Helou v Chahhoud

Supreme Court of NSW|2021-07-21|Before: Parker J

Judgment - EX TEMPORE Revised from transcript; issued 23 July 2021

In these proceedings the plaintiffs sue the defendants for repayment of the outstanding balance ($450,000) of a $500,000 loan. The borrowing in question was made for the purpose of acquiring a rural property at Peak View in the Cooma district of south eastern New South Wales.
The plaintiffs contend that under the terms of the loan agreement they are entitled to register a mortgage on the property to secure the defendants' repayment obligations. To this end they seek specific performance orders. It is for that reason that the proceedings have been brought in this Division of the Court.
The first plaintiff, Mr Fawaz Helou, is a businessman of Lebanese extraction. He uses the nickname "Fuzz". The second plaintiff, Helou Developments Australia Pty Limited ("Helou Developments"), is a company controlled by him.
The loan arose out of dealings between Mr Helou and the second defendant, Mr Elias Joseph Taleb, who is also a businessman of Lebanese extraction. The first defendant, Ms Chadia Chahhoud, is the wife of Mr Taleb. She is the sole shareholder and director of the sixth defendant, Elias Pty Limited ("EPL").
Three other Taleb/Chahhoud companies are parties to the proceedings. They are: the third defendant, Steadiform Pty Limited; the fourth defendant, Steadiform Holdings Pty Limited; and the fifth defendant, Class 1 Form Pty Limited. I will refer to them as the "formwork companies". The shares in those companies are owned by EPL, except for Class 1 Form Pty Limited, which is 50% owned by Mr Taleb and 50% by Ms Chahhoud. Mr Taleb is the sole director of each company.
The loan moneys of $500,000 were paid from an account of Mr Helou's to an account of Mr Taleb's in February 2019. This followed discussions between Mr Helou and his accountant, Mr George Jack Michael, on the one hand, and Mr Taleb on the other.
The plaintiffs' case is primarily based on a loan agreement in the form of a deed, which is dated three months after the loan was initially made. The deed was signed by Mr Taleb on his own behalf and purportedly on behalf of all of the defendants. It purported to make all of the defendants borrowers for the purposes of the loan and liable to repay it. The deed also purported to oblige the borrowers to give a mortgage over the Peak View property if called upon to do so by the lender.

Application at trial for solicitor to withdraw

The hearing began before me this Monday, 19 July in accordance with prior directions. At the beginning of the trial an application was made by notice of motion for the solicitors for the defendants to be given leave to cease to act for Ms Chahhoud and EPL and for the proceedings against those defendants to be adjourned. Leave to withdraw was required from the Court because of r 7.29 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR").
I heard the application instanter and dismissed it with costs. I indicated at the time that I would give my reasons for taking that course when I gave my judgment in the proceedings. Those reasons now follow.
I first set out the relevant procedural chronology. The plaintiffs' statement of claim was filed on 20 March 2020. On 15 April Mr Alex Ronayne, solicitor, entered an appearance for all of the defendants. A defence and cross-claim was filed on 28 May.
Thereafter the matter was case managed in the Real Property List by Darke J. Following a number of case management hearings and the completion of the timetable for the filing of evidence, on 19 March 2021 his Honour fixed the matter for hearing commencing Monday, 19 July, with an estimate of three days.
On 5 July an application was made by Mr Ronayne on the defendants' behalf to have the hearing date vacated and the proceedings adjourned. That application was heard by Darke J on the following day, 6 July.
A number of grounds for the adjournment were advanced. One was the difficulties which it was said Mr Taleb and Ms Chahhoud faced in defending the proceedings from Lebanon, where they are currently living. Reference was made to the after-effects of the huge explosion which took place in the Port of Beirut in August last year; to the country's uncertain political situation; and to the dire effect of the COVID-19 pandemic there.
Another factor put forward in support of the application was that the cross-claim raises questions about matters which go beyond the loan agreement. These matters centre in some way on a waste disposal venture in which Mr Taleb and Mr Helou were involved at a property near Canberra (Mr Taleb appears to have conducted his business, or a substantial part of his business, in the Canberra area; his and Ms Chahhoud's family home was also there).
His Honour refused to vacate the hearing date and adjourn the proceedings. Instead he made directions to facilitate the giving of evidence by video link from Lebanon. He also ordered that all of the issues arising on the cross-claim, apart from those concerning the loan, be heard separately, after the loan claims have been determined. The effect of this is that the present hearing has not been concerned with the dispute about the waste disposal operation.
The fixture was later referred to me and on 13 July my Associate wrote to the parties providing them with details of the way in which the hearing was to be conducted. Then at 2:41pm on last Friday, 16 July a notice of change of solicitor was filed on behalf of the defendants. The notice was emailed to my Associate at 3:27pm.
The new solicitor was Mr Joseph Badawi, of Harrington Legal. Counsel previously retained was also discharged and replaced by counsel who appeared before me at the trial, Mr Tiliakos. At 4:19pm my Associate re-sent the notification about the arrangements for the remote hearing, including a notification to the defendants' new solicitor, Mr Badawi.
On the afternoon of Sunday, 18 July there were sent to the Court three documents apparently emanating from Ms Chahhoud. The first was a purported notice of removal of solicitor which stated that Mr Badawi had been removed as the solicitor for Ms Chahhoud and for EPL, although not for Mr Taleb and the formwork companies. The second was a notice of motion seeking an adjournment of the proceedings. The third was an affidavit from Ms Chahhoud in support of that notice of motion which stated that a conflict of interest had only just been discovered and that she had not previously been advised about it by Mr Ronayne.
None of these documents had been filed. Filing the notice of motion and supporting affidavit would of course have required the Court's prior leave, which had not been obtained. The notice of removal of solicitor, which perhaps might have been filed without any prior leave, did not comply with the Rules in that it did not identify an address for service in New South Wales. Furthermore, in so far as the notice purportedly removed Mr Badawi as the solicitor for EPL, it would have left EPL without representation in the proceedings. The significance of this was that, although it seems from Ms Chahhoud's documents that she was proposing to conduct EPL's defence herself, the relevant rules which would have required an affidavit and a resolution of EPL permitting her to do so had not been complied with: see UCPR, r 7.1.
This was the state of affairs as it stood when on Monday morning the application to which I have referred was made. Rather than the application being pursued on the basis of the client exercising a right to remove the solicitor, the application instead took the form of an application by Mr Badawi on behalf of Ms Chahhoud and EPL for leave for him to withdraw. No doubt this approach was taken in recognition of the fact that the purported notice of removal had not been filed and did not comply with the Rules, so that Mr Badawi remained on the record for Ms Chahhoud and EPL.
The evidence in support of the application was a brief affidavit from Mr Badawi. He stated that on Saturday afternoon "we" (apparently Mr Badawi and others in his firm, although they were not identified) had, in the course of preparation for the hearing, become concerned that "a conflict of interest may exist". Mr Badawi also deposed that counsel had developed the same concern. He continued that on Sunday morning his clients were notified of a decision to withdraw. No doubt this explains the flurry of activity on Sunday afternoon which I have already described.
In my view, Mr Badawi's evidence fell far short of establishing grounds for withdrawal. The affidavit only referred to the possibility of a conflict existing; it did not identify the potential conflict. Certainly it seems that there were, and are, defences available to Ms Chahhoud and EPL which are not available to Mr Taleb (or the formwork companies). But that does not necessarily mean that there is a conflict involved in representing Ms Chahhoud and EPL, on the one hand, and Mr Taleb (and the formwork companies) on the other.
On the evidence there is simply nothing which indicates that there is, in fact, any such conflict. The application had to be refused for that reason alone.
Had there been more substance to the application there still would have been very little discretionary weight behind it. The proceedings took more than a year to come to trial. There had been ample opportunity for any conflict between the defendants to be identified.
It appears that the defendants had lost faith in Mr Ronayne (although the evidence before me did not establish any basis in fact for their having done so). No doubt Mr Badawi was anxious to ensure that the defendants should be represented by a solicitor of their choice, but ultimately he was under no obligation to accept instructions. If he did so without full investigation of the possibility of conflicts between the defendants, that cannot at all be blamed on the plaintiffs. They bore no responsibility whatever for the whole affair.
In these circumstances, even if I had contemplated allowing the application for Mr Badawi to withdraw, there would have been no justification for adjourning the hearing. This would have left Ms Chahhoud to conduct the hearing unrepresented and EPL without any representation at all. This would not have been in any party's interests, least of all in the interests of Ms Chahhoud and EPL, and this was a further reason why the application had to fail.

Claims for determination

The defendants' first line of defence was that the deed of loan was a false document. The plaintiffs alleged that it was signed by Mr Taleb in the presence of Mr Helou, Mr Michael and one of Mr Michael's employees, Mr Youssef El Chwayri. Mr El Chwayri formally signed the deed as a witness to the signatures. Mr Taleb, however, alleged that all of these gentlemen had falsified their evidence. He said that there was no meeting whatever on the day on which the deed was allegedly signed and that he had never even met Mr El Chwayri.
Mr Taleb suggested that the deed had been faked as part of a pattern of nefarious conduct on the part of Mr Helou and his associates. On his account, that conduct had extended, after he had failed to repay the loan, to threats being made against him and then a shooting incident in Beirut. This provoked a detailed rebuttal from the plaintiffs.
Forgery was not however the only defence that was put forward. The defendants other than Mr Taleb disputed that, even if the deed was valid, they were bound by it. They denied that Mr Taleb had authority to sign the deed on their behalf.
The defendants' cross‑claim also included prayers for relief under the National Credit Code (National Consumer Credit Protection Act 2009 (Cth), Sch 1) against the borrowers (to the extent liable) having to make repayment of the loan. The cross‑claim alleged that the National Credit Code applied because the loan had been made in the course of the business of lending money being conducted by the lender or lenders.
As I have mentioned, the defendants' allegation that the deed of loan was a forgery raised extensive factual issues. Each of Mr Helou, Mr Michael and Mr El Chwayri was required to give evidence and was cross‑examined, in the course of which counsel for the defendants put to each of them that their accounts of how the deed came to be signed were false. Mr Taleb then gave evidence and was cross‑examined extensively, and to considerable effect, on his credit.
But when it came to final submissions, counsel for the defendants ultimately did not press the contention that the deed of loan was a false document. Nor did counsel contest Mr Taleb's authority to bind the formwork companies to the terms of the deed as borrowers. Counsel also abandoned the National Credit Code claim advanced in the cross‑claim.
The result of these concessions is that the lender is entitled to judgment on the loan agreement against Mr Taleb and the formwork companies. There is a minor issue as to whether the lender for this purpose is Helou Developments alone or Helou Developments and Mr Helou jointly.
The major issue on the contractual claim is whether Ms Chahhoud or EPL are bound by the deed of loan (or by any previous oral agreement). In addition, there is now an alternative claim against Ms Chahhoud in equity. I will describe that claim in more detail when I deal with it below.

Chronology of relevant events

It appears that agreement was reached with the vendor for the purchase of the Peak View property in around the end of May 2018. The negotiations were carried out by Mr Taleb. The price agreed was $550,000. On 25 May Mr Taleb paid $27,500 to the vendors (5% of the purchase price) as the deposit, or part-payment of the deposit.
The contract was not prepared until shortly after this payment had been made. In evidence is a letter from the solicitors for the vendor to the solicitors appointed for the purchaser, a Canberra firm, dated 4 June 2018. Accompanying that letter was a form of contract which appears to have been prepared at around that time.
The actual signed version of the contract is not in evidence, but it seems clear enough that the contract in the form accompanying the letter was signed by Ms Chahhoud at some stage early in June 2018. She said in her evidence that she had visited the offices of the solicitors at that time and I can only assume that that was for the purpose of signing the contract.
The form of contract in evidence shows Ms Chahhoud as the purchaser. The contract price is shown as $550,000, but the contract provided for a 10% deposit. The evidence before me does not identify when and how (or even if) the remaining 5% was paid. The form of contract in evidence provided for settlement within 42 days, but it seems that Mr Taleb experienced difficulty in raising the necessary funds and the purchase was not actually completed until February the following year.
The plaintiffs' account of the making of the loan, which in the light of counsel's concessions in final submissions I take to be no longer in dispute, was as follows. Mr Taleb approached Mr Helou in January 2019. At that stage he was under pressure to complete and wished to do so because he believed that the property was worth considerably more than the contract price. The initial conversation between Mr Taleb and Mr Helou took place in Mr Taleb's car in the course of a round trip to Cooma. Mr Helou then telephoned Mr Michael from the car and told him to settle the details with Mr Taleb on his (Mr Helou's) behalf.
A meeting between Mr Michael and Mr Taleb, at which Mr Helou was (according to Mr Michael) also present, took place on 25 February. At that meeting the terms of the loan were orally agreed. The $500,000 was paid to Mr Taleb on that date.
The original term of the loan had been for three months. By the end of that period Mr Taleb was not in a position to repay and was seeking further time. Mr Helou had become suspicious about Mr Taleb's good faith and, I infer, directed Mr Michael to sort matters out.
It was in these circumstances that Mr Michael prepared the deed of loan. Together with Mr Helou and Mr El Chwayri they attended Mr Taleb's business premises in Canberra, where they obtained his signature on the deed of loan.
It seems that Mr Taleb had represented that the loan would be repaid within a further three months, but this did not happen. Eventually in October or November Mr Taleb repudiated any obligation to repay on the basis of an alleged breach by Mr Helou of his obligations of the arrangement concerning the waste disposal operation.

Contractual claim

Counsel for the plaintiffs put the contractual claim against the defendants on two bases. The primary basis, as I have already mentioned, was under the deed of loan. Counsel also contended that the oral arrangements between Mr Michael and Mr Taleb on 25 February 2019 amounted to an oral contract, which was binding on Ms Chahhoud and EPL, even if the deed of loan was not.
As I have mentioned, the deed of loan was prepared by Mr Michael, who is not a lawyer. With all due respect to him, that is clear from its form, which was amateurish at best. Mr Michael appears to have used someone else's loan agreement as a template, but without understanding the legal issues which can arise in the identification of parties, execution and the like.
The deed begins with the identification of the "lender" (to which I will refer in more detail in due course) and the "borrowers". The borrowers are the six defendants in the proceedings. After Mr Taleb, the second borrower is identified as Steadiform (its ACN is then given), following there appears "- Elias Joseph Taleb in the form of company director". The same description appears for Steadiform Holdings Pty Limited and Class 1 Form Pty Limited. Then Ms Chahhoud is identified, followed by "- Elias Taleb in the form of spouse for Ms Chadia Chahhoud". Finally, EPL is identified, with its ACN set out, followed by "- Chadia Chahhoud in the form of company director". At the end of the deed there was a single space for signature on behalf of the borrowers by Mr Taleb, which is where he signed the document.
There were no dealings whatever between Mr Michael and Ms Chahhoud. Mr Michael candidly acknowledged this in his cross-examination: Q. You never asked for Ms Chahhoud to sign that deed? A. I've never met her and I've never asked her to do anything.
In her affidavit Ms Chahhoud dealt briefly with the acquisition of the Peak View property. She did not say anything about the background to the acquisition. Paragraph 12 of her affidavit stated: I was not involved with the purchase of the Cooma Property except for attending upon the offices of my solicitor Ray Swift Moutrage and Associates [the Canberra firm] on or around 4 June 2018. Elias arranged everything else and had the Cooma Property put in my name.
The affidavit went on to deal with the deed of loan. Paragraph 16 stated: Prior to it being shown to me for the purposes of giving evidence in these proceedings, I never saw the Purported Loan Agreement.
Paragraph 17 stated: I did not and never have authorised, instructed or given permission to the Second Defendant, or any other person to sign the Purported Loan Agreement on behalf of myself or the Sixth Defendant.
Counsel for the plaintiffs objected to paragraph 17 on the ground that it was conclusory in form. But I indicated that I would read the paragraph simply as a statement that Ms Chahhoud had never given express authorisation, instructions or permission to Mr Taleb, or to any other person, to sign the deed of loan on her behalf or on behalf of EPL. As I understood it, counsel did not object to the admission of the paragraph if it was read in that way.
In cross-examination Ms Chahhoud touched on the background to the purchase of the property. In his affidavit Mr Taleb had given the impression that he had initially acquired the property for himself and it was only in February 2019 that he decided to put it in his wife's name. He said that he spoke to Ms Chahhoud and obtained her agreement to that course. Ms Chahhoud vehemently rejected this version of events.
According to Ms Chahhoud, the acquisition of a rural property for the family (she and Mr Taleb have six children) had always been a dream of hers. Ms Chahhoud also apparently saw the purchase of the property as being in some way derived from financial contributions that she had made (through her own work and through gifts from her family) to Mr Taleb's and her finances. At one point she said that she had provided approximately $690,000 to her husband and Mr Taleb in his evidence also referred to owing Ms Chahhoud money. There was, however, no evidence of any such sum having been set aside, let alone of anything amounting to an agreement between the spouses in the nature of a loan.
In cross-examination counsel sought to build upon what Ms Chahhoud said in paragraph 12 of her affidavit about leaving the arrangements for the purchase of the Peak View property to her husband. Counsel obtained the following evidence from Ms Chahhoud: Q. You say in your affidavit that Elias arranged everything, is that correct? A. Elias, Elias looked for a property for me, but maybe like, like, yes, he was like negotiating with someone, he was looking for something. I have no time to run from office to office, from place to place. So-- Q. You authorised Elias to make enquiries on your behalf? A. No, not authorising someone to do something, but like he can - Iike I've asked, I trust my husband so, "can you please find me something." Like normal, something that happens between - so I gave him an amount of money that I've been raising for nearly, you can say I've been saving that for 15 years. Yes, before I got married, 15 years. . . . Q. In paragraph 12 you say, "Elias arranged everything else--" A. Arrange everything else, what I mean by this is like he looked for a - I gave him the money, like it's between husband and wife, you trust your husband so you give him. I, I, it's my thing, so I give him the money-- HIS HONOUR Q. Ms Chahhoud. A. --to look for something for me. . . . Q. Yes. You said Elias arranged everything else? A. That's right. Q. Yes. A. Correct. Q. Insofar as he arranged everything else, you agreed with him to do that, didn't you? A. Yes, of course. Q. And however he organised it, you were content with that arrangement, is that correct? A. No, incorrect.
Counsel did not, however, contest what Ms Chahhoud said in paragraphs 16 and 17 of her affidavit. Indeed counsel did not suggest to Ms Chahhoud that she had any knowledge of the arrangements made by Mr Taleb to raise the money necessary to complete the purchase. Nor was the reference to Ms Chahhoud having given her husband money taken any further.
The principles which apply to a dispute of the present type about authority were authoritatively stated by Jordan CJ in Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 at 149-150 in a passage recently cited by the Court of Appeal in Erceg v Volonakis (2020) 103 NSWLR 200 at 205-206 [23] (citations omitted): The authority of an agent may be particular - to do a specified act or acts, or general - to do acts of one or more classes. An authority expressly given, whether it be particular or general, gives implied authority to do anything which is incidental to what is expressly authorised. Whether any authority has been given, and if so what is the scope of the authority, are questions of fact to be determined by evidence. Evidence that a person is purporting to do acts on behalf of a principal in some capacity in such circumstances that the knowledge and approval of the principal may fairly be inferred is evidence that the principal has authorised him to act in the particular capacity. If there is evidence justifying such an inference, it justifies the further inference that the person has authority to do such acts as would be done, as a matter of ordinary business practice, by a person acting in such a capacity. If there is no evidence as to what authority was in fact expressly given, or what the business practice is, the jury may draw inferences based upon their own knowledge of business and affairs. This may be done, for example, where there is evidence that a person is manager or superintendent of a business or occupies a less responsible position. Evidence that an agent was prohibited from doing an act which, apart from such a prohibition, might have been inferred to be within the scope of his authority is evidence which, if accepted, prevents it from being inferred that the act was in fact within the scope of his authority. If, however, a person ignorant of the prohibition is induced to act on the assumption that the agent possess an authority which such an agent would ordinarily possess, the doctrine of holding out may prevent the principal from disputing the agent's authority.
In the present case no question of express authority to execute the deed of loan arises. The plaintiffs' case is one of implied authority. As Jordan CJ made clear, implied authority may be inferred from other evidence. But as his Honour made clear, it must be possible to infer an instruction or acts of Ms Chahhoud herself which gave Mr Taleb authority to act on her behalf. The mere fact that Mr Taleb purported to act on her behalf does not of itself establish that in fact he had such authority.
In the course of submissions counsel also referred to Mr Taleb having ostensible authority. It was not clear to me whether this was ultimately pressed or added anything to the case but, again, for Ms Chahhoud to be bound by ostensible authority there would have to be proof of the acts by her, as the putative principal, holding Mr Taleb out: see Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 at 80-81.
In his submissions counsel for the plaintiffs laid heavy emphasis on what he characterised as an admission or concession by Ms Chahhoud in paragraph 12 of her affidavit that she left all of the arrangements associated with the purchase to her husband, Mr Taleb. Counsel submitted that these arrangements necessarily included the raising of moneys to meet Ms Chahhoud's obligation to complete the contract. Counsel characterised paragraph 12, supplemented by the passages of cross‑examination which I have set out, as in effect an admission of a grant of authority to Mr Taleb to raise the necessary funds by borrowing on Ms Chahhoud's behalf.
In my view, paragraph 12 is too weak a foundation to support the weight that counsel's argument puts on it. The conveyancing steps involved in exchanging contracts, and then completing the registration of the purchase, are quite distinct commercially and legally from the steps involved in raising finance. Not every purchase requires finance to be raised at all and there is an extremely wide scope for variation in the terms on which finance may be obtained for a purchase. These variables include not only who the borrower (or perhaps the guarantors) will be, but also the amount and term of the loan, the interest rate and the terms of any security.
In my view, the reference in paragraph 12 to other arrangements does not, even when considered on its own, necessarily convey that Ms Chahhoud was authorising Mr Taleb to raise finance on her behalf without any further reference to her. When paragraph 12 is read in the context of paragraphs 16 and 17, I think that it would even more clearly be wrong to interpret it as some sort of admission that Ms Chahhoud authorised her husband to make any and all borrowing arrangements that were required and which he saw fit to make.
Further doubt is cast on counsel's interpretation by the evidence Ms Chahhoud gave in cross-examination to the effect that the purchase of the house represented her own financial contribution to the marriage. Even if at the time the loan was made the contribution by Ms Chahhoud could not be identified with any particular fund of money or other liquid asset held by Mr Taleb, she might well have seen him as being morally obliged to provide the purchase price from his own resources without further refence to her. In other words, I see nothing in paragraph 12 to require the inference that Ms Chahhoud must have known that Mr Taleb would be borrowing in her name any particular amount, or indeed any amount at all, in order to complete the purchase.
Counsel for the plaintiffs submitted that the present case was similar in its facts to Erceg v Volonakis and should be decided in the same way. That case involved the purchase of a property by a couple in the name of the wife where the negotiations with the lender were undertaken by the husband. The trial judge, Hallen J, found by inference that the wife had agreed to the loan and had authorised the husband to enter into it on her behalf, and that finding was upheld on appeal.
In Erceg the wife did not give evidence (although an affidavit had been prepared for her and served prior to the hearing). Her husband did and stated in cross‑examination that his wife had approved the loan. The present case is quite different. There is no evidence from Mr Taleb or anyone else that Ms Chahhoud was even aware of the terms of the loan let alone that she agreed to them.
Furthermore, Ms Chahhoud did give evidence, so there can be no basis for any Jones v Dunkel inference against her. Counsel for the plaintiffs never put to Ms Chahhoud that she knew that borrowing would be required or that her husband would be undertaking it on her behalf. In my view, it would be quite wrong for me in these circumstances to reach the conclusion that she did so by inference.
For completeness, I should refer to the oral conversation upon which counsel relied as giving rise to an oral contract of loan binding on Ms Chahhoud on 25 February 2019. Mr Michael's version of the conversation in his affidavit was: Taleb: What is the interest going to be on this loan? Michael: I suggest you just agree to a figure of $1,900.00 which will roughly cover the interest on the loan. Michael: Are you still going to be ok to repay the loan in full within 2 months as previously discussed? Taleb: Yes, two months maximum three months. I told you it is worth over $800,000.00 maybe $900,000.00 but I bought It so cheap because the owner did not know what it was worth and I negotiated a cheap price with him and secured it before he went to any real estate agent to find out what it is worth. That is why I need the money to settle this as soon as possible. I will give the titles to Fawaz as security but I will need them when I go to refinance. Michael: Fuzz are you happy to lend the money on these terms? Helou: I am happy with those terms but what happens if Elias does not pay within 2-3 months? Taleb: Don't worry I have money coming in from India if I can't refinance. That is the worst case scenario. I have just sold rights to my formwork company Steadiform in India and I should have $1.5mllllon coming in within the next month. Michael: Does your wife have anything else in her name as security? Taleb: The house we are living in is not in our name yet because in Canberra you have to enter a ten year lease before owning the property. The ten years is nearly up and I have paid the ten years in advance. So your only security will be over the farm. There's no mortgage so you will be the only one with security. Helou: I am happy to proceed. I trust Elias. Michael: I will need details of your wife's account so I can arrange the transfer of the money. Taleb: I do not have my wife's account details - so just put it into my account and I will pass it on. The account number is…
Even on Mr Michael's account, there was no express stipulation that Ms Chahhoud was to be a borrower. Elsewhere in Mr Michael's version of the conversation Mr Taleb was referred to as the borrower. If Ms Chahhoud was mentioned at all in the conversation on 25 February, it seems to me equally, if not more, probable that there was only a passing reference to the property being put in her name. I suspect that it was only when Mr Michael came to prepare the deed of loan in May that he turned his mind to who should be under an obligation to repay (and to provide security). In any event, my reasoning concerning authority on the deed of loan is equally applicable to any earlier oral commitment.
The contractual claim against Ms Chahhoud therefore fails. So too does the claim against EPL. I should say in passing that on any view it would seem the claim against EPL is unsustainable since the deed of loan contemplated that if EPL was to enter into the agreement it would be through Ms Chahhoud not Mr Taleb, but I do not need to pursue that further here.
The remaining question on the contractual part of the case is who the lender is. The deed of loan identified the lender in the following terms: ('The Lender') Helou Developments Australia Pty Ltd (Mr Fawaz Helou) Address: [XX] Rookwood Rd, YAGOONA NSW 2199 (ACN 601 752 112)
Counsel pointed out that in the body of the agreement the loan was described in the following way: "This is a rollover from the initial loan amount of dollars 500,000 which was transferred to 'The Borrower' from 'The Lender' on the 25/02/2019." Counsel noted that the payment in fact was made by Mr Helou personally and submitted that this could be taken into account in construing the deed as part of the matrix of fact.
I am not sure that this submission is correct. The matrix of fact consists of matters which are known to both parties. In fact Mr Taleb had no actual knowledge of where the money came from and that was not important to him.
It is true, as counsel pointed out, that as a result of previous dealings between the parties Mr Taleb believed that the money was coming through an overdraft belonging to Mr Helou. But I am not sure that the evidence establishes that this was anything more than a general understanding that the overdraft was held by Mr Helou or entities associated with him. Accordingly, I am not sure that the fact that the money came from a bank account in the name of Mr Helou is available for the purpose of the matrix of fact.
In any event I do not think this matters. To my mind the most weighty consideration is that although the deed of loan refers to the borrowers in the plural, it refers to the lender in the singular. Furthermore Mr Helou individually is not separately listed as a lender in the way that each of the six defendants is individually listed as a borrower.
Without the parenthetical reference to Mr Helou, the reference to the lender could only be a reference to Helou Developments. The parenthetical reference is ambiguous. It may be nothing more than an identification of the contact person for the company, or it may be surplusage. The fact that the document was not professionally drafted reinforces the uncertainty about what it does mean.
Overall I do not think that the deed of loan exhibits a clear objective intention to make Mr Helou a lending party in his own individual right. His claim to enforce it fails.

Equitable claim

Counsel for the plaintiffs relied upon the following statement of principle by Romer LJ in the English Court of Appeal decision in Bannatyne v MacIver [1906] 1 KB 103 at 109: Where money is borrowed on behalf of a principal by an agent, the lender believing that the agent has authority though it turns out that his act has not been authorized, or ratified, or adopted by the principal, then, although the principal cannot be sued at law, yet in equity, to the extent to which the money borrowed has in fact been applied in paying legal debts and obligations of the principal, the lender is entitled to stand in the same position as if the money had been originally borrowed by the principal.
Counsel submitted that in the present case the equity was engaged because the money was provided by the lender in the belief that Mr Taleb was acting as agent for his wife and the moneys were in fact applied in settling a debt of hers, namely the purchase of the Peak View property under the contract.
The first difficulty with this contention is that it was not pleaded. Counsel submitted that the recitation of facts in the pleading was wide enough to cover this claim. But I think that contention is problematical.
Whatever uncertainties may exist about the nature and scope of the equitable doctrine upon which counsel relies, it is clear that that doctrine does not result in the enforcement in equity of a loan agreement which is unenforceable at law. The equity is limited to recoupment or subrogation to the extent, and to the extent only, that money has been used to discharge the debts of the putative principal. Accordingly the usual relief, which was the relief ordered in Bannatyne v MacIver, is an account to determine the extent to which the moneys have been expended on discharging the putative principal's debt, and the judgment ultimately entered is a judgment for the amount revealed by that account. No such relief was claimed in the present case.
Furthermore, it follows from the nature of the equity that the plaintiff must prove that the money was actually applied to the putative principal's debts. No such factual allegation is pleaded in the statement of claim. Accordingly, reliance on the equity falls outside the pleadings. Even if it did not it would be such as to take the defendants by surprise.
In Bannatyne v MacIver the defendants were the partners in a firm of ship and insurance brokers carrying on business at Liverpool. They established a branch of their business in London which was managed for them by a clerk called Hudson. Hudson had no authority to borrow money on behalf of the firm, but he managed to borrow a sum of money from the plaintiff by representing that he had authority to do so and that the money would be used for the purposes of the firm. At least some of the money was used for those purposes and it was in that context that Romer LJ stated the principle which I have already quoted (see [77] above).
The doctrinal basis of the equity may not be settled. It is treated by the learned authors of J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane's Equity Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) at [9-125]-[9-170] as a part of the law of subrogation. But in Bannatyne v MacIver counsel for the successful appellant (J R Atkin, as Lord Atkin then was) suggested that the basis of the doctrine might be "the equitable doctrine of following money"; the equity also covers some of the same grounds as are covered by what would now be classified as restitutionary forms of relief: see, in particular, Meagher, Gummow and Lehane at [9-140].
Bannatyne v MacIver was a commercial case. The present case involves domestic arrangements between husband and wife, which if they are to give rise to equitable intervention are more likely to involve the application of quite different equitable doctrines. If in fact the money for the purchase was provided by Mr Taleb, and the presumption of advancement was rebutted, then Ms Chahhoud would hold the property on resulting trust for him. It is by no means clear to me that in such circumstances equity would also intervene to provide an additional and inconsistent personal obligation of recoupment in favour of the creditor.
What all of this points up is that the equitable doctrine has been raised as an afterthought in the present case without the defendants having had a proper opportunity to consider the elements of the equity for the purpose of determining whether, and if so how, it could apply in circumstances such as the present. For these reasons I do not think that I should permit the equitable claim to be agitated.

Conclusions and orders

I have concluded that: 1. Helou Developments is the party entitled to judgment against Mr Taleb and the formwork companies under the deed of loan; 2. the contractual claim against Ms Chahhoud and EPL fails; and 3. the equitable claim against Ms Chahhoud is not available as a matter of pleading. (The parties addressed on interest and costs)
The orders of the Court are: 1. Order that there be judgment in favour of the second plaintiff against each of the second, third, fourth and fifth defendants in the sum of $602,133. 2. Order that the first plaintiff's claim be dismissed. 3. Order that the second plaintiff's claim as against the first defendant and the sixth defendant be dismissed. 4. Order that the cross-claim in respect of the National Credit Code issues be dismissed. 5. Order that each of the second, third, fourth and fifth defendants pay the costs of the second plaintiff's claim against him or it. 6. Order that the first plaintiff pay the costs of each of the defendants solely referable to the first plaintiff claim against her, him or it. 7. Order that the second plaintiff pay the costs of each of the first defendant and the sixth defendant solely referable to the second plaintiff's claim against her or it. 8. Order that the cross-claimants pay the costs of the cross-defendants of the cross-claim to the extent referable to the National Credit Code issues.

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: 23 July 2021

National Credit Code Uniform Civil Procedure Rules 2005(NSW)

National Credit Code (National Consumer Credit Protection Act 2009(Cth)

(2020) 103 NSWLR 200

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (3)

Cited By (1)