Johnston v Parchert & Anor

[3] On 5 August the solicitors for the plaintiff confirmed that the date for the approval of finance was to be extended to 9 August 2002 on certain conditions.[5] The settlement date was altered to 27 August 2002. Also, it was suggested that another person may purchase the property and a request was made that the plaintiff or a nominee be named as the purchaser on the contract.

[4] By letter dated 9 August, the plaintiff's solicitors advised that the application for finance had not been successful and the plaintiff elected to terminate the contract.[6]

[5] Thereafter, discussions occurred between the plaintiff and the first defendant, Mr. Robert Charles Parchert, and the plaintiff asserts that a joint venture agreement was reached as pleaded in terms of paragraph 18, 19 and 20 of the Further Amended Statement of Claim:

18. "On 9th August 2002 the First Defendant inquired of the Plaintiff words to the effect whether the Plaintiff would be prepared to do a joint venture with him and said words to the effect, "I am about to settle the sale of some management rights in respect to some units at Riverhills. I have some money to invest."

19. The Plaintiff then advised the First Defendant words to the effect, "That would be great. I was thinking of a joint venture whereby either party receives 10% interest for the period that any money is invested by that party into the project."

20. It was further discussed between the Plaintiff and the First Defendant that if there was to be a joint venture between them the terms of the joint venture would include, in addition to the payment of interest or any money invested, that all costs and outlays would be deducted from the selling price and the Plaintiff and the First Defendant would charge $20.00 to $25.00 per hour for their time as a nominal figure and once a net return from the sale of the renovated property had been calculated would split any profit 50/50."

[6] The defendants purchased the said property by contract dated 10 August 2002 for $550,000.00. The present action by the plaintiff claims fifty (50) per cent of the net proceeds of the sale by the defendants of the subject property. The subject property was sold for $1,050,000.00 in June 2003.

Evidence leading up to the meeting between the Plaintiff and First Defendant

[7] The plaintiff gave evidence that he was a builder and designer. The plaintiff first became aware of the subject property at Grieve Road through a real estate agent Mr. Mann. The plaintiff's intention was to live on the subject property. He was going to "sit on it" for twelve (12) months and then sell it as his principal place of residence. Presumably, this would have avoided his paying capital gains tax. He also intended to renovate it. The plaintiff got the original plans took photographs and prepared his own plans for the renovation. He then prepared the Take-out Sheet.[7]

[8] Because of the problems the plaintiff was having with finance, he approached a friend Mr. Kreiscbergs with a view to a joint venture. The plaintiff gave evidence that he took Mr. Kreiscbergs to the subject property and told him the purchase price, that after some renovations it would fetch a price up to $1.4 million. Mr. Kreiscbergs was a little sceptical about the figures according to the plaintiff. Event though the plaintiff asserted that Mr. Kreiscbergs would help him, he approached another friend, Paul Dakin, with a similar proposal of a joint venture. Mr. Dakin was going to put in $350,000.00, the finance was to be from Suncorp and Mr. Dakin was required to submit an assets and liabilities statement before the loan was secured. The latter did not occur. The loan would not be available in time for the extended settlement date on the subject property.[8] In evidence, the plaintiff asserted that "I had Daryl Symonds ready to settle any day. I had - John Kreiscbergs had already told me he would do the deal. And I had Paul Dakin - who had access to the finance and could settle on the day."[9] The accuracy of this statement will be discussed when dealing with the evidence of other witnesses.

Meeting between the Plaintiff and the First Defendant

[9] The plaintiff gave evidence that the first defendant visited his office at Mayda Street, Sumner Park early on 9 August 2002. The first defendant was employed by the plaintiff as a project manager. He was working on a project at Park Road, Slacks Creek at the material time. It was the first defendant's practice to call in and get the cheques for the wages on a Friday. He has been working for the plaintiff for a couple of years and they would have a chat about different things including the problems the plaintiff was having selling his property at Mayda Street which was his residence as well as his office. The first defendant was also aware of the contract signed on the subject property.

[10] The plaintiff gave evidence[10] that he told the first defendant that he had Mr. Kreiscbergs and Mr. Dakin in the wings to help him in a joint venture if necessary. According to the plaintiff the first defendant then asked if the plaintiff would do a joint venture with him as he had just sold his River Hills site.[11] Rather than push Mr. Kreiscbergs into something that he was not "really happy to do"[12], the plaintiff accepted the offer from the first defendant. The plaintiff stated that he then "ran past the same scenario"[13] with the first defendant that he had with the other proposed joint venturers. In effect this was that the first defendant would get 10% interest on monies "put in" and that all expenses would be deducted from the sale price together with the cost of purchase of the subject property and then the net proceeds would be divided 50/50. The plaintiff asserts that the first defendant agreed to this and that it was not necessary to get the agreement of his wife, the second defendant, as she would agree. The plaintiff also said that the first defendant did not require the agreement to be formalised by a written agreement. The first defendant denies any such joint venture was discussed.

[11] To support his claim that this discussion occurred, the plaintiff made reference to the presence of a Mr. Ian McIntyre who was on the mezzanine level above his office and who it is alleged heard the discussion. Mr. McIntyre's evidence will be dealt with later in these reasons.

[12] At this meeting, the plaintiff said that he produced a pro-forma agreement which he had previously entered into with Mr. McIntyre. The plaintiff offered to have one typed up or let the second defendant do it. The document was produced at trial.[14] A perusal of this document shows little connection between the alleged agreement with the first defendant and the agreement between the plaintiff and Mr. McIntyre save that the net proceeds would be divided 50/50. The first defendant denies that any such agreement was produced.

[13] The plaintiff said that he realised that he would have to terminate his second contract if the defendants were to be the purchasers. There were some stamp duty implications. The following interchange is alleged by the plaintiff to have occurred:

"So I said to Bob (the first defendant), 'Look, we can screw these people down on price. I reckon you might get it for as low as 525-40, 535-40". I said, "Look, don't worry about it, business is business, for every $10,000 we save, that's $10,000 that could make the building look a lot better." I'd already negotiated from 730 to 570, so I knew it could be picked up better because of the fact they were anxiously - he had a settlement going off in 14 days - or seven days at that stage by then - and her settlement had been extended two times, she was really peeved.

What settlement was this that you're referring to? -- She was buying a unit, Mrs. Hook was buying - selling a unit. I'd actually organised removalists for Mr. Hook, the whole lot. I give him the numbers of all my removalists, like I said we've ----

We'll just get back to the conversation with Mr. Parchert?--I'm sorry.

Yes, that's okay? - Yeah, so anyway, like I said, he said, "Oh, look, I don't want to screw these poor people", and I said, "Don't worry about it", you know, business is business, we put the money into the deal. And I said, "But look, it's critical that - critical that Mann, being the agent, does not know of our relationship. Otherwise, he can't morally go and sign up a poor sucker at a lower price." [15]

[14] The first defendant accepts that he was aware of the price offered by the plaintiff in his contracts with Mr. and Mrs. Hook. He also admitted that he made no mention of his involvement with the plaintiff in his dealings with Mr. Mann. The defendants in fact signed the contract with the vendors for $550,000.00. That was the only offer. To the extent that the first defendant accepted in his evidence the above suggestions. I am prepared to accept that in general terms that the conversation quoted above occurred. However, serious questions of credit arise in relation to the plaintiff's version of events.

[15] Mr. Kreiscbergs had known the plaintiff for some 30 years through the building industry. He was familiar with the subject property. He gave evidence that he was asked to look at the property with the plaintiff with a view to investing in the property for refurbishing and the resale. Mr. Kreiscbergs was to provide the finance and share equally in the profits after deducting the expenses. He suggested to the plaintiff that as he was not familiar with that area that the plaintiff should look for someone else to get involved. In effect, Mr. Kreiscbergs was to get involved only if the plaintiff could not find someone else.

[16] According to Mr. Kreiscbergs, the plaintiff was going to carry out the renovations. The figure of $1.4m. was mentioned as the sale price after renovations. In cross examination, Mr. Kreiscbergs said that if the plaintiff could not find someone he "would look at it again". He did not commit himself at that stage.

[17] Mr. Dakin had known the plaintiff for some 20 years. They are friends. They had had no previous commercial dealings together. The plaintiff approached him with a view to joining with him in a partnership. Mr. Dakin did not have a job at the time but approached the bank for a loan. The arrangement was to be that any expenses or costs would be deducted and the net proceeds divided equally with the plaintiff. Mr. Dakin obtained a verbal approval. He was not sure if there was anything in writing. There would be a delay of 7 to 10 days. The most Mr. Dakin could say was that if he had been asked to go ahead with the deal he would "probably have indicated that I was interested in it."[16]

[18] If the plaintiff's evidence be accepted about the agreement with the defendants, then it appears that he went ahead with the transaction without further regard to his other possible joint venturers. Neither of them had finally committed themselves. The funds which Mr. Dakin would obtain would not arrive in time for the purchase by the plaintiff. Mr. Kreiscbergs still had to consider the matter. They were obviously necessary as the financiers of any joint venture if the property was to remain in the plaintiff's name as a purchaser. Once the defendants were involved there was no suggestion that the property remain in the name of the plaintiff nor were the plaintiff and the defendants named as joint purchasers. In other words the plaintiff changed the basis of his previous arrangements. He certainly lost the benefit of having the subject premises as his principal place of residence to allow him to avoid capital gains tax. The change to his plans, I find, was necessary once his financial position became less certain given the impending settlement requirements of his second contract. The plaintiff was aware that the first defendant had money available. Whether there was then a new joint venture arrangement entered into with the defendants remains to be determined.

[19] The alleged joint venture arrangement was never reduced to writing. The plaintiff contends that he offered to reduce it to writing in similar terms to that in Exhibit 7. That document evidenced his arrangements with Mr. McIntyre. A perusal of Exhibit 7 shows little similarity with the terms of the alleged oral agreement with the first defendant, save for the equal share of profits. For example, in relation to expenses, Exhibit 7 provides as follows:

"3.1 Either partner and/or the J.V.P. will be reimbursed for their outlays for the particular venture from progress claims down from the financial institution financing the venture."

[20] It was suggested in argument that Exhibit 7 was shown to the first defendant by way of an example of a joint venture document and was not intended to be similar to the terms agreed upon by the defendant. The evidence was somewhat equivocal:

"So I went back to my office, sat down in my seat - I'm left handed, my filing cabinets are all on my left, so I reach down, pulled - went straight to McIntyre's file, pulled out a joint venture agreement between Mac and I and said, "This is the sort of document that Mac and I signed, and do you want Caroline his wife to type it up, or do you want me to organise it?" He said, "No", he said, "There's no need for a JV between you and I", I said, "Fine."[17]

[21] The document was tendered on the limited basis that that type of document existed. It is therefore of limited value in assessing what was or was not agreed to between the parties. The first defendant denies that it was produced. The plaintiff is alleging that the first defendant agreed to the joint venture. The first defendant asserts that he had not even seen the subject property at that point.

[22] The plaintiff alleges[18] that he and the first defendant agreed that the first defendant would get 10% interest on all the money "put in" by him in the restoration. In relation to other services and expenses, invoices and receipts had to be produced. In evidence in chief, the plaintiff stated:

"Yes, but what did you discuss - well, what --------? -- We had already discussed the - we had discussed the - like I said earlier in my submissions, we had discussed the - any moneys he put in he gets 10 per cent on. Any materials and - any materials or labour or contractors or hiring and firing, whatever, got put in as a cost on the project, all bank loans, all that sort of stuff got put in as a cost and when all of those were taken off at the end of the deal the profits were split 50/50."[19]

"...Any moneys that Bob and Caroline put in attracted a 10 per cent interest for the term - the term that they were in the loan. All costs and charges including mortgage documentation, solicitor's fees, and the like were also put into the calculation. All the material purchases, subcontract payments, wages - like I said, plant hire, et cetera, et cetera, were all put into the equations. Once we then sold the property and took off the commissions to the agents, solicitor's fees for the settlement, pay out the bank loans, et cetera, et cetera - whatever was left in net was then split 50/50 - identical to what is in the joint venture agreement between Mr McIntyre and myself."[20]

[23] In addresses, counsel for the plaintiff argued that the 10% should only be allowed on the actual purchase price of $549,622.39 plus stamp duty of $15,081.69. The latter was a cost of the purchase. What the defendants "put in" also included the payments for material purchases and subcontractors. Whether interest is to be allowed on say all the renovations costs is problematical. However, the ambiguous nature of the agreement suggested reflects on the accuracy of the plaintiff's recall or the exact nature of the alleged joint venture agreement. Paragraph 19 of the Statement of Claim uses "any money is invested" in relation to interest.

[24] The plaintiff visited the subject property on once occasion on 5 October 2002. The plaintiff suggests that he and the first defendant agreed to meet at the site. The plaintiff said that he and Ms. Wallis were attending an auction in the area and called in after arranging to meet the first defendant at the site. The truth is, I find, that it was convenient for the plaintiff to call in whilst he was in the area. On that occasion the plaintiff offered some advices about the project. Ms. Wallis said that he suggested that a beam be removed. The first defendant said that he never removed the beam. There was no suggestion by Ms. Wallis that a joint venture was discussed. The plaintiff suggested that he said to the first defendant at one stage of the visit that "...it's a 50/50 deal so you've got to have your input as well...". It is not clear who was present during that alleged conversation. Neither Ms. Wallis nor the defendants recall any talk of the alleged joint venture on that occasion.

[25] The first defendant said that some plans in a folder were produced.[21] The plaintiff said that they were handed over earlier. Ms. Wallis could not refute the suggestion that the folder or folders were handed over on 5 October. In fact, a perusal of the amended pleadings shows that the plaintiff's advisors had originally pleaded that that was the date that the plans were handed over (para. 2(b) Amended Reply and Answer). The plaintiff's solicitor, Mr. Eaton gave an explanation as to the amended pleading but his evidence does not alter the fact that his instructions probably changed. The plans had been prepared in May and June. If the plaintiff intended that the first defendant use them in their joint venture, then he waited some time before producing them. It is unlikely that that would occur if the plaintiff was involved in the project in any way.

[26] When the plaintiff learned that the subject property was the subject of a contract for $1,050,000.00 there was no evidence that he was surprised about the contract price. Apart from the 5 October meeting and another occasion when he visited the site just prior to settlement to take photographs[22], the only time that the plaintiff enquired as to the project was when he asked the first defendant "Oh, how are your costs - how do the costs look" and "Oh, that's going to knock the profit around a bit"[23] as an aside in a meeting at his office. The plaintiff had anticipated a price of $1.4m. If he had been a joint venture partner, one would have expected him to express an opinion or request information as to why the price was so low or why the costs were so high and perhaps seek further details. The property settled on 1 July 2003.

[27] Prior to settlement, the plaintiff approached the first defendant at a site at Park Road on or about 17 June 2003 and said:

"Oh, well, settlement's good." I said, "We'll be able to sort out the - we'll be able to sort out the - the divvy up - 50" and he said, "What are you talking about?" I said, "It was a joint venture arrangement"." He said, "What joint venture?" I said, "Are you serious"? You've got to be kidding." He said, "I don't know what you're talking about." I said, "Are you serious?' And he said, "What joint venture?" I said, "The joint venture that you and agreed to in my office." He said, "Don't know anything about it." I said, "Fine" I just put my hands up and I walked away and it's the last time I've seen him."

[28] Thereafter, the plaintiff caused a caveat to be lodged on the subject property.[24] It is dated 16 June 2003 the day before the plaintiff alleges he raised the alleged joint venture with the first defendant at Park Road. The caveat claimed that "a constructive trust arising by operation of law from an oral agreement made on or about 9 August 2002". It was removed and by consent the plaintiff was ordered to pay the costs. The latter is only relevant in relation to the counter claim. The surprising part about the plaintiff's conduct was the failure to confront the first defendant any further before lodging the caveat and perhaps talk about the price or costs and to have no paper work in relation to any aspect of the transaction.

[29] The plaintiff and the defendants had been involved in other transactions. An employment contract between the plaintiff's company and the first defendant was reduced to writing. The plaintiff confirmed in writing on 24 December 2002[25] a loan which he obtained from the first defendant for $10,000.00. However, in relation to a loan for $75,000.00 by the plaintiff from the defendants in about August 2002, the plaintiff stated that he offered to reduce it to writing but the first defendant said he did not require that but that he required a receipt. A receipt was never issued but both loans were repaid. It may be that there was a casual business relationship between the plaintiff and the first defendant but apart from the original discussion as alleged by the plaintiff concerning the joint venture, there is little else to support such an arrangement except the evidence of Mr. McIntyre.

[30] The plaintiff's case is that Mr. McIntyre heard parts of the discussion on 9 August 2002. The evidence of Mr. McIntyre was somewhat doubtful about the exact day. But putting that to one side for the moment, there is nothing in his evidence which amounted to details of a concluded agreement. His evidence was to the effect that he was on the mezzanine level which was above the office of the plaintiff. He was using the photocopier which he says was near the handrail as shown in a photograph.[26] He was doing multiple copies of certain documents.

"Okay. Brian was saying to Bob that he had a property under contract that he couldn't perform on personally. He had his house sold and the guy had had a couple of extensions and it was due for settlement and realistically there was no real guarantee the property was going to be able to settle...

...

Well, I believe the purchase price was somewhere in excess of 500. He suggested to Bob that they might be able to buy the property cheaper. Bob said that he would look at the property and evaluate it, he just wasn't going to take Brian's say-so on the particular property, and he proceeded to say that if the property was as good as he said it was and there was a quid to be made out of it as such, is the - that they'd look to proceed with something on a joint venture basis.

...

Brian suggested they use the joint venture agreement that Brian and I had previously used - and, let me say, that I don't know what the legal ramifications of that joint venture are that we've got because it was never put to the test - but Bob said he'd look at the property and there was no need for the joint venture agreement, and that he'd look after it." [27]

[32] Mr. McIntyre contended that he was able to hear that conversation from the mezzanine floor. Evidence was called from an Elaine McBride. She had worked for the plaintiff for some four (4) years. She was employed as a bookkeeper and did administration. Her office was on the mezzanine level. Her evidence was of some significance. She stated that the photocopier at the material time was not near the rail as suggested by Mr. McIntyre but to the right of the stairs which on her evidence was away from the rail. Secondly, she stated that music was usually played in the office. The plaintiff tried to play down the effect of the music in the office.[28] The plaintiff realised the importance of that point as far as Mr. McIntyre's evidence was concerned. Thirdly, Ms. McBride stated that she could never hear what the plaintiff was saying downstairs to others. For example, she could not determine whether he was on the telephone unless she went downstairs. Finally, Ms. McBride said that with the photocopier being used, it added to the noise level as it "was pretty outdated and rattled and banged and made quite a lot of noise".[29] I accept her evidence. Ms. McBride had no axe to grind and no interest in the outcome. She was most forthright in the manner she gave her evidence. Attempts to challenge her evidence clearly failed.

[33] Mr. McIntyre was a friend of the plaintiff. He had been involved in business dealings with him previously. In fact, a proposed joint venture as evidenced by Exhibit 7 involved the plaintiff and Mr. McIntyre. Mr. McIntyre had been invited to invest with the plaintiff in the present venture and so was aware of the details of the proposal alleged to have been put to the first defendant by the plaintiff on 9 August. Also, after Mr. McIntyre came downstairs after the first defendant departed the plaintiff told him about what arrangements had been made. Of course, that was not admissible as to the truth of the matter but it is relevant in assessing Mr. McIntyre's source of information on the same day. He was not asked to recall what he had overheard until last month which is some twenty one (21) months after the event. It is difficult to know if Mr. McIntyre recalls what he was told by the plaintiff as distinct from what he may have believed he heard. In view of Ms. McBride's evidence as to the acoustics, I find that Mr. McIntyre's evidence to be unreliable on the alleged joint venture agreement. Ms. McBride stated that the plaintiff never made mention of the joint venture agreement to her. The plaintiff contended that he did on the day of the alleged agreement.[30] This self serving evidence reflects poorly on the plaintiff's credibility. The evidence was allowed as original evidence.

[34] According to the plaintiff, the defendants were required to submit details of costs to be deducted from the sale price to arrive at a net figure for distribution. The defendants prepared those details after two days of the hearing of the action. They did not keep any records as they believed that as owners of the subject premises they could do as they wished. There was no demand by the plaintiff to keep details of outgoings or costs of the renovation. That conduct is consistent with the first defendant's evidence that he was not a party to a joint venture. Usually, when the first defendant was working for the plaintiff, the former was required to keep records.[31] Even though he borrowed some $10,000.00 at one stage from the plaintiff to pay for some of the improvements, it was repaid. The defendants were awaiting a loan of $100,000.00 from the bank.[32] There was no suggestion that the $10,000 be set off against other expenses incurred by the defendants. Initially, the plaintiff asserted that this had been a contribution to the joint venture.[33] It was repaid before the sale of the subject property. This seems inconsistent with the purported agreement if it was a contribution by the plaintiff.

[35] Exhibit 17 is an invoice whereby the defendants used an account of the plaintiff to obtain certain goods. That adds little to the evidence. No other similar documents were produced to show any contribution by the plaintiff. The defendants did not contest that the trade account of the plaintiff's company was used for convenience and such moneys were repaid. It is inconsistent with the alleged agreement for monies to have been repaid before the finalisation of the project. On the plaintiff's version, the costs were to be deducted at the end of the day. The basis upon which the work was carried out and paid for seems to me to be inconsistent with any joint venture arrangement: contrast Brown v Brown.[34]

General observations concerning the defendants' evidence

[36] One can infer from both the evidence of the plaintiff and the defendants that the defendants were hard working people. They gave their evidence in a forthright and candid manner. The manner in which they gave their evidence can be contrasted to that of the plaintiff who from time to time was unresponsive, evasive and even misleading. The defendants' evidence was generally consistent. They had had experience restoring houses previously. They were willing to work hard to make a profit on their proposed residence. Consistent with this they did not keep records of hours worked or a running sheet of outgoings.

[37] The first time that the second defendant was aware of a claim by the plaintiff was when the caveat arrived in the mail in June 2003. I accept her evidence and her statement that she would never have entered into a joint venture with the plaintiff. In the past any renovation work was done by themselves on homes which they lived in and sold. There was a reluctance by the second defendant to move into the subject property because of the extensive renovations. They had intended to move in but changed their minds.[35]

General observations concerning the plaintiff's evidence

[38] The plaintiff in his evidence attempted to involve the defendants in a scam by purporting to change their address to the subject premises without moving in. The plaintiff was going to move in according to his evidence but allow the defendants to get the advantages of having the subject premises notionally as their principal residence whilst continuing to reside at Thornside. The defendants rejected this line of evidence. It does the plaintiff no credit to admit to being a party to an attempt to avoid paying stamp duty.

[39] The plaintiff usually required that records be kept on jobs in which he was involved. This did not occur on the renovations of the subject property.[36] Although the plaintiff contends that the defendants were entitled to an hourly rate, no records of hours were kept. It was only when it became necessary at trial that an estimate of the hours spent was made. The accuracy of that claim will be dealt with on the quantum.

[40] The plaintiff complained to Mr. Mann, the real estate agent, in early 2003, that the first defendant was spending too much time working on the subject property. The plaintiff had continued to employ the plaintiff on other projects. The plaintiff had reduced the first defendant's wage from $1500.00 per week to $1,000.00 per week from late 2002. In that event, it is difficult to understand why the plaintiff would be complaining if he had an interest in the subject property. The comment was made in the context of problems on another site and perhaps carries little significance.

[41] In order to terminate the second contract, the plaintiff had his solicitor, Mr. Burrell, write to the vendor's solicitors and inform them that he had not been able to get finance.[37] The plaintiff admitted that this was not "technically correct".[38] The plaintiff found it convenient to mislead the vendor's solicitors so as to avoid the contract.

[42] The plaintiff gave evidence that the first defendant had told him that the purchase of the subject property by the defendants was subject to finance.[39] When shown the contract[40] the plaintiff gave an unacceptable explanation as to how the contract appeared to be subject to finance. Clearly it was not. It was a failed attempt by the plaintiff to bolster his earlier evidence.

The significance of the first defendant continuing to work for the plaintiff

[43] The plaintiff or his company employed the first defendant at $1,500.00 per week. The first defendant was willing to work for up to sixty (60) hours per week. As the work at Park Road eased up, it was not necessary for the first defendant to continue to work long hours. The plaintiff did not expect him to. After the first defendant signed up on the subject property he was in a position to continue to do the supervision work for the plaintiff and to carry out the renovation on the defendants' subject property.

[44] Once his wages were reduced to $1,000.00 in late 2002[41], the expectations of his working long hours for the plaintiff was reduced. Consistent with his obligations to the plaintiff, the first defendant was able to carry out work on the subject property. The fact that the plaintiff continued to employ him is not determinative of an interest in the subject property on the part of the plaintiff. Consistent with a change in the duties expected of the first defendant it was highly convenient for the plaintiff to lower his wages due to the downturn in work.

The extent to which the plaintiff's plans were followed by the defendants

[45] It was important for the plaintiff to prove that the plans and ideas which he had for the subject property were adopted by the first defendant. That was part of the reasoning to show that they were joint venturers. The plaintiff failed to establish that his plans and ideas were adopted by the first defendant. In the first instance, the folders were not provided to the first defendant, I find, until 5 October 2002. Many of the ideas suggested by the plaintiff in the plans[42] were not adopted by the first defendant. Some of the proposals by the plaintiff would have been adopted by anyone carrying out a renovation e.g. re-tiling, painting and landscaping. The plaintiff agreed to that proposition.[43]

[46] The first defendant gave evidence in some detail of the nature of the work carried out by him in contrast to that proposed by the plaintiff.[44] Even the plaintiff conceded that there were significant variations to the plans and proposals initially prepared by him.[45]

[47] It is therefore open to find, and I do so, that even though the plaintiff provided plans and suggestions as to the manner in which the subject property could be developed, it does not assist the plaintiff to establish a joint venture with the defendants. His plans were substantially altered and the first defendant did what he wanted to do in the renovation work. He was not bound by the plans or suggestions of the plaintiff who, I find, had no role to play in carrying out the work. His lack of interest in the project generally was inconsistent with his being involved in a joint venture project with the defendants.

Findings in relation to the alleged joint venture agreement

[48] (a) The evidence given by the plaintiff is not reliable. Apart from the evidence of Mr. McIntyre, which is rejected, there is no other evidence in the case to support in any meaningful way, the evidence of the plaintiff as to the existence of an agreement.

(b) There is no reliable basis for finding that an agreement was made on 9 August 2002.

(c) The evidence of the defendants was supported by both their conduct and that of the plaintiff and consistent with no joint venture agreement.

(d) The evidence of the defendants was both honest and reliable.

[49] In view of the above findings it is strictly not necessary to make any findings in relation to a contract between the plaintiff and the second defendant. However, for completeness, the following findings are made:

(a)

At no stage did the first defendant assure the plaintiff that his wife would or had agreed to the alleged agreement. The plaintiff accepts that any contract was with the first defendant.[46]

(b)

There was no conduct by the second defendant which amounted to ratification of any alleged agreement. There was no acquiescence: City Bank of Sydney v McLaughlin.[47]

(c)

Any inferences which the plaintiff's counsel says one might draw from the conduct of the second defendant is at best equivocal and at worst contrary to the case of the plaintiff.

(d)

In the event that there was found to be any agreement made between the plaintiff and the first defendant, the second defendant would not be bound by it.

[50] In the event that this matter proceeds further, it is necessary to assess the amount of the net proceeds for distribution between the parties. The subject property was purchased for $549,622.39. In addition to that there were legal costs including stamp duty of $15,081.69. The agent's commission was $29,370.00. These items are not in dispute.

[51] Also, during submissions, counsel for the plaintiff admitted that the sum of $234,511.56, being the cost of renovations, was not in dispute. However, the plaintiff challenges the number of hours claimed by the defendants. Given that the first defendant was working for the plaintiff at the same time, it seems that the hours claimed may be excessive.[48] The calculation was done by the defendants last weekend and they have erred in favour of their own case. The Quantum Calculations sheet[49] was prepared by the plaintiff. There was some 2060.9 hours allowed by him when assessing the project. The work done by the defendants was quite different and so a direct comparison would not be helpful. The figure included subcontractors. Based upon figures done by the defendants and extracted from Exhibit 23 together with the evidence of the first defendant, a figure of some $106,000.00 was paid directly to subcontractors. That figure is included in the agreed figure of $234,511.56.

[52] The plaintiff's counsel conceded that some 900 hours would be reasonable for the labour based upon the Quantum Calculations sheets. When one adds up the total hours as contained in Exhibit 3, the total is 2060 hours. However nothing turns on that as the nature of the work differed when carried out by the first defendant and secondly, the figure would have included subcontractors. In evidence the plaintiff conceded some 300 hours as reasonable for the first defendant. That conservative estimate overlooks supervision necessary to allow the work to be carried out in an efficient and orderly manner by the different trades.

[53] The plaintiff expected the first defendant to work on other jobs for about 27 hours per week. This related mainly to the five days per week with some weekend work. If the first defendant met that commitment, he may have spent up to five (5) hours per day on the sites other than the subject property. The work was done over some 26 weeks. The defendants also worked on weekends. The first defendant was expected to work up to 60 hours per week with the plaintiff. When working on the subject property he also worked on weekends. The plaintiff conceded that he would allow 3-4 hours per day for supervision on a job of the size on the subject property.[50] The first defendant also carried out a significant part of the work. If one allows for work done during the week and also the contribution of the first defendant on the weekend, then a figure of say thirty hours per week seems to be reasonable. This is consistent with his carrying out his other commitments with the plaintiff on other tasks. This would amount to $19,500.00 referable to the first defendant's contribution.

[54] In relation to the second defendant, in the absence of the first defendant she would have done some supervision. The plaintiff did not doubt she was a hard worker.[51] She also gave evidence that she and her son contributed to the work carried out. Her evidence was not really challenged except in the broad sense of the claim being excessive. I would limit her claim to 28 hours per week as there may have been some duplication in supervision. Also, she had other work she was doing elsewhere. Over a period of 26 weeks, this amounts to $13,000.00.

[55] Robert Parchert, the defendants' son helped with landscaping and other tasks. His contribution of 156 hours over 26 weeks was not challenged. I allow a figure of $10.00 per hour. The amount for his labour is allowed at $1560.00.

[56] It is difficult to know what the exact agreement was in relation to what sum attracted the 10% interest. I am not convinced that the agreement was certain in this respect. The defendants denied the existence of the agreement and so one has to interpret it based on the version of events as given by the plaintiff to carry out the exercise. In that event, I find, that interest is payable on the sum of $564,704.08 which sum includes the stamp duty paid on purchase. The agent's commission is payable on sale and should not attract interest. The renovations were costs incurred during construction and the words "put in" may refer only to the original contribution. The agreement is too uncertain in that respect to allow interest on that sum. Interest is allowed on the sum of $564,704.08 at the rate of 10% from 25 September 2002 until the date of settlement viz. 1 July 2003. That amounts to some $47,059.00 and is part of the amount to be added to the overall costs.

[57] The calculation of the joint venture profit is summarised as follows:

Sale Price of subject property $1,050,000.00

Less

Purchase Price 549,622.39

Legal fees and stamp duty 15,081.69

Interest on contribution 47,059.00

Agent's commission 29,370.00

Renovation Costs 234,511.00

Labour costs

First Defendant 19,500

Second Defendant 13,000

R. Parchert 1,560 34,060.00 909,704.09

_________ __________

Joint Venture Profit 140,295.91

Amount due to each party 70,147.95

[58] The plaintiff lodged a caveat on the subject land on 17 June 2003 in order to protect his alleged interest prior to the settlement on 1 July 2003. The caveat was withdrawn by consent. As part of the consent order, the plaintiff agreed to pay the costs of the defendants on the standard basis. Those costs amounted to $5,558.00.[52] That figure has been paid by the plaintiff. The amount of costs on an indemnity basis was $10,376.09.[53] The latter figure has not been challenged as being unreasonable. Therefore, the defendants incurred $4,818.00 over and above the assessed costs.

[59] The findings in this case establish that the lodging of the caveat was made without reasonable cause. The fact that the plaintiff agreed to the withdrawal of the caveat may have been for different reasons. However, it is consistent with there being no reasonable cause.

[60] Section 130 of the Land Title Act 1994 provides as follows:

(1) A person who lodges or continues a caveat without reasonable cause must compensate anyone else who suffers loss or damage as a result.

(2) In a proceeding for compensation under subsection (1), a court of competent jurisdiction may include in a judgement for compensation a component for exemplary damages.

(3) In a proceeding for compensation under subsection (1), it must be presumed that the caveat was lodged or continued without reasonable cause unless the person who lodged or continued it proves that it was lodged or continued with reasonable cause."

[61] The defendants contend that they have suffered loss and damage as a result of the lodging of the caveat viz. the sum of $4,818.09. Sub-section (3) presumes that the caveat was lodged without reasonable cause unless the contrary is proved. This has not been done in the present case. The question remains whether the amount of $4,818.09 can be recovered as loss and damage in the present action. The plaintiff contends that the defendants having agreed to withdraw the caveat and pay costs on the standard basis is estopped from claiming a further amount in the present case.

[62] The defendants contend that estoppel does not apply as it involves two separate issues. The answer is probably to be found in passages in McGregor on Damages seventeenth ed. :

"...Clearly, it would make nonsense of the rules of the court as to the award of costs and the assessment of costs if the successful party could recover as damages either the costs withheld by the court or any further costs he has incurred to the solicitor beyond the assessed costs, whether in the same action or in a further action brought solely for this purpose."[54]

"...Costs incurred in earlier proceedings brought in another jurisdiction cannot be recovered in damages in a later action in England between the same parties in respect of the same claim; it was so held in the Ocean Dynamic[55]."

"...If the now claimant is thus capable of establishing a separate cause of action, it may be that he has found a sufficient peg upon which to claim as damages costs incurred by him in the earlier proceedings..."[56]

"...More importantly, as to the extra costs over and above those for which the now plaintiff might have obtained judgment taxed as between party and party, Brett M.R. explained the position thus:

'The theory of extra costs is that they are not necessary to the purpose of the party who has incurred them....It may be quite reasonable as between the successful party and his solicitor that the extra costs should be paid to that solicitor; but it is unreasonable that the losing party should pay them, they not having been caused by his litigation. If this be taken to be the reason why extra costs are not allowed upon taxation, it is obviously immaterial whether or not the litigation was false and malicious and without reasonable or proper cause; the extra costs are not damage caused by the unjust litigation, and therefore they are not damage for which an action will lie.'[57]

What is not yet decided, however, is whether, where there is other damage sufficient to ground the action, such extra costs can be added thereto. This is a question of policy and a question of the scope of the protection of the tort."[58]

[63] It may be that s.130 provides a separate basis for seeking damages for loss and damage. The fact that exemplary damages can be sought in a "court of competent jurisdiction" envisages such separate action. But applying the principle to be found in Eyre's case, such a claim for the extra costs should be disallowed. There seems to be no authority which can be identified which would allow such a claim. Counsel were unable to point to any relevant cases. The learned author McGregor referred to general principles which I have applied at first instance, and he comments on the lack of authority where the extra costs may be attached to other damage e.g. loss of income caused by the delay in settlement and which was brought about by the lodging of the caveat. It has been unnecessary to deal with the estoppel argument. However, findings may be necessary if the matter proceeds further:

(a) The action in the Supreme Court involved the same parties as are before the Court.

(b) The same Act was involved, in this case The Land Title Act 1994.

(c) The plaintiff settled on the basis that costs were limited to party and party costs. In my view estoppel does arise.[59]

1.

The claim by the plaintiff is dismissed.

2.

It is ordered that the plaintiff pay the costs of the first and second defendant to be assessed on the standard basis.

3.

The counter-claim is dismissed.

4.

It is ordered that the first and second defendants do pay the costs of the plaintiff of the counter-claim to be assessed on the standard basis.

[34] [1905] NSWStRp 17; (1905) 5 SR (NSW) 146.

[47] [1909] HCA 78; (1910) 9 CLR 615 at 625-6,629 and 633

[48] (2236 hours at $25.00 per hour - Exhibit27)

[55] [1982] 2 Lloyd's Rep.88. (para. 17-004)

[57] Quartz Hill Gold Mining Co. v Eyre (1883) 11 QBD 674 at 690 (C.A.)

[59] Zeiss Stiftung v Rayner & Keeler Ltd (No 3) (1970) Ch. 506 at 538.