In the matter of Waterfront Investments Group Pty Limited (in liquidation) [2015] NSWSC 18

Solicitors: Gillis Delaney Lawyers (Plaintiffs) Reuben George Lawyers (Defendants) File Number(s): 2013/193520

Introduction

1. By Amended Statement of Claim filed on 29 May 2014, Mr John Kukulovski ("Liquidator") in his capacity as liquidator of Waterfront Investments Group Pty Ltd (in liq) ("Waterfront") and Waterfront seek a range of relief against several parties. Waterfront carried out a substantial property development on land situated at The Entrance, New South Wales, comprising 25 residential units and areas on the ground floor used for retail activity.
2. The First Defendant ("Eddy Investments") is the purchaser of commercial unit 1A in the development and the Second Defendant, Mr Edward Ahmajani, is the sole director and shareholder in Eddy Investments. The Third Defendant ("NJ Investments") is the purchaser of unit 11 in the development and its sole director and shareholder is the Fourth Defendant, Mrs Nicole Jammal. The Fifth Defendant ("Platnum") received certain payments and its sole director and shareholder is also Mrs Jammal. The Sixth Defendant, Mr Samir Jammal, was the sole director of Waterfront at relevant times (Ex P1, 952 - 954), is the husband of Mrs Jammal and the uncle of Mr Ahmajani, and also has an involvement with the other entities involved in the proceedings. In their opening submissions, the Defendants accepted that any relevant knowledge held by or attributable to Mr Jammal could also, to the extent relevant, be attributed to Eddy Investments, NJ Investments and/or Platnum, since Mr Jammal acknowledges that he effectively controlled each of those corporations, and I proceed on that basis. The Seventh Defendant is National Australia Bank Limited ("NAB"), which is a secured lender to Eddy Investments in respect of unit 1A and NJ Investments in respect of unit 11. By letter dated 14 October 2014, NAB noted that no allegations were made against it in the Amended Statement of Claim and that it would not appear at the hearing and neither consented to nor opposed the orders sought.
3. The matters in issue in the proceedings narrowed somewhat by the time of the final hearing. In particular, the Plaintiffs claimed a declaration that Waterfront was insolvent at relevant times. In their opening submissions, the Defendants accepted that Waterfront was, for the purposes of these proceedings, insolvent as at the date of execution of each of the contracts for the sale of unit 11 (9 October 2009) and unit 1A (18 December 2009). I proceed on that basis. I note, for completeness, that the Defendants conceded actual insolvency and not any failure to comply with s 286 of the Corporations Act 2001 (Cth) in respect of the maintenance of financial records for the companies. It is not necessary to determine whether insolvency could have been established on that basis where it is conceded on other grounds.

Affidavit evidence and credit

1. The Plaintiffs relied on the Liquidator's affidavit dated 30 September 2014 which set out background to the proceedings and the result of the Liquidator's inquiries into the circumstances of the sale of unit 11 and unit 1A. He also referred to the circumstances surrounding the deposit of a bank cheque in the sum of AUD 131,000 into a new account in the name of Waterfront and subsequent withdrawals from that account. By his further affidavit dated 7 May 2014, the Liquidator set out the basis of his opinion that Waterfront was insolvent from 13 January 2010 onwards. As I noted above, the fact of Waterfront's insolvency at relevant times was ultimately not disputed in the proceedings.
2. The Plaintiffs also relied on an affidavit of Mr Michael Touma sworn 14 March 2014 which set out information concerning the BBX trading system and dealings between companies in the BBX Group, Waterfront and Mr Jammal and associated entities in respect of the development. Mr Touma's affidavit annexed a copy of the rules of the BBX trading program as it operated in 2009 and 2010, which are of some relevance as I will note below. The Plaintiffs also relied on an affidavit in reply of Mr Touma sworn 17 October 2014. The Plaintiffs submit that Mr Touma should be accepted as a truthful witness, that he was not seriously challenged on many of the contested conversations and his account of all conversations (including that relating to a round robin transaction to which I refer below) should be accepted.
3. A credit finding in respect of Mr Touma is only necessary in limited respects, given the conclusions which I reach on other grounds. I consider that Mr Touma's evidence should be approached with regard to the fact that the commercial dealings between Mr Jammal, Mr Touma and an associate, Mr Vieira, were by no means transparent, as will emerge below. An assessment of Mr Touma's credit must have regard to his evidence that, in response to Mr Jammal's indication that Mr Jammal needed to show NAB that a deposit had been paid for the purchase of unit 1A by Eddy Investments, Mr Touma (rather than Mr Jammal) proposed a round robin by which: "Eddy Investments could have 1.5 million Trade Dollars from BBX on the basis that we get that back from Waterfront after settlement to zero out the liability." (Touma 17.10.14 [36]) Mr Touma's evidence is also that he also assisted Mr Jammal in adjusting commission paid on the sale of various units so as to avoid BankWest thinking that there was "anything unusual" about the sale of Unit 11 to NJ Investments (to which I also refer below) (Touma 17.10.14 [40]).
4. Companies associated with Mr Touma appear to have an interest in the outcome of the proceedings, at least as creditors of Waterfront, and Mr Touma took steps to encourage claims of the kind now made by the Liquidator, having written to the Liquidator on 19 December 2011 (Ex D2, p 1700) referring to the fact that his accountant, Mr Vieira, had investigated the position in respect of Waterfront for him and that Mr Vieira's investigation had identified further assets which might be available to the Liquidator. As will emerge below, Mr Vieira's role in the matter was not limited to that of Mr Touma's accountant, and he or companies associated with him also appears to have an interest in the proceedings arising from the purchase of several units in the development by a company associated with him. That letter also referred to dealings between Waterfront and Eddy Investments in respect of unit 1A and referred to a BBX dollar advance to Eddy Investments which was "subsequently repaid by BBX dollars advanced by Waterfront", although it did not characterise that transaction as a "round robin", by contrast with Mr Touma's evidence given in these proceedings. That letter also referred to the purchase of unit 11 by NJ Investments and to Mr Vieira's advice that he had provided a bank cheque of AUD 131,000 to Waterfront on settlement of the purchase of units 19 and 25. I consider that Mr Touma's evidence needs to be approached with a degree of caution having regard to his and Mr Vieira's association and their interest in the outcome of the proceedings, and the nature of the transactions in which he was involved.
5. The Plaintiffs sought to rely on a valuation report prepared by a real estate valuer, Mr Lenord, in respect of unit 11 which was rejected for reasons set out in an earlier judgment, including that its conclusions depended on an adjustment for the value of BBX trade dollars which Mr Lenord was not qualified to undertake. The Plaintiffs were granted but did not seek to exercise leave to lead admissible evidence from Mr Lenord in respect of that unit. The Plaintiffs did not seek to read a second valuation report prepared by Mr Lenord in respect of unit 1A. The Plaintiffs also rely on the tender of extracts from liquidators' examinations of Mr Jammal on 11 April 2013 and 10 May 2013, Mrs Jammal on 17 July 2013 and Mr Ahmajani on 17 July 2013. The Plaintiffs also tendered historical valuations of units 1A and 11 (CB 3, tabs 25 - 26), which were tendered subject to limiting orders under s 136 of the Evidence Act 1995 (NSW) that they were not relied upon to prove the value of the units.
6. The Defendants relied on affidavits of Mr Samir Jammal dated 22 August 2014 and 6 November 2014. Mr Jammal's evidence was that he made relevant decisions on behalf of each of Waterfront, Eddy Investments, NJ Investments and Platnum (Jammal 22.8.14 [5] - [8]). In particular, Mr Jammal's evidence was that he made the decisions for NJ Investments, although Mrs Jammal would sign documents whenever it was required and that: "I have always made the decisions for the company. NJ Investments was registered for the purpose of buying a unit in the property development (Unit 11). I arranged this purchase for both Waterfront and NJ Investments and I made all decisions regarding the transaction." (Jammal 22.8.14 [7])
7. Mr Jammal's evidence in his affidavit dated 22 August 2014 was, in effect, that he controlled Eddy Investments and that: "I took the steps necessary to have Eddy Investments put into Eddy [Ahmajani]'s name. He has always been the only director and shareholder of the company. Even though he is its director, Eddy Investments is really my company. I make the decisions for the company and I tell Eddy if and when documents need to be executed for the company. Eddy Investments was started especially so it could purchase the commercial unit in the property development (Unit 1A). This was my idea and I arranged all aspects of that transaction, including by making the relevant decisions on behalf of both Waterfront and Eddy Investments." (Jammal 22.8.14 [5]) Mr Ahmajani's evidence in cross-examination as to his involvement with Eddy Investments, to which I will refer below, is not wholly consistent with Mr Jammal's evidence in that regard.
8. Mr Sulan, who appeared with Mr D'Arville for the Plaintiffs, submits that Mr Jammal should not be accepted as a witness of truth and that the Court could only rely upon Mr Jammal's evidence in respect of statements against interest. Mr Bedrossian, who appeared for the Defendants, fairly accepted that there were issues as to Mr Jammal's credit but also fairly submitted that it should be carefully scrutinised rather than rejected in its entirety (T350 - 351). Several matters support an adverse credit finding in respect of Mr Jammal. There were substantial contradictions between Mr Jammal's evidence on oath in the Liquidator's examinations and his evidence in these proceedings, which are so extensive that both versions of events cannot be true, and it is unlikely that the incorrectness of at least one of the two versions is an innocent error or attributable to any lack of recollection on the part of Mr Jammal. Mr Jammal's evidence was that he told Mr Grant Notman of BankWest that units 11 and 1A were being brought by his companies and that Mr Notman did not express any concern as to his involvement (Jammal 22.8.14 [56] - [57], T184). The Plaintiffs submit, and I accept, that the likelihood is that, contrary to that evidence, Mr Jammal did not inform BankWest of that matter, although it discovered that matter prior to settlement and permitted settlement to proceed (Notman, T254 - 255, Touma 17.10.14 [40], [43], 200, Ex D2, tab 19 1830, Ex D4, 205, 209, 254-256, 269, 288-289). The Plaintiffs submit that Mr Jammal also made up a story about BankWest delaying settlement of unit 11 at Christmas 2009 until all other sales went through (T184, T193) and point out that, although the Defendants called Mr Notman on subpoena, he was not asked about that matter. Mr Jammal's evidence as to that matter seems to be inconsistent with the fact that the application for finance for the purchase from NAB was not made until February 2010 (Ex P9, tab 7). It also seems to me that, as the Plaintiffs point out, Mr Jammal's evidence about a conversation with Mr Ahmajani concerning the shifting cash component of the purchase price for unit 1A should not be accepted where it was not referred to by Mr Jammal or Mr Ahmajani in the Liquidator's examinations, was not contained in Mr Jammal's first affidavit and was not corroborated by Mr Ahmajani. A claim made by Eddy Investments, under Mr Jammal's control, for an input tax credit on the purchase of unit 1A, when Waterfront had not lodged a business activity statement so as to be assessed for the corresponding GST and did not have funds to pay it, was also adverse to Mr Jammal's credit (T178-T180), at least so far as wider issues of commercial morality were concerned. I generally accept the Plaintiffs' criticisms of Mr Jammal's evidence and I give little weight to that evidence except where it is corroborated by other evidence or was against his interests.
9. The Defendants also relied on an affidavit of Mrs Nicole Jammal dated 13 August 2014. I will refer to several aspects of Mrs Jammal's evidence in paragraph 131 below in dealings with the claims brought against her. Mrs Jammal's evidence was that her memory of particular dates and events was not very good, and she referred to health issues which might explain that difficulty (Mrs Jammal 13.8.14 [7]). The Plaintiffs submit that Mrs Jammal should be accepted as a truthful witness in respect of aspects of her evidence to which I refer in paragraph 131 below. I generally accept that evidence, with the qualifications that she plainly had a limited role in decision-making, although she was prepared to act as Mr Jammal requested, and that her evidence as to the contract price for unit 11 cannot be treated as determinative. It is not necessary to reach any wider credit finding in respect of Mrs Jammal.
10. The Defendants also relied on an affidavit of Mr Edward Ahmajani dated 13 August 2014. Mr Ahmajani's affidavit evidence was consistent with Mr Jammal's evidence as to the latter's control over Eddy Investments, although Mr Ahmajani significantly retreated from that position in cross-examination. That affidavit evidence was as follows: "The decision to open the company was not mine. Sam [Jammal] approached me and asked me to help by having a company in my name and for that company to buy the commercial unit in the development. I did not put any of my own money into the company or into buying the commercial unit. Although I am a director of Eddy Investments, I follow [Mr Jammal's] direction in relation to what the company should be doing. I trust [Mr Jammal] with all of those decisions. Although I sign the documents that I need to sign and although I know generally what is happening with the company, I do not know all of the specific details about the company's finances." (Ahmajani 13.8.14 [4] - [5])
11. Mr Ahmajani also gave evidence of his lack of involvement in discussions in relation to the loan obtained by Eddy Investments from NAB and in the negotiations to buy unit 1A, which were addressed by Mr Jammal, and that he left the details as to the amount of money needed to be paid by Eddy Investments to purchase the unit to Mr Jammal, and that Mr Jammal now looks after and deals with all of the finances of Eddy Investments, and decides what rent is to be paid to Eddy Investments from the companies which are running businesses in the commercial unit. On the other hand, Mr Ahmajani's evidence in cross-examination was that he relied on Mr Jammal's advice, but nonetheless made the ultimate decisions in respect of Eddy Investments and considered the company to be his own, as a vehicle for property investment.
12. The Plaintiffs submit that Mr Ahmajani should be accepted as a truthful witness in respect of aspects of his evidence to which I refer in paragraph 133 below. I accept that Mr Ahmajhani was a broadly truthful witness. It seems to me that he was also unsophisticated in financial and commercial matters; too willing to accept propositions put to him in cross examination as to the value of commercial premises 1A which were not supported by objective evidence; that any independent decision-making on his part was substantially undermined by his reliance on Mr Jammal; and that his willingness to accept responsibility for Eddy Investments' decisions reflected his perception that to do so was consistent with loyalty to Mr Jammal.
13. The Defendants also rely on affidavits of their solicitor, Mr Reuben Mansour, who acted for NJ Investments in respect of the purchase of unit 11 and for Eddy Investments in respect of the purchase of unit 1A, and on the affidavits of Mr Michael Taylor, who acted for Waterfront in respect of the sales of units 11 and 1A respectively. The Defendants also led evidence from the officer then dealing with the matter at BankWest, Mr Notman, who was called on subpoena, and I will refer further to aspects of his evidence below. The Defendants also relied on valuation reports prepared by a certified practising valuer, Mr Wotton, in respect of units 11 and 1A respectively. I will also refer further to Mr Wotton's evidence below.

Claims against NJ Investments

1. In their opening submissions, the Plaintiffs summarised their claims, including against NJ Investments, in respect of the sale of unit 11 in the development as comprising variously a "debt claim" for the outstanding purchase price under the contract for the purchase of unit 11; a claim that NJ Investments held unit 11 subject to a vendor's lien for the outstanding purchase price; a claim against NJ Investments on the ground that the transaction was uncommercial within the meaning of s 588FB of the Corporations Act; a claim that Mr Jammal had breached his directors' and fiduciary duties in respect of the sale of unit 11; and a claim against NJ Investments, Mrs Jammal and Platnum that they were involved or were accessories to Mr Jammal's breach of such duties. The Plaintiffs initially claimed an order for an account and judgment against NJ Investments in the sum of AUD 400,000 or alternatively in the sum of $400,000 in BBX trade dollars. (BBX trade dollars are a form of barter exchange "currency", for want of a better word, administered by the BBX Group) The Liquidator also sought orders under s 588FF(1)(a) of the Corporations Act that NJ Investments pay Waterfront the sum of AUD 400,000 or alternatively the sum of $400,000 in BBX trade dollars and interest. As clarified in closing submissions, the Plaintiffs sought judgment against NJ Investments in the amount of AUD 400,000 (being an amount claimed to be owed under the contract for unit 11, referable to the amount due in BBX trade dollars), interest of AUD 142,579.48 and costs.
2. I should now say something further as to the history of the development by Waterfront of the property at The Entrance before turning to the facts of the sale of unit 11 by Waterfront to NJ Investments. Waterfront completed a development of a block of units at the Entrance, including commercial premises and residential units, in late 2008 (Jammal 22.8.14 [12]). That development was financed by BankWest. One unit in the development was sold off the plan, prior to its completion, in about April 2007 and several units were subsequently sold to arms-length purchasers (Jammal 6.11.14 [14] - [19]). Units 1, 6 - 7, 14 - 15 and 20 were later sold to a company associated with Mr Vieira, who in turn has a commercial relationship with the BBX Group. A significant portion of the consideration payable for those units was "paid" in BBX trade dollars and Mr Vieira's company appears to have been funded by a loan of BBX trade dollars made by the BBX Group in respect of that part of the purchase consideration payable in BBX trade dollars.
3. BankWest obtained a valuation for the development and the units comprising it from CB Richard Ellis ("CBRE") on 24 December 2008 (Ex D2, p 1798), which valued unit 11 at AUD 475,000 inclusive of GST and at AUD 431,818 exclusive of GST and applied a capitalisation approach and direct comparison approach to value commercial premises 1A at AUD 1,250,000 (Ex D2, p 1805). The Defendants accepted that that document was not admissible to prove the value of the relevant properties, and it was admitted subject to a limiting order under s 136 of the Evidence Act reflecting that matter. By letter dated 31 March 2009, First National Real Estate at The Entrance had similarly advised Mr Jammal that commercial premises comprising unit 1A "in today's market should achieve a total of $1 million to $1,200,000" (Ex D4, Tab 1).
4. By late 2009, BankWest was seeking to have its loan on the development, or at least as much of it as could be recovered by sales of the properties, paid out. Mr Jammal signed forbearance deeds with BankWest and was then seeking to avoid personal bankruptcy as a result of the development. It appears that sales of properties in the development ultimately left a shortfall of between AUD 2,000,000 and AUD 2,500,000 owed to BankWest (Kukulovski 7.5.14 [33]).
5. Mr Jammal was provided with a copy of CBRE's valuation of the development by early 2009 (T236) and that allowed him to estimate the price at which BankWest would be prepared to release its security to permit sale of individual units in the development (T161). In particular, Mr Jammal could anticipate that BankWest would likely release its security in respect of unit 11 for AUD 475,000 and in respect of unit 1A for AUD 1,250,000, given the values indicated in that report (T162-163). That valuation was part of the surrounding circumstances in which the parties entered the relevant contracts for the sale of units 11 and 1A, so far as Mr Jammal was, on any view, playing a significant role for both vendor and purchaser in respect of the sales of those units.
6. Contemporaneous correspondence within BankWest and between Mr Vieira, who was representing the company which purchased many of the units in the relevant property, Mr Touma who was representing the BBX Group which had an involvement in the sale of those properties, and Mr Jammal plainly recognised the depressed condition of the local property market prior to the sales of units 11 and 1A to NJ Investments and Eddy Investments respectively. I have not neglected the fact that, in seeking to persuade Mr Vieira as to the value of units in the development, Mr Jammal asserted that "unit 11 is adjacent to Unit 12, very similar in size internally and externally has exchanged and valued at $900,000 (Ex P5). That evidence was admitted with a limitation under s 136 of the Evidence Act that it was limited to proof of the communication and not proof of an asserted fact and does not seem to me to support any inference as to the objective value of the unit. An email dated 21 August 2009 from Mr Touma to Mr Jammal, copied to Mr Vieira, and subsequently sent by Mr Jammal to Mr Notman of BankWest (Ex D2, p 1830), observed that: "As you are aware The Entrance and Terrigal, real estate market is currently a bloodbath with unit prices heading south and many projects, mortgage in possession or about to." Mr Vieira in turn referred, in an email dated 6 November 2009 (Ex D4, Tab 3, p 250), to the "terrible valuations that has come from the valuers in relation to the various properties".
7. Internal correspondence of BankWest also recorded the fact that The Entrance was "undoubtedly one of the worst affected regions in NSW" in respect of property values (Ex D2, p 1577) and a strategy paper dated 29 September 2009 prepared by BankWest noted that the valuation of the properties delivered by CBRE in January 2009 had reflected a 47% reduction in value compared with the July 2006 valuation, leaving the bank with a loan to value ratio of 123% (Ex D2, p 1579). Mr Jammal's evidence, which I accept notwithstanding my reservations as to his credit generally, was that the global financial crisis and the state of the real estate market in the area of The Entrance had a significant impact upon Waterfront's ability to sell units in the development and upon the prices that were able to be achieved for the units from late 2008 (Jammal 22.8.14 [49]).
8. Numerous schedules were exchanged between Mr Touma, Mr Vieira and Mr Jammal in the period prior to the completion of sales of several other units in the development to Mr Vieira's companies, where the parties sought to combine Australian dollars and BBX trade dollars so as to generate a sufficient cash payment to satisfy BankWest, by reference to CBRE's valuation of the particular units, and at the same time maintain a higher stated sale price for purchase of the units by including a BBX trade dollar component. The Defendants rely on Mr Touma's evidence that the various versions of the schedules created by him represented or reflected the best prices that he was able to come up with for the properties (T308-309). Further correspondence took place between Mr Touma, Ms MacDonald (who was Chief Operating Officer of BBX Group and also involved in real estate matters), Mr Vieira and Mr Jammal in respect to arrangements for sale of the properties, including to Mr Vieira's company, in the period from February 2009 (Ex D4, Tab 3). That correspondence supports an inference (for which Mr Bedrossian contended at T351) that BBX trade dollars were used to inflate the apparent purchase price of the units in the development, including those purchased by Mr Vieira's and Mr Jammal's interests. At one point, Mr Vieira recognised that the extent of the suggested inflation of the purchase price for two of the units would be prejudicial to his relationship with his bank and required that the purchase price of those two units be reduced, although he raised no issue as to the suggested purchase price for other units (Ex D4, Tab 3, p 166).
9. Mr Vieira's proposal also contemplated a side letter signed by Waterfront and co-signed by BBX Group, by which Waterfront authorised BBX Group to rebate 400,000 BBX trade dollars to Mr Vieira's company, which he stated "obviously" was not to be attached to any of the contracts (Ex D4, Tab 3, p 171). I consider the proper inference is that that letter was not to be attached in order to avoid qualifying the appearance that a higher price was to be paid to purchase the properties. In the same email, Mr Vieira recognised the then state of the property market as follows: "Michael [Touma] as you are well aware, the current market in relation to residential properties and commercial properties are shot to bits. I have been more than fair in the values placed on the said properties and the only reason I am currently willing to purchase properties at this time is because of the trade component, otherwise I like everybody else will just sit and wait til the end of this year or early next year when there will be substantial discounting in the whole market (as advised to me by my bankers)." Other correspondence between Mr Vieira and Mr Touma outlined the prices which were to be paid on particular units, on the basis that a rebate of BBX trade dollars between Waterfront and Mr Vieira was to be known only to Mr Touma and Mr Jammal, and that the email referring to it was not to be forwarded to the lawyers "for obvious reasons" and the rebate clauses were to be "extract[ed]" (Ex D4, Tab 3, p 178).
10. A contract between Waterfront and NJ Investments in respect of unit 11 was exchanged on 9 October 2009 (Ex D1, 1864). The contract provided, on the first page, that the contract price was $900,000 with a deposit of $90,000 and the balance of $810,000 and contained a cross-reference "as per Annexure "A". Annexure A in turn provided, relevantly, that: "The Purchaser and the Vendor agree that consideration for the property will be as follows: $500,000 of the contract price will be payable by Australian dollars (AU$): $400,000 of the contract price will be payable in BBX trade dollars (BBX$)." Clause 16.7 of the contract in turn provided that, on completion, NJ Investments must pay to Waterfront by settlement cheque, the price (less the deposit) and any other amount payable by it under the contract, netting off any amount due by Waterfront to it. The contract between NJ Investments and Waterfront was stamped with duty of AUD 35,990, which is the amount of duty payable on the total purchase price stated on the first page of the contract including both the amounts payable in AUD and BBX trade dollars.
11. A letter dated 26 November 2009 from BBX Real Estate Services Pty Ltd to the solicitor for Waterfront refers to BBX trade dollars being held in escrow in preparation for the settlement of other properties in the development and also to instructions from Waterfront "not to worry about transferring funds into trust" for the sale of units 11 and 1A (Touma 17.10.14, Annexure "A1"). However, that letter does not support an inference that BBX trade dollars were not to be used in the transaction, as distinct from an inference that they were not required to be held in trust prior to settlement in transactions involving three companies, Waterfront, NJ Investments and Eddy Investments, that were then under Mr Jammal's practical control.
12. By letter dated 18 December 2009, Waterfront's solicitor wrote to NJ Investments' solicitor providing an authority and direction in respect of settlement, which provided for bank cheques to certain parties, including BankWest, and for payment of the "BBX portion" of 400,759.52 BBX trade dollars to Waterfront. Settlement was then scheduled to take place on 22 December 2009 but did not take place on that date.
13. NJ Investments relied on the stated contract price in respect of unit 11 to apply for a loan in the amount of AUD 680,000 to NAB on or about 18 January 2010 (Ex P9, tabs 6-7) and NAB lent NJ Investments an amount of AUD 679,069.16 to fund the purchase of that unit (Ex D1, 1948).
14. Settlement of the sale of unit 11 occurred on 11 March 2010 (Ex D1, 1945). It is common ground that the BBX trade dollar component of the purchase price was not paid at settlement, although Mr Touma's evidence is that it was common practice that the BBX portion of the purchase price was not payable until after settlement (Touma 17.10.14 [23], T293-295). It also is common ground that NJ Investments did not subsequently pay the BBX portion of the purchase price to Waterfront, which transferred title to the unit to NJ Investments without having received that payment. NJ Investments also directed that an amount of AUD 130,647.91 of the amount borrowed from NAB in respect of unit 11 be transferred to Platnum (Ex D1, 1948; T197). The Plaintiffs submit that, and I accept that, at the time of the transfer to Platnum, NJ Investments was in breach of contract because it had not transferred the BBX trade dollar component of the purchase price to Waterfront.

Claim against NJ Investments in contract

1. An issue of construction arises in respect of both contracts for the sale of unit 11 and unit 1A which are in similar terms. I will first address that issue in respect of unit 11 and then return to that issue in respect of unit 1A below. As I noted above, the front page of the contract for unit 11 (Ex D1, 1864ff) identifies the sale price as $900,000 and refers to the additional provisions contained in Annexure A to that contract which I have set out above.
2. I have had regard to well-established principles as to the manner in which commercial contracts should be interpreted. In Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109, Gibbs J (as his Honour then was) observed that: "It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust."
3. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40], the High Court observed (citations omitted): "It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." The approach was confirmed in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25 at [35] where French CJ, Hayne, Crennan and Kiefel JJ observed that (citations omitted): "[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'."
4. In Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184; (2014) 310 ALR 113, Leeming JA (with whom Ward and Emmett JJA agreed) in turn observed (at [71]) that the mandatory words "will require consideration" in the passage from Electricity Generation Corporation that I have quoted above require that the surrounding circumstances be considered to construe the meaning of the words of a contract in context. Mr Bedrossian also pointed to the summary of those principles in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2014] NSWCA 323 at [36]-[39] where Macfarlan JA (with whom Meagher and Barrett JJA agreed) noted that the meaning of the terms is to be determined by what a reasonable businessperson would have understood those terms to mean; that process will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract; evidence of surrounding circumstances is only admissible to assist in the interpretation process if the language of the contract is ambiguous or susceptible of more than one meaning, though one must have regard to the surrounding circumstances in order to determine whether or not there is such ambiguity; and, once it is determined that an expression in a contract is unambiguous, evidence of surrounding circumstances cannot be used to contradict its plain meaning.
5. Mr Sulan contends that, as a matter of construction, the contract for the sale of unit 11 provided for payment of a purchase price of $900,000 for unit 11, being the amount set out on the front page of the contract, and by cl 16.7 which provided for NJ Investments' obligation to pay that price, and contends that the special conditions contained in Annexure A do not alter the nature of the "debt" that is owed by NJ Investments under the contract which "remains a debt denominated in Australian dollars which Waterfront is entitled to enforce". The Plaintiffs contend that: "The only effect of annexure A was to specify a payment method which Waterfront accepted may be used to satisfy that obligation. The annexure does not mandate the BBX form of consideration."
6. On the other hand, Mr Bedrossian submits that the reference to a "price" on the front page of the contract as "$900,000" must be read in light of the specific terms of the contract, where that front page largely performs the function of being a summary of the key features of the contract, emphasises the parties' agreement recorded in Annexure A that "consideration for the property will be as follows" and submits that that phrase defines what the consideration for the transfer of the property will be. Mr Bedrossian also submits that any argument that the obligation to pay 400,000 BBX trade dollars converts to an obligation to pay AUD 400,000 if the BBX trade dollars are not paid at settlement is inconsistent with the statement in Annexure A that the sale price "will be as follows" and creates a commercial nonsense, by which a property understood (at least by reference to the CBRE valuation obtained by BankWest and known to Mr Jammal) to have a value of AUD 475,000 would become the subject of an obligation to pay AUD 900,000.
7. It seems to me that the relevant contractual provisions are to be understood, in their commercial context, as reflecting the fact that it was necessary for the parties to specify the purchase price in the contracts in monetary terms both to allow the ready calculation of stamp duty and, possibly, to assist NJ Investments to borrow more from NAB than it was obliged in pay in Australian dollars under the relevant contract. It is evident from the surrounding circumstances that Waterfront on the one hand and NJ Investments on the other proceeded on basis that one BBX trade dollar was to be treated as equating to one Australian dollar, although it does not follow (as will be noted below) that a BBX trade dollar had that value on an objective basis. That assumption was consistent with rule 4(1) of the BBX Trading Rules annexed to Mr Touma's affidavit dated 14 March 2014.
8. It seems to me that the relevant contractual terms, comprising the reference to the price on the first page of the contract and the cross-reference to Annexure A, that Annexure and the standard clause as to payment of the purchase price in cl 16.7 (which had not been amended to reflect that Annexure) are properly construed as providing for payment of that part of the total consideration amounting to $400,000 by, and only by, the transfer of BBX trade dollars and did not contemplate the payment of those amounts in Australian dollars as distinct from BBX trade dollars. That reading gives effect to the cross-reference to Annexure A on the front page of the contract and to the language "will be payable in BBX trade dollars" in that Annexure. It seems to me that cl 16.7 must be read subject to those specific provisions, where a payment in BBX trade dollars plainly could not be made by bank cheque. As I noted above, the surrounding circumstances in which Waterfront and NJ Investments (each acting by Mr Jammal) entered the relevant contract included their knowledge of the values attributed to the units in the CBRE valuation and the state of the property market recorded in contemporaneous correspondence. I accept Mr Bedrossian's submission that the construction for which the Plaintiffs contend is commercially inconceivable, where it would have NJ Investments paying, in Australian dollars, a total purchase price well in excess of what Mr Jammal plainly understood was the then market value of unit 11, where there was no necessity for it to do so either to satisfy BankWest's requirements (reflecting the CBRE valuation) or to achieve any purpose in respect of its borrowing from NAB. The construction of the contracts for which the Plaintiffs contend, it seems to me, reduces to the proposition that the parties objectively intended to pay, in Australian dollars, the total purchase price notwithstanding that they knew of the then valuation obtained by BankWest at a significantly lesser amount, which was close to the Australian dollar amount specified in Annexure "A", and notwithstanding that the contract specifically provided for a substantial part of the stated consideration to be payable in BBX trade dollars.
9. I accept that the total contract price payable under the contract for unit 11 was $900,000, consistent with payment of the stamp duty calculated on that basis. However, it seems to me clear that the parties' objective intention was, at all relevant times, that the amount of $400,000 of the contract price would be payable in BBX "trade dollars", not Australian dollars, so that the effect of performance of the contract would be that Waterfront would receive $500,000 in Australian dollars and $400,000 of BBX trade dollars, on the assumption the parties made that one BBX trade dollar was to be treated as equivalent to one AUD. It does not seem to me that the contract imposed any obligation upon NJ Investments to pay the amount payable in BBX trade dollars in Australian dollars, even if it did not deliver BBX trade dollars. Rather, the consequence of that circumstance would be a breach of the contract, for which damages would be recoverable, quantified by reference to the objective value of the amount of BBX trade dollars not received, which would not necessarily reflect the parties' assumption that one BBX trade dollar equated to one AUD.
10. The Plaintiffs alternatively submit that NJ Investments is "indebted to Waterfront in an amount of $400,000 of BBX [trade dollars]". It does not seem to me that that proposition can be accepted. BBX trade dollars are a commodity, not money capable of giving rise to a debt, and NJ Investments can no more be indebted to Waterfront in an amount of $400,000 of BBX trade dollars than it can be indebted to Waterfront in an amount of $400,000 of any other commodity. I note, although it is not necessary to that conclusion, that claims in a foreign currency are not necessarily treated in that manner, but that qualification obviously has no application to BBX trade dollars: Jolley v Mainka (1933) 49 CLR 242 at 260; Miliangos v George Frank (Textiles) Ltd [1976] AC 443; Vehicle Wash Systems Pty Ltd v Mark VII Equipment Inc (1997) 80 FCR 571; 150 ALR 261 at 265 - 266; Daewoo Australia Pty Ltd v Suncorp Metway Ltd [2000] NSWSC 35; (2000) 48 NSWLR 692 at [18]ff; and see the discussion of this issue in F Assaf, Statutory Demands and Winding Up in Insolvency, (2nd ed 2012, LexisNexis Butterworths) at [2.59].
11. The Defendants accept that NJ Investments did not deliver 400,000 BBX trade dollars to Waterfront in respect of unit 11 and that Mr Jammal's evidence seeking to provide an explanation as to why this did not occur is not relevant to the fact of breach of the contract for unit 11. However, Mr Bedrossian submits that the Plaintiffs have led no evidence as to the damages suffered by Waterfront by reason of that breach of contract. He submits that the evidence indicates that BBX trade dollars have no value and would be a financial burden upon Waterfront in that, in order to receive and facilitate a trade with BBX trade dollars, Waterfront would incur substantial cash and BBX fees payable to the BBX management company (Touma 14.3.14 [6], [23]; letter dated 26 September 2013 from Plaintiffs' solicitors, Ex P9, tab 14).
12. As I noted above, a breach of NJ Investments' obligation to pay BBX trade dollars gives rise to a claim for damages, so far as a commodity was not delivered, not a claim for debt. It is by no means clear that the Plaintiffs pursue such a claim (as distinct from a claim for debt) to which no reference was made in their summary of their case. The fact that there was an issue as to the valuation of BBX trade dollars, in such a claim, was recognised by the Liquidator's solicitors by at least 15 August 2013, when they advised the Defendants' solicitors (Ex P9, Tab 12) that one of the issues in the proceedings was "[v]aluation of BBX dollars relative to Australian dollars, if Annexure "A" to the contract is found to be authentic." (The reference to authenticity of Annexure A is to an earlier challenge to the authenticity of that annexure which was not pressed by the Liquidator at the hearing.) A further letter dated 26 September 2013 from the Plaintiffs' solicitors (Ex P9, tab 14) recognised the transaction costs in cash that would be incurred by Waterfront (or at least the Liquidator) in seeking to realise value for the BBX trade dollars due to be credited to it. However, the Plaintiffs ultimately did not address that issue or establish the quantum of a claim for damages arising from the non-delivery of BBX trade dollars, against the contingencies that their construction of the contract was not accepted (as it has not been) and that the claim for non-delivery of BBX trade dollars did not give rise to a claim in debt but in damages. (I note, for completeness, that the property valuer called by the Plaintiffs, Mr Lenord, sought to discount the value of BBX trade dollars in order to assess the purchase price of other units in the development acquired by companies associated with Mr Vieira by part delivery of BBX trade dollars. However, his expert report was rejected, inter alia, because his expertise as a real estate valuer did not qualify him to make that assessment and because he did not set out reasoning that would support the discount that he adopted.)
13. The fact that a BBX trade dollar, although treated as corresponding to AUD 1 under the BBX Rules, did not have a value of AUD 1 to Waterfront seems to me to be clear, where Waterfront could only trade with a BBX trade dollar after authorisation by the BBX Group and with another member of the BBX trading system (Touma [3]); the BBX Group was entitled to receive fees and other monies in respect of such transactions, including transaction fees which would be payable by Waterfront which were at relevant times 12% of the value of the trade in BBX Dollars (Touma 14.3.14 [6]); and there is no suggestion that BBX Trade Dollars could simply be exchanged for cash. Beyond that observation, it is by not possible, absent evidence of the worth of BBX trade dollars led by the Plaintiffs, to determine the amount of any loss suffered by Waterfront from non-delivery of BBX trade dollars to it.
14. I accept of course, that the Court must do the best it can to make a reliable assessment of damages, where damages are difficult to assess, including where the plaintiff has failed to lead the best evidence of damages: Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83, per Mason CJ and Dawson J, 125 per Deane J, 153 per Gaudron J. However, in Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319, Pincus J noted that "if the evidence called by the plaintiff fails to provide any rational foundation for a proper estimate of damages the Court should simply decline to make one". That approach was approved by Brooking J in JLW (Vic) Pty Ltd v Tsiligou [1944] 1 VR 237 at 243 and by the Court of Appeal in Troulis v Vamvoukalis [1998] NSWCA 237 where Gleeson CJ observed that, where damages were susceptible of evidentiary proof, but there was an absence of raw material to which good sense may be applied, "[j]ustice does not dictate that … a figure should be plucked out of the air". That decision has been approved in subsequent cases, including McCrohan v Harith [2010] NSWCA 67 at [128], where McColl JA (with whom Campbell JA and Handley AJA agreed) held that an estimate of damages, in the nature of a "guess", should not be made where precise evidence of the damages suffered could have been adduced, but was not.
15. This is not a case where there is conceptual difficulty with proving the exchange value of BBX trade dollars as a commodity, but simply a case where the Plaintiffs have not led evidence to place the Court in a position to make any reasoned estimate of that matter. I accept the Defendants' submission that, in these circumstances, the Court cannot award substantive damages for the non-delivery of BBX trade dollars where no evidentiary basis for a valuation of BBX trade dollars was established. In such a situation, it would be open to the Court to award nominal damages to the Plaintiffs for the non-delivery of BBX trade dollars, to recognise the fact of breach of the contract: Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286. However, I do not consider I should take that course where the parties did not address that possibility in submissions and it is unlikely to be in the parties' interests to incur the costs involved in further submissions in that regard.
16. I note, for completeness, that the Defendants also plead that NJ Investments paid the BBX fees required for the required amount of BBX trade dollars to be transferred to Waterfront, but that the BBX management company and/or Mr Touma breached their legal and/or equitable obligations by failing to do so. It does not seem to me that that would provide an answer to the Plaintiffs' claim in debt against NJ Investments, if it were otherwise established. A purchaser does not avoid liability to pay the purchase price in respect of a property, merely because, for example, its lender or a third party funding the proposed purchase is in breach of obligations owed to the purchaser. I am conscious, in that regard, that the Defendants pleaded, in a summary way, a claim in frustration in paragraph 37(d) of the Further Amended Defence, but no substantive submissions were made in support of that claim.
17. The Plaintiffs' claim in debt in respect of unit 11 therefore fails, because the amount of the contract price payable in AUD was paid to Waterfront, the balance of the stated purchase price was to be discharged by the transfer of BBX trade dollars to Waterfront, and a failure to transfer a commodity gives rise to a claim for damages for breach of contract, not a claim for debt. To the extent that a claim for damages for breach of contract was available to the Plaintiffs in respect of unit 11, they have not, as noted above, led evidence to establish the quantum of damages, and the parties did not address the possibility of nominal damages to acknowledge the breach arising from failure to transfer the amount of BBX trade dollars due.

Claim for vendor's lien over unit 11

1. Waterfront claims a lien over unit 11 to secure the payment of the unpaid purchase price, being the BBX trade dollar component of the purchase price. The Plaintiffs refer to Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 at 478, where Hope JA (with whom Glass and Mahoney JJA agreed) observed that an equitable lien exists, in respect of an enforceable contract: "when completion has taken place and part of the purchase price has not been paid, unless a contrary intention appears. A contrary intention may appear where the contract provides for the satisfaction of the purchase price by some means other than payment on completion." The Plaintiffs did not draw attention to any authority that extends the principle of an equitable lien beyond a failure to pay a monetary purchase price to the non-delivery of a commodity which was to be treated as part of the contractual consideration. The Defendants submit that a vendor's lien operates to secure outstanding financial obligations and the payment of BBX trade dollars is not a financial obligation.
2. It seems to me that an equitable lien is not established in respect of the amount of BBX trade dollars payable under the contract for unit 11. As I noted above, it seems to me that a failure to deliver a commodity, such as BBX trade dollars, in breach of contract sounds in damages and, within the principle recognised in Reliance Finance Corporation above, the provision for satisfaction of the purchase price by means other than payment on completion, namely the delivery of BBX trade dollars, excludes the availability of an equitable lien in respect of that component of the contractual consideration.

Uncommercial transaction claim in respect of unit 11

1. Section 588FB(1) of the Corporations Act provides that a transaction is an "uncommercial transaction" if it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to the benefit or detriment to the company in entering the transaction, the benefit to other parties to the transaction and any other relevant matter. Whether a reasonable person in the company's circumstances would not have entered into the transaction is determined by an objective inquiry, by reference to the factors specified in s 588FB(1).
2. It is common ground between the parties that the relevant principles regarding "uncommercial transactions" are those set out in Demondrille Nominees Pty Ltd v Shirlaw [1997] FCA 1220; (1997) 25 ACSR 535 at 547 - 548 and by Gordon J (with whom Heerey J agreed) in Capital Finance Pty Ltd v Tolcher [2007] FCAFC 185; (2007) 164 FCR 83 at [129]. In Demondrille Nominees Pty Ltd v Shirlaw above, Foster, Lindgren and Madgwick JJ observed (at 548) that s 588FB of the then Corporations Law sought to balance the interests of the unsecured creditors of a company being wound up and those who would otherwise be the beneficiaries of pre-winding up transactions entered into by the company and its purpose was: "To prevent a depletion of the assets of a company which is being wound up by, relevantly, "transactions at an under-value" entered into within a specified limited time prior to the commencement of the winding up: see explanatory memorandum, para 1014." Their Honours also observed that a transaction is uncommercial for the purposes of this section where there is a bargain "of such magnitude that it could not be explained by normal commercial practice". That formulation was also adopted in Capital Finance Australia Ltd v Tolcher above at [120] and [129], where Gordon J also noted that the categories of "uncommercial transaction" are not closed; that the standard to be applied is an objective one, to be assessed by reference to the company's circumstances, including the knowledge of those who were directing the company, such as its controlling director; and that a transaction will be "uncommercial" where the consideration lacks a commercial quality.
3. The Plaintiffs point out that a claim for an uncommercial transaction requires, first, that the transaction is an "insolvent transaction" under s 588FC of the Corporations Act, in that Waterfront was insolvent at the time the transaction was entered into or an act was done for the purpose of giving effect to the transaction or it became insolvent by reason of the transaction and the transaction was entered into during the two years prior to the relation-back day. As I noted above, the insolvency of Waterfront at the relevant time was not contested and the relevant transaction occurred within two years prior to the relation-back day, being the date on which Waterfront resolved to enter into liquidation on 13 July 2010.
4. The Liquidator submits that the sale of unit 11 was an uncommercial transaction so far as Waterfront had entered into a binding contract for the sale of that unit and permitted settlement of that sale without ensuring that the consideration specified in the contract - or, more precisely, the BBX trade dollar component of that consideration - was paid to Waterfront. The Liquidator submits that those acts conferred a benefit on NJ Investments to the extent that it did not pay the full consideration required by the contract and gave rise to a corresponding detriment to Waterfront. The Liquidator submits that there is no explanation, consistent with commercial practice, which would explain why Waterfront would permit settlement to occur without receiving full value under the contract. It seems to me that submission does not give sufficient weight to the value of what was sold compared with what was paid for it. In any event, it seems to me that a party acting commercially would likely permit settlement of a sale at less than the stated contractual price, if that stated price was at an overvalue and no third party purchaser would be prepared to pay a corresponding price. The Liquidator also submits that the value of unit 11 is established by the monetary sum recorded on the front page of the contract for its sale and points out that the incoming mortgagee, NAB, agreed to lend funds and obtain a first registered mortgage on that basis. It seems to me that limited weight can be given to that matter where, first, NAB appears to have applied its loan to value ratio to the stated contract price without adjustment for the proposed use of BBX Trade dollars as part of the consideration in making the relevant loan and, second, because the possibility that NAB was induced, by the structure of the transaction, to lend against an overstated value of the property must be recognised. An inference is plainly open that NJ Investments, under Mr Jammal's control, chose to enter a contract at an inflated price, involving the use of BBX trade dollars, so as to support an inflated borrowing from NAB and fund the payment to Platnum to which I will refer below. Mr Bedrossian's submissions recognised that possibility in noting that the involvement of BBX trade dollars in the relevant contracts "permitted the impression to be created that the properties were worth more than they actually were, thus allowing the raising of a greater amount of finance from an incoming mortgagee."
5. On the other hand, NJ Investments, Mrs Jammal and Mr Jammal deny that the sale was an uncommercial transaction and say that the amount of AUD 500,000 payable under the contract, and paid by NJ Investments, was, by itself, equal to or greater than the market value of unit 11 at the time of the transaction, or alternatively that the combined amount of AUD 500,000 and 400,000 BBX trade dollars was, of and by itself, equal to or greater than the market value of unit 11 at the time of the transaction (Further Amended Defence [41]).
6. As I noted above, the Liquidator initially sought to rely on valuation evidence establishing that unit 11 had a value of AUD 900,000 (the stated contract price, including the amount payable by BBX trade dollars) but I rejected that evidence for reasons set out in an earlier judgment, and the Liquidator did not exercise the leave that I had granted to lead further evidence in an admissible form. The Defendants in turn relied on valuation evidence of Mr Wotton that unit 11 was worth AUD 475,000 at the relevant time. I have also referred above to the contemporaneous evidence that indicates both the depressed condition of the local property market and that Mr Jammal and others concerned in the transactions, including BankWest, considered that unit 11 had a value of AUD 450,000 - AUD 475,000 at the time of the relevant transaction. Mr Jammal's evidence was that he caused NJ Investments to overpay for that property so as to ensure that BankWest received at least the minimum amount of recovery which it required. Notwithstanding the issues as to Mr Jammal's credit generally, that position is supported by the objective evidence that Mr Jammal sought to satisfy BankWest's requirements so as to avoid personal bankruptcy, by the contemporaneous evidence as to the then value of the properties and by Mr Wotton's evidence.
7. I am not satisfied that an uncommercial transaction claim is established in respect of the sale of unit 11. It does not seem to me that it has been established that a reasonable person in Waterfront's circumstances would not have entered into the transaction, having regard to the fact that Waterfront received AUD consideration at least equal to the then market value of the property, both as emerging from the information then known to Mr Jammal and BankWest, and as a matter of objective fact having regard to Mr Wotton's evidence. It seems to me that the facts that the consideration payable by BBX trade dollars was not received, and that NJ Investments was able to borrow a greater amount from NAB or directed part of that excess borrowing to Platnum, do not lead to a contrary result, since a reasonable person in Waterfront's position would have seen no benefit in not entering into or proceeding with the transaction where it had no reasonable basis to think that a third party sale would have delivered a better result, having regard only to the AUD component of the sale.

Claims against Eddy Investments

1. In their opening submissions, the Plaintiffs summarised their claim in respect of unit 1A as a debt claim against Eddy Investments for the outstanding purchase price under the contract for Unit 1A; a claim that Eddy Investments held unit 1A subject to a vendor's lien for the outstanding purchase price; a claim against Eddy Investments on the grounds that the transaction was uncommercial within the meaning of s 588FB of the Corporations Act; a claim against Mr Jammal in respect of breach of directors and fiduciary duties; and claims against Eddy Investments, Mr Ahmajani and Platnum that they were involved in or were accessories to the breach by Mr Jammal.
2. Waterfront initially also claimed an order for an account or alternatively judgment against Eddy Investments in the amount of AUD 1,649,999.90 and, in the alternative, in the sum of AUD 350,000 and $1,550,000 in BBX trade dollars. The Liquidator also sought orders under s 588FF(1)(a) of the Corporations Act that Eddy Investments pay Waterfront the sum of AUD 1,649,999.90 or alternatively AUD 350,000 and $1,550,000 in BBX trade dollars and interest. As clarified in closing submissions, the Plaintiffs sought judgment as against Eddy Investments for AUD 1,650,002 (quantified as the amount claimed to be owing under the contract for unit 1A, being the sum of AUD 348,974 and AUD 1,301,028), interest of AUD 599,251.35 and costs. (The change in the Liquidator's claim from an initial claim in respect of $1,550,000 in BBX trade dollars to a later claim in the order of AUD1,301,028 relating to the BBX trade dollar component of the purchase price presumably reflects a discrepancy between an amount of BBX trade dollars transferred and then reversed and the terms of the contract for unit 1A, to which I refer below.) The structure of these claims is generally the same as the claims against NJ investments in respect of unit 11, although additional issues arise and Eddy Investments raised additional defences in respect of these claims.

Claim against Eddy Investments in contract

1. I should first set out the facts of the transaction between Waterfront and Eddy Investments. Waterfront sold unit 1A in the property, which are commercial premises, to Eddy Investments and it is common ground that those premises are currently occupied by companies controlled by Mr and Mrs Jammal which operate restaurants from the premises. The contract between Waterfront and Eddy Investment for the sale of the commercial premises was exchanged on 18 December 2009 (Ex P1, 1046). The effect of the concession as to Waterfront's insolvency noted above is that it was insolvent at the time of exchange of that contract. Mr Ahmajani accepted in cross-examination that he made (or at least was responsible for) the final decision to enter into the contract on behalf of Eddy Investments (T80) and Mr Jammal also accepted that matter in cross-examination (T220).
2. The structure of the contract was substantially similar to the contract in respect of Unit 11. The purchase price was shown as $2,900,000 with a deposit of $290,000 and a balance of $2,610,000 and there was again a reference to "as per annexure A". A set of special conditions to the contract, which the parties treated as comprising Annexure "A", included a provision that: "The Purchaser and the Vendor agree that consideration for the property will be as follows: $1,600,000.00 of the contract price will be payable by Australian dollars (AU$) $1,300,000.00 of the contract price will be payable in BBX Trade Dollars (BBX$)." The contract between Waterfront and Eddy Investments was stamped with duty payable of AUD 144,990, recorded on the first page of the contract, which reflects the full purchase price of the contract.
3. Prior to the exchange of the contract for unit 1A, correspondence dated 26 November 2009 took place between BBX Real Estate Services Pty Ltd and Mr Taylor, the solicitor acting for Waterfront, and Mr Touma referred to that evidence in cross-examination as indicating that BBX trade dollars were not intended to be a part of the sale of unit 1A (Touma 17.10.14, Annexure A1, p 246F). As I noted in paragraph 27 above, I do not consider that correspondence supported that inference, as distinct from an inference that they were not required to be held in trust in a dealing between companies that were then under Mr Jammal's practical control, and I do not accept Mr Touma's evidence in that respect.
4. Eddy Investments made an application for a loan in the amount of AUD 2m to the NAB on or about 1 December 2009 (Ex P9, tab 9). Mr Ahmajani accepted in cross-examination that Eddy Investments was seeking to borrow that amount from NAB because of its obligation to pay AUD 1.6 m under the contract to buy unit 1A (T89) (although that contract had not yet been signed) and that there was no other arrangement with respect to the amount of AUD 1.6 m owed under the contract (T89). NAB lent an amount of AUD 1.745 m to Eddy Investments for it to purchase unit 1A (Ex P1, 1119).
5. A letter dated 5 February 2010 from Waterfront's solicitors to Eddy Investments' solicitors contained an authority and direction as to payment of the balance of purchase monies, which provided, inter alia, for payment by bank cheque in favour of BankWest for AUD 1,198,192.30 and to Waterfront of AUD 4,850.98 and of a BBX portion of the purchase price of 1,364,755.82 BBX trade dollars and recorded that settlement was due to take place on 9 February 2010. A letter dated 5 February 2010 from Eddy Investments' solicitors to NAB, which was also the lender to Eddy Investments in respect of that purchase, recorded the bank cheques to be provided at settlement, which included a cheque in favour of Waterfront for the same amount, a cheque in favour of BankWest for the same amount, and a cheque in favour of Platnum for AUD 348,974. The Plaintiffs submit, and I accept, that, at the time of the payment to Platnum, Eddy Investments was in breach of contract because it had not paid the full Australian dollar component or the BBX trade dollar required under the contract.
6. Settlement in respect of the purchase of unit 1A occurred on 9 February 2010 (Ex P1, 1119). Stamp duty was paid on the stated contract price on the first page of the contract of AUD 2.9 m (T74). Following settlement, Eddy Investments claimed an input tax credit on behalf of Eddy Investments in an amount of AUD 263,636, referable to the stated contract price (Ex P1, 1140; T180). Waterfront did not lodge any corresponding business activity statement with the Australian Taxation Office so as to pay any GST on the sale (T178-T180)
7. On 18 March 2010, a debit of 1,500,000 BBX trade dollars was recorded in an account of Eddy Investments held with BBX Management Pty Ltd and a credit in the same number of BBX trade dollars was recorded in the account of Waterfront with BBX Management. The timing of that transfer did not correspond to the date of settlement and the number of BBX points transferred did not correspond to the number of BBX points due to be provided on settlement under the contract. On 11 June 2010, the amount of 1,500,000 BBX trade dollars was debited to the account of Waterfront with BBX Management and a credit of that amount was recorded in the account of Eddy Investments. The narrative attached to that transaction describes it as: "Re imburse [sic] trade dollars as agreed for purchase of commercial property old auth No 736636." Although that description refers to commercial property, it does not specifically refer to unit 1A or to the relevant development.
8. The Plaintiffs put their claim for debt in respect of the amount of BBX trade dollars not transferred in respect of unit 1A in the same manner as its claim for debt in respect of unit 11. An additional issue arises in respect of unit 1A, so far as the Australian dollar component of the price recorded in the contract for unit 1A was AUD 1,600,000. It is common ground that only the amount of approximately AUD 1,250,000 was paid to Waterfront at settlement and the Plaintiffs submit, logically enough, that it follows that a debt of approximately AUD 350,000 is owed by Eddy Investments in respect of the sale of unit 1A. That claim is a claim in debt, subject to the defences raised by Defendants by way of collateral contract, estoppel and, by a proposed amendment, of sham.

Defence of collateral contract in respect of unit 1A

1. By paragraphs 13(b) and 62 - 69 of its Further Amended Defence, Eddy Investments pleads a collateral contract, said to have arisen from dealings by Mr Jammal, or an equitable estoppel by representation, in defence of the claim relating to the unpaid Australian dollar amount of the purchase price for unit 1A. By paragraph 13(b) of the Further Amended Defence, the Defendants (and specifically Eddy Investments) claim that the cheques provided by Eddy Investments totalling approximately AUD 1,250,000 "comprise the totality of the amount of Australian dollars required by the contracts (including the Collateral Contract) between the parties."
2. Paragraph 62 of the Further Amended Defence in turn pleads a collateral contract formed in late 2009 and prior to Waterfront and Eddy Investments exchanging the contract for the sale of unit 1A, particularised as follows: "(a) The Collateral Contract was reached by a decision taken by [Mr Samir Jammal], in each of his capacities as the director of [Waterfront] and as the directing mind/will of Eddy Investments (being also a decision approved of, to the extent necessary, by [Mr Ahmajani]. (b) The Collateral Contract was concluded between, on the one hand, Samir Jammal on behalf of Edward Ahmajani (the second defendant), on behalf of [Eddy Investments], and, on the other hand, Samir Jammal (the sixth defendant) on behalf of [Waterfront], though (as already particularised) [Mr Ahmajani's] involvement was mechanical only, it being in substance and effect [Mr Samir Jammal] who made decisions on behalf of [Eddy Investments]."
3. The Further Amended Defence pleads further matters relating to the then uncertainty as to a shortfall owing to BankWest in respect of the property and pleads that the market value of unit 1A was not more than AUD 1,250,000. The terms of the collateral contract are pleaded, in paragraph 66 of the Further Amended Defence, as follows: "(a) Eddy Investments would enter into a contract for sale in relation to Unit 1A for a total stated amount of consideration in Australian dollars of $1,600,000 for the purpose of assisting [Waterfront] to satisfy its requirement to establish for BankWest that a total amount equivalent or close to the valuation amount recorded in the CB Richard Ellis valuation report dated December 2008 would be generated by the sale of the various individual properties within the Development. (b) Notwithstanding the express terms of the Contract for Sale in relation to Unit 1A, the actual consideration required to be paid by Eddy Investments upon the settlement of the purchase of Unit 1A would be adjusted depending upon the actual amount of Australian dollars required to be realised by Waterfront from the sale of Unit 1A so as to meet BankWest's requirements, provided that: (i) any such adjustment would not result in the consideration payable by Eddy Investments exceeding $1,600,000 Australian dollars; and (ii) any such adjustment would not result in the consideration payable by Eddy Investments being lower than $1,250,000 Australian dollars." Eddy Investments in turn pleads that, prior to settlement, Waterfront informed Eddy Investments that the amount of consideration in Australian dollars actually required in order to complete the purchase was AUD 1,250,000.
4. In order to establish the collateral contract, the Defendants rely on Mr Jammal's evidence that he caused a written contract to be executed in respect of unit 1A at a higher price and that, by the time of settlement of the purchase of unit 1A, the amount payable in Australian dollars by Eddy Investments was AUD 1,250,000. Mr Jammal's evidence (Jammal 22.8.14 [64] - [74]) is that, in substance, the Australian dollar component of the purchase price for unit 1A which was necessary to pay out BankWest was fluctuating in the course of discussions with Mr Touma and Mr Vieira from November 2009, presumably reflecting the amount payable by Mr Vieira's company in respect of other units and that: "For this reason, when it came to executing a contract for Eddy Investments to purchase Unit 1A, I caused the Australian dollar component to be identified at $1.6 million. This was a number, which I had calculated as the absolute worst-case scenario amount which I would have had to contribute in order to meet BankWest's requirements. I had assumed the likelihood of reduced contributions on the part of Hector Vieira." (Jammal 22.8.14 [71])
5. Mr Jammal also gives evidence, in his further affidavit dated 6 November 2014, of a conversation with Mr Ahmajani which is said to support the alleged collateral contract or estoppel, in which he told Mr Ahmajani prior to signing the written contract on behalf of Eddy Investments: "Look, we're signing this contract. We still don't know the final figures on it, but for the purposes of signing it and giving it to the Bank, at this moment this is what are going to be the figures, but it will change." (Jammal 6.11.14 [4])
6. I am unable to accept Mr Jammal's evidence in respect of these matters. First, I have reached generally adverse findings as to Mr Jammal's credit above. Second, it seems to me that Mr Jammal's evidence in this respect is inconsistent with the fact that stamp duty was paid on the stated purchase price of the unit, including, relevantly, the component of AUD 1,600,000; that Eddy Investments claimed a GST tax credit on the stated purchase price of unit 1A, again including the component of AUD 1,600,000; and that the contract providing for the stated purchase price of unit 1A, including the component of AUD 1,600,000, was used by Eddy Investments in borrowing the amount necessary to acquire the unit from NAB. I therefore do not accept that the pleaded collateral contract has been established, so far as it depends upon evidence of Mr Jammal. The Defendants' reliance on a collateral contract was also significantly undermined by Mr Ahmajani's evidence in cross-examination that he was not aware of any other agreement other than the written contract for the purchase of unit 1A (T96) and that, so far as he was concerned, the written contract represented the arrangement or agreement for Eddy Investments to purchase the property (T97).
7. As the Plaintiffs point out, the suggested collateral contract is also inconsistent with the terms of the main contract, so far as it provided with a cash component for the purchase price of unit 1A of AUD 1,600,000. The Plaintiffs submit, and I accept, that the suggested collateral contract cannot take effect to the extent of that inconsistency: Hoyts Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133 at 146; Esanda Ltd v Burgess [1984] 2 NSWLR 139 at 144 - 145; Gates v Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1 at 11.
8. The Plaintiffs also submit that, to the extent the pleaded collateral contract is a disposition of Waterfront's interest in unit 1A, Mr Jammal may not bring an action or proceeding on the collateral contract, because it is not in writing, by reason of ss 23C and 54A(1) of the Conveyancing Act 1919 (NSW). The Defendants respond that s 54A(1) of the Conveyancing Act does not exclude their reliance on a collateral contract, because that section only applies where there is an action being brought upon a contract for the sale or other disposition of land, rather than by way of defence, and they submit that s 23C of the Conveyancing Act only applies to prevent the creation or disposition of an interest in land, except by writing, and the collateral contract on which they rely neither creates nor disposes of any interest in land. It is not necessary to determine these matters, which were the subject of limited submissions, where I have held that the pleaded collateral contract defence cannot be established on other grounds.

Defence of equitable estoppel in respect of unit 1A

1. The Defendants also plead, in paragraphs 70 - 71 of the Further Amended Defence, a claim in equitable estoppel as follows: "As a consequence of the matters pleaded above in relation to the Collateral Contract the Plaintiffs are now estopped from claiming any further payment of Australian dollars from Eddy Investments in respect of the purchase of Unit 1A. In particular: (a) Prior to the exchange between Waterfront and Eddy Investments of the contract for sale of Unit 1A, Waterfront represented to Eddy Investments that, if Eddy Investments entered into a contract for sale in relation to Unit 1A involving a consideration of $1,600,000 Australian dollars, Waterfront would only require Eddy Investments to pay, upon settlement, such amount of Australian dollars, falling between $1,250,000 and $1,600,000 as was required by Waterfront to meet its financial commitment to BankWest, but nothing more. (b) Eddy Investments relied to its detriment upon that representation by Waterfront and thereby entered into a written contract to purchase Unit 1A from Waterfront at a stated consideration of Australian Dollars well in excess of the actual market value of the property and upon the understanding and belief that Eddy Investments and Waterfront had a binding arrangement whereby Eddy Investments would not necessarily be required to pay that full amount of Australian Dollar consideration. (c) By now bringing proceedings for approximately $350,000 Australian Dollars in relation to the sale of Unit 1A to Eddy Investments, Waterfront is acting inconsistently with its representation to and/or agreement with Eddy Investments and is, thereby, acting unconscionably. (d) Waterfront is consequently estopped from bringing that claim."
2. The Defendants submit that an equitable estoppel may be established despite the principle in Hoyts Pty Ltd v Spencer to which I referred above: Lahoud v Lahoud [2006] NSWCA 169 at [111]; Saleh v Romanous [2010] NSWCA 274; (2010) 79 NSWLR 453 at [58] - [63]. The Defendants' claim in estoppel is pleaded as a representational estoppel, and the Defendants would therefore need to establish that the pleaded understanding and belief had been adopted by Eddy Investments on the basis of the pleaded representation and that would operate to its detriment if that representation were not adhered to: Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 428; Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 at 444. In Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 at [42]ff, Pembroke J identified three key elements of a representational estoppel as being that the representor's words or conduct must be clear and unambiguous; the relying party's conduct in relying to its detriment on those words or conduct must be reasonable; and the representor must know or intend that the relying party will act or abstain from acting in reliance on those words or that conduct or, in effect, have some reasonable expectation that its words or conduct will induce some detrimental reliance by the relying party.
3. Mr Bedrossian submits that the fact that Mr Jammal acted for and directed the actions of each of Waterfront and Eddy Investments at the relevant time in late 2009 is not a reason why an estoppel cannot be found. He submits that Mr Jammal's evidence that he did not consider that the contractual term referring to the payment of AUD 1,600,000 would be enforced (or that its enforcement was subject to the pleaded collateral contract) confirms the understanding of both Waterfront and Eddy Investments at the relevant time as to the nature or extent of the legal relations which were in place between the parties. He submits that reliance by Eddy Investments, in the sense of an understanding and agreement between the parties as to the manner or circumstances in which the contractual terms would or would not be enforced, is a proper foundation for an equitable estoppel and that Eddy Investments is entitled to rely upon and to enforce against Waterfront the understanding as to the enforcement of the contract as to unit 1A, notwithstanding that such an understanding arose at a time when Mr Jammal acted for both companies.
4. I do not accept that an equitable estoppel is established. First, the alleged equitable estoppel depends upon Mr Jammal's evidence, which I do not accept in this regard, and involves a degree of further artificiality, so far as it contemplates that Mr Jammal, on behalf of Waterfront, made a representation to Mr Jammal, on behalf of Eddy Investments, to the suggested effect. Second, Mr Ahmajani was then the director of Eddy Investments, and his evidence did not support the making of such a representation or any reliance by Eddy Investments on such a representation. Third, the suggested representation, and reliance on it, are inconsistent with the matters to which I referred above in holding that a corresponding collateral contract was not established.

Defence of sham in respect of unit 1A

1. In the course of the hearing, the Defendants sought to amend their Further Amended Defence to add paragraph 11(c1) as follows: "Further or alternatively to sub-paragraph (c) above, say that the written documents referred to as the contract for Unit 1A was and is neither binding upon nor enforceable against Eddy Investments insofar as it purports to have required the payment of AUD1,600,000, because there was never, as a matter of fact, any intention or agreement by both parties to the transaction that such an obligation would be binding upon Eddy Investments and would be enforceable by Waterfront." It was common ground between the parties that the Court should reserve the question whether that amendment should be permitted to be determined in this judgment.
2. Mr Bedrossian submits that the proposed amendment should be permitted, and that the Defendants should be permitted to put that argument that the sale contract for unit 1A was not binding and enforceable as to the price of AUD 1,600,000. He notes that the proposed amendment was first identified to the Plaintiffs early on the morning of 6 November 2014, the second day of hearing (T51) and that notice was given to the Plaintiffs prior to any cross-examination of the Defendants' witnesses. He submits that the contention is not materially different, in a factual sense, from the estoppel and collateral contract defences raised by the Defendants.
3. It seems to me that the proposed amendment would, as Mr Sulan contends, cause substantial prejudice to the Liquidator, because the Liquidator would be deprived of the opportunity to consider what further claims ought to be made, including a potential claim that the contract as a whole had failed, if the provision for payment of the consideration in that contract was wholly or partly a sham. It also seems to me that, as Mr Sulan pointed out, there would be a real unfairness to Mr Ahmajani, as a director of Eddy Investments, in reaching a finding that the contract to which it was party was a sham, where it had been provided to NAB as the basis of a substantial borrowing, where that proposition had never been put by the other Defendants to Mr Ahmajani so as to afford him an opportunity to answer it. Accordingly, I would not permit that amendment.
4. I will nonetheless address the substance of the sham claim in case an appellate court were to take a different view as to whether the amendment should have been permitted. The Defendants submitted that: "Although the expression 'sham' carries with it negative connotations, which the Defendants say should not be placed upon them, the written contract for the sale of Unit 1A from Waterfront to Eddy Investments was, on the evidence, a form of 'sham'. It was a contract entered into, but with the knowledge and expectation of both parties that, barring exceptional circumstances, the contract would not be performed at that stated consideration."
5. In Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 at 454; 82 ALR 530, Lockhart J observed that: "A 'sham' is … for the purposes of Australian law, something that is intended to be mistaken for something else or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front." In Equuscorp Pty Ltd v Glengallen Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 at [46], the High Court referred to Sharrment above and held that whether a sham is established depends on whether the parties intended their respective rights and obligations to derive from what appears to be a legal instrument, although the Court there held that a loan agreement was not shown to be a "sham" merely because the relevant transactions were not commercially sensible. In Raftland Pty Ltd v Federal Commissioner of Taxation [2008] HCA 21; (2008) 238 CLR 516 at [35]-[36], Gleeson CJ, Gummow and Crennan JJ observed that the term "sham" is correctly used at least where there is an objective of deliberate deception of third parties, but also left open a less pejorative usage that denied the legal effect of the relevant arrangement based on an examination of the whole of the relevant circumstances.
6. Mr Bedrossian also referred to N Seddon, R Bigwood and M Ellinghaus Cheshire & Fifoot Law of Contract (10th Australian edition 2012, LexisNexis Butterworths at [10.9) for the proposition that: "A document may be intended to come into operation only if an unstated contingency is fulfilled, or it may not be intended to operate at all, for example, because it is a sham or a joke, or intended to mask a different transaction. Evidence of such matters is always admissible." [footnotes omitted] He also relies on the proposition advanced by the authors (at [5.11]) that "Contrary to accepted orthodoxy, the test for determining whether an agreement is a sham is subjective."
7. Mr Bedrossian also referred to the summary of the relevant principles by Leeming JA (with whom McColl JA and Sackville AJA agreed) in Lewis v Condon [2013] NSWCA 204; (2013) 85 NSWLR 99 at [57]-[65], where his Honour observed (at [62]) that, in respect of a sham, "legal meaning is given to a document by reference to a subjective intention" and (at [65]) that "It is also necessary to be precise as to the extent to which a transaction is said to be a sham. The whole of the transaction may be a sham, or merely a part of it…."
8. Mr Bedrossian submitted that the evidence supports the conclusion that it was not intended that Eddy Investments was to pay AUD 1,600,000 for unit 1A. I do not accept that submission. It seems to me that the evidence would not have supported a finding that the contract for unit 1A, or the provision for consideration in it, was a sham in any event. That evidence was not supported by Mr Ahmajani's evidence in cross-examination. There is a significant amount of objective evidence which is consistent with that contract, and the provision for consideration in it, having been intended to have operative and binding effect upon the parties, including the payment of stamp duty on the basis that the contract price was as stated in the contract, and the claim by Eddy Investments for GST input tax credit, which resulted in a substantial cash payment to it, on the same basis, and the fact that that contract was provided by Eddy Investments to NAB as the basis of a substantial borrowing from NAB.
9. Accordingly, had I permitted the amendment, I would not have accepted the proposition that the contractual obligation of Eddy Investments to pay an amount of AUD 1,600,000 to Waterfront was a sham.

BBX component of the sale prices for unit 1A

1. I noted above that the contract in respect of unit 1A provided for $1,300,000.00 of the contract price to be payable in BBX trade dollars. A payment of 1,500,000 BBX trade dollars was recorded in Waterfront's BBX trade dollar account on 18 March 2010 and later reversed by a debit of 1,500,000 BBX trade dollars on 11 June 2010. Mr Jammal's evidence was that Waterfront paid fees in Australian dollars to the BBX Group so the BBX trade dollar portion of the purchases of unit 11 by NJ Investments and unit 1A by Eddy Investments would be transferred by the BBX management company and that he never authorised the reversal of the payment by Eddy Investments of 1,500,000 BBX trade dollars to Waterfront (Jammal 6.11.14 [46]).
2. The Plaintiffs point out that the transfer of 1,500,000 BBX trade dollars by Eddy Investments to Waterfront on 18 March 2010 did not occur at the time of settlement of the sale of unit 1A and was not for the same amount as the 1,300,000 BBX trade dollars required by the special conditions to the contract for the sale of unit 1A, and that the amount of points transferred was returned by Waterfront on 11 June 2010, less than three months after the initial transfer. The Plaintiffs also submit that the transaction was part of a round robin which did not result in consideration ultimately flowing to Waterfront. They rely on Mr Touma's evidence to the effect that the transactions were a round robin authorised by Mr Jammal (Touma [36], Ex P1, 1191-1198). Mr Jammal denied that evidence in cross-examination, and his evidence was that the BBX dollar payment was made from a credit line provided by the BBX group (T203). The Plaintiffs submit that evidence should not be accepted, and they submit that the transaction had the net effect that no consideration flowed from Eddy Investments to Waterfront in respect of the BBX component and was directed to deceiving NAB as to the total purchase price payable for unit 1A.
3. The Defendants submit - somewhat inconsistently with their other submissions in respect of the use of BBX trade dollars, to which I referred above - that the manner in which the transactions occurred were not consistent with an intention to deceive NAB and were consistent with a genuine transaction, initially funded by a line of credit granted by the BBX Group in favour of Eddy Investments. The Defendants submit that 1,500,000 BBX trade dollars were paid in respect of unit 1A and that the Court should find that the subsequent reversal (or 'repayment') of those BBX trade dollars to Waterfront was a step taken by Mr Touma in the books and records of the BBX Group and that Mr Jammal did not authorise the reversal of the transaction (Jammal 22.8.14 [46]). Mr Bedrossian also submits that Mr Touma puts forward no evidence of an authorisation at the time of the reversal (in June 2010) and relies on a conversation in early December 2009 and that there is no credible evidence that Mr Jammal authorised the reversal. The Defendants contend that no obligation to pay an amount of 1,500,000 BBX trade dollars subsists, so far as Eddy Investments transferred that amount to the benefit of Waterfront on or about 18 March 2010.
4. Aspects of this transaction, and in particular the difference in the number of BBX trade dollars involved, raised significant uncertainty as to its proper characterisation. It does not seem to me necessary to resolve that uncertainty since, whether or not the transaction related to unit 1A and was a "round robin" in any pejorative sense, it does not seem to me that the transfer of BBX trade dollars to Waterfront, which was reversed within a relatively short time and without Waterfront having obtained any economic benefit from them, would have discharged an obligation to transfer 1,300,000 BBX trade dollars to Waterfront in respect of the sale of unit 1A, whether or not the transaction was reversed with Mr Jammal's authority.
5. The Plaintiffs submit that, for essentially the same reasons as submitted in respect of unit 11, an amount of AUD 1,300,000 is therefore payable, in addition to the amount of AUD 350,000 being the unpaid part of the cash component. I do not accept that submission, for the same reason I did not accept that submission in respect of the sale of unit 11, namely that the failure to transfer a commodity, BBX trade dollars, gives rise to a claim for damages for breach of contract, not a claim for debt, and the Plaintiffs have not established the quantum of such damages, or any adequate basis for the Court to make an estimate in that regard, for the reasons noted above in respect of unit 11.

Claim for vendor's lien over unit 1A

1. Waterfront claims a lien over unit 1A to secure the payment of the unpaid purchase price in respect of that property. I referred to the applicable principles in respect of unit 11 above. It seems to me that an equitable lien is established, so far as the unpaid amount of AUD 350,000 is due in respect of unit 1A, but not in respect of the amount of BBX trade dollars payable under the contract. As I noted above, it seems to me that a failure to deliver a commodity, such as BBX trade dollars, in breach of contract sounds in damages and, within the principle in Reliance Finance Corporation above, the provision for satisfaction of the purchase price by a means other than payment on completion, namely the delivery of BBX trade dollars, excludes the availability of an equitable lien in respect of that portion of the contractual consideration.

Uncommercial transaction claim in respect of unit 1A

1. The Liquidator submits that the sale of unit 1A was an uncommercial transaction so far as Waterfront entered into a binding contract for the sale of that unit and permitted settlement of that sale without ensuring that the consideration specified in the contract was paid to Waterfront, and that those acts conferred a benefit on Eddy Investments to the extent that it did not pay the full consideration required by the contract and a corresponding detriment to Waterfront. The Liquidator submits that there is no explanation, consistent with commercial practice, which would explain why Waterfront would permit settlement to occur without receiving full value under the contract. The Liquidator submits that the value of unit 1A is established by the monetary sum recorded on the front page of the contract and points out that the incoming mortgagee, NAB, agreed to lend funds and obtain a first registered mortgage on that basis. As I noted above in respect of unit 11, it seems to me that limited weight can be given to that matter where NAB applied its loan to value ratio in making the relevant loans and, second, because the possibility that NAB was induced, by the structure of the transaction, to lend against an overstated value of unit 1A must be recognised. The Liquidator did not seek to read its expert valuer's evidence in respect of unit 1A.
2. The Defendants deny that the sale of unit 1A by Waterfront to Eddy Investments was an uncommercial transaction within s 588FB of the Corporations Act, on the basis that the amount of AUD 1,250,000 paid by Eddy Investments was, by itself, equal to or greater than the market value of unit 1A at the time of the transaction, or alternatively that the combined amount of AUD 1,250,000 and 1,500,000 BBX trade dollars was equal to or greater than the market value of unit 1A at the time of the transaction (Further Amended Defence [24]). Mr Wotton's evidence as to valuation was that unit 1A was valued at AUD 1,100,000 plus GST (AUD 1,210,000 inclusive of GST) at the relevant time. The Defendants also point to contemporaneous documents which indicate that the value of unit 1A, as understood by those involved, was in the order of AUD 1m - 1.25m at the relevant time. Mr Jammal's evidence was that he caused Eddy Investments to overpay for that property so as to ensure that BankWest received at least the minimum amount of recovery which it required. Notwithstanding the issues as to Mr Jammal's credit generally, that position is supported by the objective evidence that Mr Jammal sought to satisfy BankWest's requirements so as to avoid personal bankruptcy and by the objective evidence as to the then value of the properties led by Mr Wotton.
3. I am not satisfied that the uncommercial transaction claim is established in respect of the sale of unit 1A, notwithstanding that part of the cash purchase price was not paid by Eddy Investments. It does not seem to me that it has been established that a reasonable person in Waterfront's circumstances would not have entered into, or proceeded with, the transaction, having regard to the fact that Waterfront would (had the full purchase price been paid) have received Australian dollar consideration of AUD 1.6m which substantially exceeded the then value of the property and, even when part of the Australian dollar component of the purchase price was not paid, received AUD 1.25m which was at least equal to the then market value of the property, both as emerging from the information then known to Mr Jammal and BankWest, and having regard to Mr Wotton's evidence. It seems to me that a contrary result does not arise by reason that all of the stated cash consideration was not received; or that 1.3 m BBX trade dollars may or may not have been received, which depends both on whether the 1.5m BBX trade dollars later paid were attributable to the transaction and whether or not they were a round robin; or that Eddy Investments was able to borrow a greater amount from NAB, or directed that part of that excess borrowing be paid to Platnum. Again, a reasonable person in Waterfront's position would have seen little or no benefit in not entering into or proceeding with the transaction where it had no reasonable basis to think that a third party sale would have delivered a better result, having regard only to that part of the AUD component of the sale that it had in fact received.

Claim against Mr Jammal and Platnum in respect of AUD 131,000

1. The facts relating to this claim are in narrow scope. Mr Jammal submitted an application to open a bank account in the name of Waterfront with Arab Bank Australia Ltd on 30 April 2010 and Mr Jammal was the sole signatory of that account. A bank cheque in the amount of AUD 131,000 payable to Waterfront, provided by Mr Vieira (Ex P7), was deposited into that account on the same date (Ex P1, pp 1196 - 1204). An email dated 29 April 2010 from Mr Vieira described that bank cheque as a "cheque for BankWest re the settlement of additional monies outstanding on your account". That description is consistent with that cheque being directed to Waterfront in order to pay down its debt to BankWest. That characterisation of the transaction is also consistent with an invoice dated 29 April 2010 from Waterfront to Mr Vieira's company, which referred to a "loan to Waterfront Investments Group P/L to repay bank loan", albeit the figure (inclusive of GST) was stated as $141,000 not $131,000 (Ex P8). A loan account statement for Mr Vieira (Ex D4, Tab 3, p 325) in turn recorded a payment of AUD 141,000 to Waterfront on 27 April 2010 described as "final settlement to assist Sam [Jammal] with his release from BankWest Units 19 and 25". (Another possibility raised by Mr Bedrossian in submissions (T365), that there were two separate transactions, one for AUD 131,000 and one for AUD 141,000, is highly unlikely given the coincidence in dates).
2. Mr Jammal accepted in cross-examination that he opened the account in the name of Waterfront so that he could bank Mr Vieira's cheque into the account and then withdraw it and so as to prevent the amounts being paid by Mr Vieira being available to BankWest (T164, 170). The relevant funds were withdrawn from the account between 6 and 21 May 2010, with AUD 84,592 being withdrawn by bank cheques payable to Platnum (Ex P1, p 255) in amounts of AUD 50,000 on 13 May 2010, AUD 30,000 on 17 May 2010 and AUD 4,592.15 on 21 May 2010. Cash withdrawals of the balance of the account were made between 6 and 21 May 2010.
3. The Plaintiffs submit that the amount of AUD 131,000 has been used for purposes other than those of Waterfront and that Mr Jammal breached his duties as a director of Waterfront by withdrawing the funds for his own use or the use of Platnum and that each of Platnum and Mrs Jammal were knowingly involved in the breaches within the meaning of s 79 of the Corporations Act or accessories within the second limb of Barnes v Addy (1874) LR 9 Ch App 244. I will address the claims against Mr Jammal and Platnum at this point and the claim against Mrs Jammal below, in dealing with the other claims against her.
4. The Defendants' primary defence to the claim is that the amount of AUD 131,000 was owed to Mr Jammal, rather than to Waterfront, and was his property although it was deposited in Waterfront's bank account opened with Arab Bank. In paragraph 16B of the Further Amended Defence, the Defendants admit the date and amount of the deposit to Arab Bank and admit that the deposited cheque was made payable to Waterfront but deny that: "The funds deposited were funds, to which [Waterfront] was beneficially entitled, but rather says that the funds were monies being provided by Mr Vieira (or his nominees) to [Mr Jammal] (or his nominees, including NJ Investments and Eddy Investments) as an adjusting payment, the need for which arose because [Mr Jammal] and his nominees (being NJ Investments and Eddy Investments) had paid to Waterfront more than ought to have been otherwise required for the purchase of Unit 11 and Unit 1A and they had thereby effectively subsidised Mr Vieira and/or Mr Touma's purchases from Waterfront."
5. The Defendants rely on Mr Jammal's evidence that those funds represented an adjusting payment due to him (or NJ Investments or Eddy Investments as his nominees) in his personal capacity and separate from Waterfront (Jammal 22.8.14 [105] - [106]). Mr Jammal also characterised this payment, in his affidavit evidence (Jammal 6.11.14 [77]), as follows: "There were also discussions between Hector Vieira and Michael Touma and myself regarding other adjustments that would occur between the three of us and outside of the contracts for sale of the properties. Because of the way in which the deals were being structured, it came to be that Hector Vieira was receiving more benefit from some of his purchases that he should have been receiving. Consequently, it was necessary for him to make an adjusting payment or a compensatory payment to me. This was the amount of $131,000." Mr Jammal's evidence was that, although that amount was paid by bank cheque in favour of Waterfront, it was not Waterfront's money (Jammal 22.8.14 [78]).
6. In their opening submissions, the Defendants submitted that Mr Jammal: "had caused NJ Investments to purchase Unit 11 and had caused Eddy Investments to purchase Unit 1A at prices well above those at which [Mr Jammal] otherwise could entirely legitimately have caused those companies to purchase those properties. He did so for the purpose of taking the additional steps required to ensure that BankWest received the total funds, which it required." The Defendants also submit that that amount was an adjusting payment made directly by Mr Vieira to Mr Jammal, to reimburse him for his earlier "overpayments" on units 11 and 1A (although it should be noted that Mr Jammal personally did not make such payments in respect of those units) rather than a payment to Waterfront, and contend that the beneficial entitlement to the monies did not change where Mr Jammal asked Mr Vieira to make the cheque payable to Waterfront.
7. The Defendants also submit that the essential witness in respect of this allegation, from the Plaintiffs' perspective, was Mr Vieira, who prepared an affidavit for use in the proceedings and was present in court during part of the hearing (T173), but was not called by the Plaintiffs. Mr Bedrossian submits that an adverse inference (or, more precisely, an inference that his evidence would not have assisted the Plaintiffs) ought to be drawn as a consequence of the Plaintiffs' failure to call Mr Vieira. The Defendants also submit that Mr Jammal's evidence establishes that the amount of AUD 131,000 did not belong beneficially to Waterfront and they refer to suggested inconsistencies in the documentary materials purportedly supporting the conclusion that the AUD 131,000 was due to Waterfront and in the previous explanation given by Mr Vieira to the Liquidator in writing as compared to the case put by the Plaintiffs.
8. It seems to me that it has been established that the relevant funds were Waterfront's property. First, the amount was provided by Mr Vieira to Waterfront rather than to Mr Jammal. Second, the basis of any adjusting payment to Mr Jammal remains obscure, where NJ Investments had not in fact paid, in Australian dollars, substantially more than the value of unit 11 and had not paid the BBX dollar component of the purchase; Eddy Investments had not paid substantially more than the value of unit 1A, had not paid part of the consideration due in Australian dollars in respect of that unit and had not, at the date of settlement or for some time thereafter, paid the amount of BBX trade dollars referable to the purchase, even if the amount of 1,500,000 BBX trade dollars later credited to Waterfront's account was referable to the purchase of unit 1A; and it is therefore not established that Mr Jammal, NJ Investments or Eddy Investments had provided any subsidy to Mr Vieira's purchases from Waterfront. To the extent that Mr Vieira was in fact persuaded to make such a payment, I accept the Plaintiffs' submission that it must have been referable to Waterfront's sale of the relevant properties, since there is no evidence of any other relationship between Mr Vieira and Mr Jammal which would have given rise to any cause for such a payment. So far as the Defendants' contention to the contrary depends on Mr Jammal's evidence, I do not accept that evidence for the reasons noted above.
9. I deal with the principles applicable to establishing a breach of s 181 of the Corporations Act and breach of fiduciary duty below. I am satisfied that the payment of monies that were the property of Waterfront to Platnum and by cash withdrawals for unspecified purposes establishes a breach of s 181 of the Corporations Act and a breach of fiduciary duty on the part of Mr Jammal.
10. I also deal with the principles applicable to establishing a claim for accessorial liability, under s 79 of the Corporations Act and in equity below. I am satisfied that a claim for accessorial liability is established against Platnum in respect of the amount of AUD 84,952 received by it (from the amount of AUD 131,000 paid by Mr Vieira to Waterfront) on the basis that Mr Jammal's knowledge of relevant matters should be attributed to Platnum. The evidence does not establish that Platnum was involved in the cash withdrawals of the balance of the amount, and a claim for knowing involvement cannot succeed in respect of the balance of that amount without the fact of its involvement being established.

Uncommercial transaction claim against Platnum

1. The Liquidator initially also sought an order under s 588FF(1)(a) of the Corporations Act that Platnum be directed to pay Waterfront the sum of AUD 130,647.91 and the further sum of AUD 348,974 and AUD 131,000. As clarified in closing submissions, the Plaintiffs sought judgment against Platnum in the amount of AUD 564,213 (being the amounts received by it in respect of unit 11 and unit 1A and the withdrawals from Waterfront bank account), interest and costs.
2. The Plaintiffs submit that Waterfront's asset in units 11 and 1A provided a means by which Mr Jammal could obtain loans from NAB to NJ Investments and Eddy Investments from NAB and "divert" monies to Platnum (T207). The Defendants respond that the amount of AUD 130,647.91 paid to Platnum out of the NJ Investment's borrowing in respect of unit 11: "were monies obtained by NJ Investments as part of a loan transaction between NJ Investments and National Australia Bank (and subsequently paid by NJ Investments to Platnum) and were not monies either owed by or payable to Waterfront as part of a contract for sale of Unit 11."
3. The Defendants in turn submit that the direction on which the Plaintiffs rely was given by the solicitors for NJ Investments to its lender, NAB, which was lending money to NJ Investments. The Defendants submit that, obviously enough, NJ Investments was directing its lender to pay some of the monies which it had borrowed to a third party, Platnum. The Defendants in turn contend that that amount did not belong to Waterfront. The Defendants also plead that the amount of AUD 348,974 paid to Platnum out of Eddy Investments' borrowing in respect of unit 1A: "were monies obtained by Eddy Investments as part of a loan transaction between Eddy Investments and National Australia Bank (and subsequently paid by Eddy Investments to Platnum) and were not monies either owned by or payable to Waterfront as part of the contract for sale of Unit 1A." (Further Amended Defence [50])
4. I have set out the principles applicable to establishing an uncommercial transaction above. I do not consider that the claims against Platnum in respect of unit 11 or unit 1A have been established. In any property sale transaction, the vendor's property provides the purchaser the means to borrow on security for its acquisition of that property and, if it borrows more than it requires to complete the purchase, to deploy the excess as it chooses. The Plaintiffs also contend that, if BankWest had known that there was a greater AUD amount available on the settlement of the transaction in respect of units 11 and 1A, it would have claimed such monies and that BankWest would not have released its security if it had known that monies would be transferred to Platnum rather than paying the debt which was owed to it. That proposition may be correct, but it does not seem to establish an uncommercial transaction claim in respect of dealings of the purchasers with monies borrowed by them on the security of the relevant properties. It seems to me that the fact that Waterfront received, in respect of each unit, at least the value of the properties excludes that claim.
5. A claim against Platnum is established on the basis that the payment of AUD 84,952 to it (from the amount of AUD 131,000 paid by Mr Vieira to Waterfront) is an uncommercial transaction, within the principles set out above. A payment of an amount by an insolvent company to another entity under the practical control of its sole director, without consideration and not in discharge of a proper claim, is plainly not consistent with normal commercial practice. However, the claim is not established in respect of other amounts withdrawn in cash from Waterfront's Arab Bank account since it has not been established that they were paid to Platnum.

Claim for breach of directors' duties against Mr Jammal

1. The Plaintiffs also sought a declaration that Mr Jammal breached fiduciary duties owed to Waterfront as a director of Waterfront and a declaration under s 1317E of the Corporations Act that Mr Jammal contravened ss 180(1), 181(1) and 182(1) of the Corporations Act. No declaration of a contravention of those provisions of the Corporations Act can be made under s 1317E of the Corporations Act, since the balance of authority indicates that that section only applies to proceedings in which relief is sought by the Australian Securities and Investments Commission: One.Tel Ltd (in liq) v Rich [2005] NSWSC 226; (2005) 190 FLR 443 at [69]-[70] ; Primacy Underwriting Agency Pty Ltd v Kilborn [2007] NSWSC 158; (2007) 25 ACLC 160 at [6]-[8] . As clarified in closing submissions, the Plaintiffs sought judgment against Mr Jammal in the amount of AUD 2,180,990 (being the amounts claimed to be owing under the relevant contracts of AUD 400,000 and AUD 1,650,002) and the amounts of withdrawals from the bank account in Waterfront's name of AUD 130,988 and interest.
2. The Plaintiffs contend that Mr Jammal owed duties to Waterfront at general law and under s 180 of the Corporations Act to exercise reasonable care and diligence; at general law and under s 181 of the Corporations Act to act in good faith in Waterfront's interests and for a proper purpose; and at general law and under s 182 of the Corporations Act not to use his position as a director of Waterfront to gain an advantage for himself or cause detriment to Waterfront, and corresponding fiduciary duties. The Defendants admit that Mr Jammal, as a director of Waterfront, owed duties to Waterfront under ss 180(1), 181(1) and 182(1) of the Corporations Act of the nature pleaded, but deny that he owed a fiduciary duty to Waterfront of the nature pleaded, and otherwise do not admit the relevant allegations against him.
3. The Plaintiffs point to Mr Jammal's evidence that he controlled each of NJ Investments, Eddy Investments and Platnum, as well as being a director of Waterfront. Mrs Jammal's evidence, in respect of NJ Investments, was to the same effect although, as I noted above, Mr Ahmajani took a more qualified position in respect of Eddy Investments. The Plaintiffs point out that Waterfront was, as is now accepted, insolvent at the time of the relevant transactions and that Mr Jammal's duties to Waterfront therefore required that he take into account the interests of creditors: Kinsela v Kinsela (1986) 4 NSWLR 722 at 730. The Plaintiffs point out that Waterfront's creditors included BankWest which was owed substantial amounts and the Australian Taxation Office, and that it was in Waterfront's interest to ensure that it received the maximum amount of consideration in respect of the properties to satisfy its debts, and not in Waterfront's interests for the properties to be transferred and for the proceeds of sale to be "diverted" to Platnum, of which Mrs Jammal was the sole director and shareholder, although Mr Jammal's evidence is that he controlled it.
4. Broadly, s 180(1) of the Corporations Act requires a director or officer to exercise his or her powers and discharge his or her duties with the degree of care and diligence which a reasonable person would exercise if he or she was a director or officer of a corporation in the corporation's circumstances and occupied the office within that corporation held by the director or officer and had the same responsibilities within the corporation as the director or officer. In Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253 at [372] (upheld by the Court of Appeal in Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1), Santow J (as his Honour then was) noted that the duties imposed by the section are essentially the same as directors' duties at general law; that, in determining whether a director had exercised reasonable care and diligence, the test was what an ordinary person, with the director's knowledge and experience, might be expected to have done in the circumstances if he or she was acting on his or her own behalf; and that the duty of care and diligence would require special vigilance in a situation of potential conflict. In Australian Securities & Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1, Austin J noted (at [7203]) that the statutory duty incorporates a minimum standard of diligence and (at [7242]) that the question in respect of a contravention of s 180(1) was whether a company officer failed to meet the standard of care and diligence, and this was to be assessed with regard to the circumstances existing at the relevant time, without the benefit of hindsight and with the distinction between negligence and mistakes or errors of judgment firmly in mind.
5. I summarised the relevant principles in respect of s 181 of the Corporations Act and the broadly corresponding general law duty in Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; (2014) 101 ACSR 233 at [419] - [421] as follows (omitting several authorities) and I repeat that summary for present purposes: "Section 181(1) of the Corporations Act requires a director or other officer of a corporation to exercise his or her powers and discharge his or her duties in good faith in the best interests of the corporation, and for a proper purpose. In Chew v R (1991) 4 WAR 21; 5 ACSR 473 at 499, Malcolm CJ summarised the requirements of that duty as being that directors (1) must exercise their powers in the interests of the company, and must not misuse or abuse their power; (2) must avoid conflict between their personal interests and those of the company; (3) must not take advantage of their position to make secret profits; and (4) must not misappropriate the company's assets for themselves. The case law is divided as to whether a contravention of s 181(1)(a) of the Corporations Act requires that it be established that a director engaged deliberately in conduct which he or she knew was not in the company's best interests: for example, Forge v Australian Securities and Investments Commission [2004] NSWCA 448; (2004) 213 ALR 574 at [245] per McColl JA (with whom Handley and Santow JJA agreed); Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd above at [150], varied on appeal on another point in V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd above. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 44 WAR 1, the Court of Appeal of the Supreme Court of Western Australia unanimously held that the corresponding general law duty to act in good faith in the company's best interests was subjective and would be complied with if directors honestly believed they acted in the company's best interests (at [923] per Lee AJA, at [1988] per Drummond AJA, [2027], at [2772], [2795] per Carr AJA). The alternative view is that a contravention of that limb of s 181 can be established if the law objectively considers that what the director did was improper, even if the director subjectively believed that he or she was acting in the company's best interests: see, for example, Australian Growth Resources Corporation Pty Ltd v Van Reesema (1988) 13 ACLR 261 at 270-271; 6 ACLC 529 per King CJ; Mernda Developments Pty Ltd (in liq) v Alamanda Property Investments No 2 Pty Ltd [2011] VSCA 392; (2011) 86 ACSR 277 at [32]-[33]. The difference in those approaches does not seem to me to be material for the purposes of this case. The section may be contravened if a director promotes his or her personal interest in a situation where there is a conflict or real or substantial possibility of a conflict between those interests and the company's interests: Australian Securities and Investments Commission v Adler above at [735]; Parker above at [72]. A contravention of s 181(1)(b) may also be established if a director does not exercise his or her powers for the purpose for which they were conferred or exercised them for an improper purpose, and the bulk of authority indicates that question is to be determined objectively: Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; 14 ACSR 109 at 137 per Ipp J (with whom Malcolm CJ and Seaman J agreed); Australian Securities and Investments Commission v Adler above at [738]-[739]; Parker above at [73]. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) above, the majority held that whether a director acts for an improper purpose, for the purposes of the corresponding general law duty, is determined objectively involving an assessment by the Court of what was reasonable in the circumstances (at [933] per Lee AJA, at [1988], [2027], [2073] per Drummond AJA). By contrast, Carr AJA held that the test whether directors had acted for an improper purpose was primarily subjective, although a decision would be voidable if directors acted in good faith for a purpose that was beyond their powers or for a collateral purpose (at [2923])."
6. I also summarised the relevant principles in respect of s 182 of the Corporations Act and the broadly corresponding general law duty in Re Colorado Products Pty Ltd (in prov liq) above at [432] - [433] as follows (omitting several authorities): "Section 182(1) of the Corporations Act prohibits a director, secretary, officer or employee of a corporation from improperly using his or her position to gain an advantage for himself or herself or someone else or cause detriment to the corporation. An objective standard is to be applied in determining what amounts to an "improper" use of position, and impropriety is established by "a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case" … It is not necessary that the relevant director gain an advantage for himself or herself or cause a detriment to the company in order to establish a contravention of the section: Chew v R [1992] HCA 18; (1992) 173 CLR 626 at 633 per Mason CJ, Brennan, Gaudron and McHugh JJ. An objective test was also applied to determine whether this section was contravened in Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd above and, in Hydrocool Pty Ltd v Hepburn (No 4) [2011] FCA 495; (2011) 279 ALR 646, Siopsis J followed R v Byrnes, above, in holding that impropriety for the purposes of this section was objective and did not require subjective knowledge of impropriety and followed Chew v R, above, in holding that a contravention could be established although the desired object was not achieved. …."
7. A director of a company is also a recognised category of fiduciary, and the no conflict rule prohibits conduct where the director has a personal interest or duty owed to a third party which gives rise to a real and sensible possibility of a conflict: Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 at 198-199; Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 at 557-558. In Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at 199, McHugh, Gummow, Hayne and Callinan JJ formulated the no conflict rule as follows: "… [t]he fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is 'a conflict or a real or substantial possibility of a conflict' between personal interests of the fiduciary and those to whom the duty is owed."
8. I have noted above that Mr Jammal was a director of Waterfront and it seems to me plain that he must be treated as a de facto director of NJ Investments and Eddy Investments. On his own evidence as to the scope of his role in those companies, it seems to me that he had a serious and actual conflict of interest in negotiating and implementing the sales of units 11 and 1A for both vendor and purchaser; compare Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102; (2014) 285 FLR 121. However, the Plaintiffs' case placed primary emphasis on several specific matters which I will address in turn.
9. In their opening submissions, the Plaintiffs identified the relevant breaches alleged against Mr Jammal as, first, allowing Waterfront to execute sale contracts which provided for payment in BBX trade dollars where BBX trade dollars "was not consideration which was and would be available to Waterfront's creditors"; allowing Waterfront to settle the transactions and transfer title to the properties without receiving the full consideration required by the contracts at settlement; and taking no steps following settlement to ensure that Waterfront received full consideration. The Defendants accepted, in opening submissions, that Mr Jammal had a duty to bear in mind the interests of the relevant creditors given the financial circumstances of Waterfront at the time of the transactions, although they submit that the relevant creditor was BankWest, on the basis that it was a secured creditor with an entitlement to receive the entirety of the proceeds of sale of all of Waterfront's property. The Defendants point out that BankWest knew of the Australian dollar amounts to be achieved on the sale of each of units 11 and 1A and consented to the relevant sales and settlements, and later made inquiries about but did not progress the possibility of realising value from amounts due in BBX trade dollars. The Defendants respond to the submission that Mr Jammal breached his duties to Waterfront by allowing it to execute contracts containing provision for payment by BBX trade dollars by pointing out that BankWest did not complain about, and indeed seems to have accepted, the involvement of BBX trade dollars and, possibly more fundamentally, that Waterfront had achieved an Australian dollar cash price in excess of the market value of each of units 11 and 1A. The Defendants submit that no breach of fiduciary or statutory duty was committed by Mr Jammal so far as he obtained fair and reasonable (if not greater than market) prices for the two properties and reached a result that exceeded BankWest's minimum requirements.
10. It does not seem to me that (putting aside the wider conflict of interest to which I have referred) any breach of fiduciary or statutory duty has been established on the specific basis that Mr Jammal allowed Waterfront to execute sale contracts which provided for payment in BBX trade dollars on the basis that BBX trade dollars "was not consideration which was and would be available to Waterfront's creditors". The fundamental difficulty with that allegation is that the evidence to which I have referred above provides no basis for a conclusion that a third party purchaser would have paid a greater amount for the properties than NJ Investments and Eddy Investments in fact paid in Australian dollars, or that NJ Investments and Eddy Investments would have agreed to pay a greater amount in Australian dollars than the contract provided, or that Waterfront was disadvantaged by having the right to receive an additional transfer of BBX trade dollars for what they were worth. It also does not seem to me that a breach of fiduciary or statutory duty has been established by Mr Jammal allowing the settlement to proceed without receiving BBX trade dollars at settlement, where Mr Touma's evidence was that was the usual process for transactions involving BBX trade dollars. It seems to me that Mr Jammal's failure to take subsequent steps to seek to bring about a transfer of the BBX trade dollars to Waterfront in respect of unit 11 and unit 1A breached at least his fiduciary duties owed to Waterfront and s 180 of the Corporations Act, and also contravened ss 181 and 182 of the Corporations Act, since it preferred the interests of NJ Investments and Eddy Investments in not making available the relevant BBX trade dollars. However, for the reasons noted above, the Plaintiffs have not established an evidentiary basis to quantify the damages (or any equitable compensation) that would follow from Waterfront not having received the transfer of those amounts.
11. The Plaintiffs also identified the relevant breaches alleged against Mr Jammal as entering into a "round robin" transaction in respect of 1,500,000 BBX trade dollars in respect of unit 1A. The Defendants deny that Mr Jammal breached his duties to Waterfront on the basis that: "He arranged for the required amounts of BBX Trade Dollars to be paid by the BBX management company to Waterfront and in fact caused each of NJ Investments and Eddy Investments to pay the fees required for those BBX transactions." That proposition in turn reflects Mr Jammal's evidence that, in substance, he believed that all that was necessary to be credited with amounts of BBX trade dollars was to pay the requisite cash fees to the BBX management company. I do not accept that evidence, both because I do not accept Mr Jammal's evidence generally, and because it is inherently implausible that the BBX management company would generally make large amount of BBX trade dollars available to a company, which may redeem those amounts in dealings with third parties, merely because a relatively small cash fee had been paid in respect of those amounts. Mr Touma's evidence that such transactions were in the nature of loans, based on criteria involving more than payment of the relevant fees, seems to me to be inherently more consistent with the commercial probabilities, although I recognise that the BBX Group had afforded very favourable loan arrangements in respect of BBX trade dollars to Mr Vieira (Ex D4, Tab 3, p 181). However, the fact that such an arrangement is reached with one party does not indicate that it is available to all. It seems to me that Mr Jammal's involvement in those transactions breached at least s 180 and probably also ss 181 and 182 of the Corporations Act. However, it is again not necessary to address that matter at length where, for the reasons noted above, the Plaintiffs have not established an evidentiary basis to quantify the damages (or equitable compensation) which would follow from Waterfront not having received the transfer of that amount of BBX trade dollars.
12. The Plaintiffs also identified the relevant breaches alleged against Mr Jammal as allowing AUD 348,974 in respect of unit 1A and AUD 130,647 in respect of unit 11 to be paid to Platnum rather than Waterfront or its creditors at settlement. The Defendants respond that the amounts obtained by NJ Investments and Eddy Investments (in addition to the cash component required for the purchase of units 11 and 1A respectively) by way of finance from the NAB did not belong to Waterfront and was money entitled to be applied by NJ Investments as it chose. It does not seem to me that any breach is established in respect of unit 11, where Waterfront had received the full AUD amount due under the contact which substantially corresponded to the value of the unit sold to NJ investments. It seems to me that Mr Jammal's involvement in the transaction involving unit 1A breached at least his fiduciary duties and s 180 and probably also ss 181 and 182 of the Corporations Act, where Mr Jammal procured the relevant payment by Eddy Investments to Platnum at a time the amount of AUD 350,000 due by Eddy Investments to Waterfront had not been paid. This result follows from my rejection of the defences in collateral contract, estoppel and sham above, and from the conflict of interest involved in making that payment to Platnum when the amount due to Waterfront was unpaid. Accordingly, Waterfront is entitled to damages, or equitable compensation, of AUD 348,974 against Mr Jammal on that basis.

Accessorial liability

1. The Plaintiffs submit that each of NJ Investments, Eddy Investments, Platnum, Mrs Jammal and Mr Ahmajani are liable as accessories to Mr Jammal's alleged breaches of duty. The Plaintiffs submit that each of them was knowingly concerned and involved in those breaches within the meaning of s 79 of the Corporations Act or were accessories for the purposes of the second limb of Barnes v Addy above. The Plaintiffs also point out that, on the Defendants' case, Mr Jammal was the controlling mind of each of NJ Investments, Eddy Investments and Platnum and each of them therefore had relevant knowledge of the facts giving rise to the contraventions.
2. Section 79 of the Corporations Act provides that a person is involved in a contravention if, relevantly, that person aided, abetted, counselled or procured the contravention or was in any way knowingly concerned in or party to the contravention. A finding of knowing concern requires that the relevant person is an intentional participant in the contravention, the requisite intention being established if the person has knowledge of the essential elements of the contravention: Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 667 per Mason ACJ, Wilson, Deane and Dawson JJ. It is not, however, necessary to prove that person knew that the conduct amounted to a contravention of the Corporations Act: Yorke v Lucas above at 667. That finding also at least requires that person was in fact "concerned" in the contravention, in that he or she had a practical involvement in the acts or omissions constituting the contravention: Ashbury v Reid [1961] WAR 49 at 51; Trade Practices Commission v Australian Meat Holdings Pty Ltd (1988) 83 ALR 299 at 357, where Wilcox J observed that the word "concerned" in s 75B(1)(c) of the Trade Practices Act 1974 (Cth) requires "facts connecting the accused with the commission of the relevant offence"; Australian Securities & Investments Commission v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373, where Brereton J treated this element as requiring "some intentional participation or assistance in the contravening conduct"; Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340; (2014) 98 ACSR 347 at [543].
3. The second limb of the rule in Barnes v Addy above in turn allows a third party to be held liable as a constructive trustee if he or she knowingly assists a director in a transaction which is in breach of duty to the company: Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, the High Court emphasised (at [179], [183]) that its earlier decision in Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; 5 ALR 231 established a requirement that any breach of trust or breach of fiduciary duty relied on to establish liability for knowing assistance must be dishonest and fraudulent, so that the impugned conduct must involve circumstances attracting a degree of opprobrium beyond an innocent breach of trust or duty. In Ramsay v BigTinCan Pty Ltd [2014] NSWCA 324; (2014) 101 ACSR 415 at [30], Macfarlan JA (with whom McColl and Gleeson JJA generally agreed) referred, without disapproval, to the trial judge's treatment of Farah Constructions as authority that the elements of a knowing assistance claim were (1) a dishonest and fraudulent breach of duty by the fiduciary; (2) knowledge of that dishonest and fraudulent breach by a third party; and (3) assistance in that breach by that third party, and also referred to Consul Developments above as authority that conduct may be "dishonest and fraudulent" for the purposes of liability for knowing assistance where it can be described, in ordinary language, as morally culpable. A third party which is the corporate creature or alter ego of a fiduciary who acted in breach of duty can also be held to be knowingly involved in that breach without the need to separately establish dishonesty on its part, although the Plaintiffs did not expressly put their case on that basis: Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296 at [243].
4. I am satisfied that a claim for knowing involvement is established against NJ Investments in respect of Mr Jammal's failure to take steps to bring about the transfer of BBX dollars due in respect of its acquisition of unit 11, where NJ Investments, under Mr Jammal's control, took no such steps and Mr Jammal's knowledge of the relevant matters is attributed to it. However, I have held above that the Plaintiffs have not established the evidentiary basis for quantification of any loss in respect of Waterfront's not receiving the BBX portion of the consideration for that unit, or any basis for the Court to make an estimate of that loss.
5. I am satisfied that a claim for knowing involvement is established against Eddy Investments in respect Mr Jammal's failure to take steps to bring about the transfer of BBX dollars in respect of unit 1A, for the same reason, although the Plaintiffs have not established their loss. I am also satisfied that a claim for knowing involvement is established against Eddy Investments in respect of the transfer of AUD 348,974 in respect of the sale of unit 1A to Platnum, in that Mr Jammal's knowledge of relevant matters is attributed to Eddy Investments, and Eddy Investments, under Mr Jammal's practical control, was plainly concerned in making the relevant payment to Platnum when the balance of Australian dollars due to Waterfront was not paid.
6. I am satisfied that a claim for knowing involvement is established against Platnum in respect of at least Mr Jammal's breach of fiduciary duty in respect of the payment of AUD 348,974 to Platnum in respect of unit 1A, which I addressed in paragraph 123 above. That claim could also have been put as one of knowing receipt or on the basis of the principle in Grimaldi to which I referred in paragraph 126 above. As I noted above, I am also satisfied that a claim for knowing involvement is established against Platnum in respect of the amount of AUD 84,952 paid to Platnum (being part of the amount AUD 131,000 paid by Mr Vieira to Waterfront) in that Mr Jammal's knowledge of relevant matters may be attributed to Platnum, and Platnum was involved in that payment by receiving it.
7. As clarified in closing submissions, the Plaintiffs sought judgment against Mrs Jammal for AUD 833,566.00 (being an amount claimed to be owing under the contract for unit 11 of AUD 400,000, an amount received by Platnum in respect of unit 1A of AUD 348,974 and withdrawals from the bank account held in the name of Waterfront in the amount of AUD 84,592) or alternatively AUD 564,213 (being amounts received by Platnum in respect of units 11 and 1A and the withdrawals from Waterfront's account), interest and costs. The Plaintiffs submit that Mrs Jammal had full knowledge of the transaction between Waterfront and NJ Investments and that she agreed to the sale, was involved in procuring the loan from NAB in respect of unit 11, was involved in and saw the settlement directions to the NAB and that the transaction was explained to her by a solicitor, Mr Taylor (Ex P9, tab 5, T244). The Plaintiffs also submit that Mrs Jammal was aware of the transfer of AUD 348,974 to Platnum in respect of unit 1A, although that proposition neglects the fact that a claim for knowing involvement requires involvement and not only knowledge. The Plaintiffs submit that Mrs Jammal has not taken any steps since settlement to ensure that the full consideration was paid under the relevant contracts.
8. Mrs Jammal's evidence was that everything to do with business and money was left to Mr Jammal; that he generally informed her what was going with financial issues, but she was not certain that he always explained all the details to her; and she had not always asked Mr Jammal for explanations regarding those types of matters (Mrs Jammal 13.8.14 [4] - [5]). Her evidence was that she was generally not involved in details of business issues, but signed documents when she was asked to do so (Mrs Jammal 13.8.14 [6]). That Plaintiffs submit that Mr Jammal accepted that she knew that Waterfront and Mr Jammal was under financial pressure at the time of the sale of unit 11 by Waterfront (T112); she understood the contract price for unit 11 was AUD 900,000 (T114); she was part of the decision that NJ Investments should purchase unit 11 (T117-T119); she arrived at the purchase price following the valuation which was received (T117); she knew that NJ Investments was borrowing more from the NAB than was required and that the balance would be paid to Platnum (T123-T124); and she had seen the settlement cheque directions to NAB at the time of settlement (T133). That submission somewhat overstated Mrs Jammal's evidence, to the effect that she "vaguely" recalled that NJ Investments was borrowing more from NAB than was required to purchase unit 11 and that the balance would be paid to Platnum (T124) and "vaguely" remembered having seen settlement cheque directions to NAB at the time of the settlement (T133).
9. I am not satisfied that the matters to which the Plaintiffs refer established sufficient involvement in, or knowledge of the essential elements of, the specific contraventions that I have found against Mr Jammal in respect of unit 11, relating to the failure to transfer the BBX component of the purchase price for that unit, so as to establish a claim for knowing involvement against Mrs Jammal, having regard to the serious character of such a finding. I have held above that the Plaintiffs have not in any event established the evidentiary basis for quantification of any loss in respect of the sale of unit 11 to NJ Investments or for the Court to estimate that loss. The Plaintiff's submission that Mrs Jammal knew of matters relating to that payment of AUD 348,974 to Platnum in respect of unit 1A is not sufficient to establish a claim for knowing involvement, where there is no evidence that she had any substantive involvement in the acts or omissions constituting the alleged contravention in respect of unit 1A, the sale of that unit to Eddy Investments or the transfer of those monies to Platnum. I have not neglected the fact that she was the director and sole shareholder of Platnum, but the evidence plainly establishes Mr Jammal's control of this transaction, to the exclusion of any substantive role of Mrs Jammal in it. It has not been established that Mrs Jammal knew the essential elements of the contravention involved in the payment of AUD 84,952 to Platnum from the Arab Bank account of Waterfront, including any element of impropriety in the payment. It has also not been established that Mrs Jammal was in fact involved in, still less that she knew the essential elements of the contravention involved in, the cash withdrawals of the balance of the amount held in that account. The claim for knowing involvement against Mrs Jammal therefore fails.
10. The Plaintiffs initially sought judgment against Mr Ahmajani in the same amounts as against Eddy Investments, or alternatively judgment in the amount of AUD 348,974 (being the amount paid to Platnum in respect of the sale of unit 1A) and interest. The Plaintiffs refer to evidence of Mr Ahmajani that he made the decision to purchase commercial premises 1A on behalf of Eddy Investments (T80); that he knew that Waterfront and Mr Jammal were under financial pressure at the time of the purchase of commercial premises 1A; that he formed the view that AUD 2.9m was a fair price for those premises and that is what those premises were worth and that it was a market price (T83) and he was prepared to enter into a contract for AUD 2.9 m (T84); that he was making decisions for Eddy Investments independently (T84); that he received advice from a solicitor in respect of the contract (T87); that he understood the cash component obligation of AUD 1.6 m under the contract (T88); that Eddy Investments borrowed monies from NAB to meet that obligation (T89); that the documents relating to the loan from NAB were explained to him (T90); that the written contract for the sale of commercial premises 1A was the full agreement (T95-97, T109); that he was aware of the amounts that were to be paid to Platnum on settlement (T101-106); that Mr Jammal controlled the process by which monies due to Waterfront under the contract were paid (T104) and was to look after the BBX component of the purchase price (T106); and that Mr Jammal was involved in claiming the input tax credit on behalf of Eddy Investments (T107-T108).
11. The matters to which the Plaintiffs refer to do not seem to me to indicate that Mr Ahmajani had sufficient involvement in, or knowledge of the essential elements of, the specific contraventions that I have found against Mr Jammal in respect of unit 1A, relating to Eddy Investments' failure to pay a portion of the Australian dollar purchase price or transfer the BBX component of the purchase price for that unit and its payment of AUD 348,974 to Platnum while part of the Australian dollar purchase price for unit 1A had not been paid by it. I am not satisfied that it has been established, given Mr Ahmajani's lack of business or financial sophistication, his trust in Mr Jammal and his evidence to which I referred above, that he had knowledge of the essential facts giving rise to a breach of duty by Mr Jammal in respect of those matters or that he had any knowledge of any impropriety in the payment to Platnum. The claim for knowing involvement against Mr Ahmajani therefore fails.

Orders and costs

1. In summary, the Plaintiffs have succeeded in aspects of their claims against Mr Jammal in respect of the amount of AUD 348,974 paid to Platnum in respect of the sale of unit 1A and in respect of the appropriation of AUD 131,000 paid by Mr Vieira to Waterfront. The Plaintiffs have also established a breach of fiduciary and statutory duty against Mr Jammal, but not any entitlement to damages or equitable compensation, in respect of the failure to transfer BBX trade dollars to Waterfront in respect of the purchase of units 11 and 1A.
2. The Plaintiffs have succeeded in claims against Platnum in respect of the amount of AUD 348,974 paid to it in respect of the sale of unit 1A, and in respect of the lesser amount of AUD 84,952 received by Platnum from the amount of AUD 131,000 paid by Mr Vieira to Waterfront. The Plaintiffs have succeeded in a claim against Eddy Investments in respect of the amount of AUD 348,974 paid to Platnum in respect of the sale of unit 1A. The Plaintiffs have failed in establishing any entitlement to damages or equitable compensation against NJ Investments and have failed in their claims for knowing involvement against Mrs Jammal and Mr Ahmajani.
3. The parties should bring in agreed short minutes of order to give effect to this judgment, and dealing with costs, within 21 days or, absent agreement, their respective draft short minutes of order and short submissions as to the differences between them. Those orders will need to address whether the Plaintiffs elect to pursue any claim for an accounting of profits in lieu of a claim for damages or compensation. I will hear the parties as to costs, including in respect of those claims that succeeded only in part against some parties and failed wholly against others.

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: 09 February 2015