish the job'. Roman said 'yes we finish the job'. "
2. Mr Roberts submitted that Mr Cerny thus represented that Europlex would be able to complete the works if Unique Living: 1. authorised a unit purchaser to make a payment of $400,000 on account of its purchase price immediately and directly to Europlex; and 2. agreed to discount the purchase price by $25,000.
3. But Mr Hayek's evidence makes clear that he did not rely on what Mr Cerny said. He sent an email to Mr Minarovic protesting the arrangement at [81]. Thereafter he received an assurance from Mr Minarovic that "I will repay all this money back to you even if my commission is completely depleted". Mr Hayek's affidavit evidence is that he relied on what Mr Minarovic said, not on what Mr Cerny said.
4. In any event, the alleged representation is said to be misleading because neither Mr Minarovic nor Mr Cerny in fact intended that Europlex would apply the $400,000 advance to complete the Terrigal development and that Europlex did not in fact apply the $400,000 to the development.
5. There is no direct evidence that this is so. Mr Minarovic denied it in cross-examination. He said "the money has been spent at the site" on "trades, on the materials, on the building" and "on the construction costs".
6. I see no reason to doubt Mr Minarovic's evidence.
7. In any event I think it clear that both Mr Cerny and Mr Minarovic were speaking on behalf of Europlex and were understood by Mr Hayek to be speaking on behalf of Europlex, and not in their personal capacity.

Fifth representation

1. Mr Hayek gave evidence in his affidavit that on 20 March 2017 he received an invoice from Europlex for $150,000 and had a conversation with Mr Minarovic as follows: "I said, 'What is this invoice for?' Rado replied, 'It's to pay the strata registration fees, civil engineer and council fees for the occupation certificate and other costs to finish the units according to the buyer's specifications and have units completely finished and ready for settlement in 10 days. It also includes all my time and costs for East Gosford since my last invoice.' I said, 'I will pay the invoice, but I want the property to be settled in a week.' Rado said 'Ok, you have my word'."
2. Mr Roberts submitted that Mr Minarovic thereby represented that Europlex would complete the works (including the townhouses, strata registration and occupation certificates) if Unique Living paid Europlex another $150,000.
3. Although this was not developed in Mr Roberts's submissions, according to the cross-claim this representation is said to be misleading because Mr Minarovic allegedly knew that the cost to complete the construction of the townhouses would exceed $150,000, that Mr Minarovic did not intend for Europlex to apply the $150,000 to complete the development, and did not in fact do so.
4. I have not been directed to any evidence to justify these assertions.
5. In any event, Mr Hayek understood Mr Minarovic to be speaking on behalf of Europlex, and not in a personal capacity.

Sixth representation

1. Mr Hayek said that on 6 April 2017 he had this conversation with Mr Minarovic: "Rado said, 'We need another $150,000.' I replied, 'Why? What for? I can't believe this.' Rado said, 'I am so sorry, I have fucked up badly. I mismanaged the project completely. This is a loan to me and I will pay it back to you. I promise on my children's lives I will return this money to you in full by June'. I said, 'I am sorry, but I cannot do it. I do not have the money.' Rado said, 'I know you are drowning in debt and if we don't settle on the 15 units you will sink so I will walk off the job now you will end up on the street. I suggest you better approve the loan and trust me, I will repay you.' I said, 'but you don't understand, I have no money'. Rado replied 'I have already spoken with the purchaser of unit 9. He is going to give us further $150,000 as a loan to complete the construction work if you discount his unit by $7,500. You accept that, and we will finish the job'."
2. In cross-examination Mr Minarovic denied having this conversation.
3. Mr Roberts submitted that Mr Minarovic thus represented that Europlex would complete the works if Unique Living authorised the purchaser from unit 9 to make an immediate and direct payment to Europlex, and if Unique Living agreed to discount the purchase by $7,500.
4. In Unique Living's cross-claim it is said that this representation was misleading for two reasons. First, because Mr Minarovic and therefore Europlex did not intend to apply, and did not in fact apply, the $150,000 to the development; and second, that Mr Minarovic knew that the cost to complete the construction would exceed $150,000.
5. Again, I have not been directed to any evidence to establish these matters.
6. Further, as with the earlier representations, it is clear that Mr Minarovic was speaking on behalf of Europlex, and not in his personal capacity, and that Mr Hayek understood that.

Seventh representation

1. Finally, Mr Hayek alleges that on 21 May 2017 he had this conversation with Mr Minarovic: "Rado said 'We need $400,000 to finish the townhouses and everything and to cover for the GST. It will be the last payment I will ever ask for. It is a loan to me and I will pay you back in two months I promise.' I said, 'You can't be serious. You already owe me so much, you made so many mistakes, so many promises and so many threats'. Rado said 'If you don't pay us the $400,000 we will walk off the job. You will get in trouble with the people I owe money to and I will put caveats against you, so you will never be able to finish those townhouses'."
2. In cross-examination Mr Minarovic denied asking for $400,000 to complete the townhouses and threatening to walk off the site.
3. Mr Roberts submitted that the conversation amounted to a representation by Mr Minarovic that Europlex would complete the works if Unique paid another $400,000.
4. I do not accept that submission. If any representation was made in a conversation it was that Mr Minarovic would cause the $400,000 to be repaid within two months and that if the money was not advanced Europlex "will walk off the job". I see no representation arising from these words about completion of the works.

Conclusion of misleading or deceptive conduct case

1. For those reasons, I am not satisfied that Unique Living has made out a misleading or deceptive conduct case against Mr Minarovic or against Mr Cerny.

The East Gosford property

1. On or about 29 April 2015 Unique Living purchased a property at East Gosford for $1.57 million.
2. There was then a development approval attached to the property for 14 units and 4 townhouses.
3. Unique Living requested various town planning consultants and other parties (including Europlex) to prepare and submit documents to amend the development application to permit construction of 27 units and no townhouses.
4. Unique Living spent some $334,000 preparing that documentation. Those costs included $16,293 paid to Europlex.
5. Europlex lodged the amended development application. It invoiced Unique Living for that work and was paid.
6. In cross-examination, Mr Hayek accepted that Mr Minarovic was "involved" in the amended development application although he added: "To what extent: very little. Probably about, as I said earlier, less than 10 per cent I would say".
7. Unique Living did not develop the property in accordance with the amended development approval. On 16 February 2018 it sold the property to a third party for $2.87 million.
8. Mr Minarovic gave evidence in his affidavit that in or about March 2016 he and Mr Hayek had a discussion to this effect: "Mr Hayek: Should I buy the property in East Gosford? Mr Minarovic: Yes. I've looked at the property and documents. Go for it. Mr Hayek: I'll buy it. Get to work on the DA and modification. Same deal as before. 70/30 split and I'll hold your profit at the end. Do you agree? Mr Minarovic: I agree."
9. If this conversation occurred, it must have been prior to March 2016 as Unique Living became the owner of the property in February 2016.
10. In his affidavit, Mr Hayek denied the existence of a joint venture to develop the East Gosford property.
11. He gave more nuanced evidence in cross-examination as follows: "Q. And do you recall that at some point in time in 2015 you said to Mr Minarovic, 'Should I buy the property in East Gosford?' A. Yeah. Q. To which he - A. Yeah, 'What do you think, should I buy it?' Q. And what did he say? A. 'Yeah, I think it's a good project.' Q. And after he said it was a good project, what did you say to him, if anything? A. Get together some - I'm sure, I don't recall exactly what I said to him, but I'm sure that my next logical answer will be, 'Well, get me more detailed information so we can assess the feasibility of you managing the project, the construction project, the construction work.' Q. Did you say to him words to the effect, 'Get to the work on the DA modification?' A. Yeah, that's the DA modification we're talking about. 'Well, help me with that. Earn my trust after you've lost it' and by that time we started to see that there - well, there's probably, I mean, a few hundred thousand or maybe up to a million dollars that we're running behind with the Terrigal project. So, you know there was a bit of a, you know, I wasn't very happy about it and he was keen, he was keen even into 2017, he was like, 'I hope - I hope that you will still go with me for the next project' and I said, 'Well, I don't know, I can't answer that for now.' Q. It's the case, isn't it, that you told Mr Minarovic words to the effect, 'Go and work on the DA modification?' A. And I told the same - a lot of other things, work on this engineering report, work on that thing, so, yes. Q. And by telling those things to Mr Minarovic, you were involving him in the East Gosford development, weren't you? A. As a consultant or a helper, you know, an advisor. Q. And you're involving Mr Minarovic in the East Gosford development whilst the Terrigal development had yet to be completed? A. Yes. Q. And you said to Mr Minarovic, 'Same deal as before, 70/30 split?' A. I said to him, 'Get me Terrigal as per time, I've got pre-sale contracts and we have to be really right with the time and the budget and then you'll be my builder. You'll be my - the project manager, just like in Terrigal, 30 for you, 70 for me'."
12. I see no reason to doubt Mr Hayek's account of what happened. Mr Minarovic had acted as project manager on the Terrigal project. It seems probable that the men would have agreed that he play the same role in relation to the East Gosford property, were it to be developed.
13. But the development did not proceed.
14. Mr Hayek arranged for the development approval to be amended and then on-sold the property. It is true that Mr Minarovic played some role in the formulation and submission of the application to amend the development application. For that work Europlex submitted an invoice which Unique Living paid.
15. Mr Minarovic did not get to play any role as project manager. The profit that Unique Living made on the property was not from a development that Mr Minarovic project managed. No occasion arose for any commission to be paid.
16. Europlex's claim in respect of the East Gosford property must be dismissed.

Conclusion

1. I invite the parties to confer and agree on the orders necessary to give effect to these reasons.

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: 21 August 2018