LCM Operations Pty Ltd v Rabah Enterprises Pty Ltd - [2023] NSWSC 590 - NSWSC 2023 case summary — Zoe

NSWNSWSC

LCM Operations Pty Ltd v Rabah Enterprises Pty Ltd

[2023] NSWSC 590

Supreme Court of NSW|2023-03-08|Before: Rees J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2023-03-08

Before

Rees J

Catchwords

[2009] NSWSC 1229 Australian Securities and Investments Commission v Rich [2005] NSWSC 417
(2005) 191 FLR 385 Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd [1990] HCA 11
[2002] HCA 17 Challenger Property Asset Management Pty Ltd v Stonnington City Council (2011) 34 VR 445
[2011] VSC 184 Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 Dare v Pulham [1982] HCA 70

Source

Original judgment source is linked above.

Catchwords

[2009] NSWSC 1229 Australian Securities and Investments Commission v Rich [2005] NSWSC 417(2005) 191 FLR 385 Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd [1990] HCA 11[2002] HCA 17 Challenger Property Asset Management Pty Ltd v Stonnington City Council (2011) 34 VR 445[2011] VSC 184 Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 Dare v Pulham [1982] HCA 70(1982) 148 CLR 658 Equuscorp Pty Ltd v Haxton [2012] HCA 7(2012) 246 CLR 498 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22(2007) 230 CLR 89 Federal Commissioner of Taxation v Cassiniti [2018] FCAF 212(1916) 22 CLR 490 Gye v McIntyre [1991] HCA 60[2019] NSWSC 22 In the matter of Shot One Pty Ltd (in liquidation) [2017] VSC 741 Jones v Dunkel [1959] HCA 8[2008] VSCA 93 Lym International Pty Limited v Marcolongo (2011) 15 BPR 29,465[2011] NSWCA 303 Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560[2000] FCA 507 Pavey & Matthews Pty Ltd v Paul [1987] HCA 5[2007] FCAFC 125 Young v Queensland Trustees Ltd [1956] HCA 1

Judgment (11 paragraphs)

[1]

These proceedings

These proceedings were commenced on 9 September 2020. The plaintiff sued Rabah for $14.8 million as an outstanding debt said to arise from a contract between 316 Group and Rabah for the provision of construction services in relation to the Burwood development. The contract was said to be implied from the course of conduct carried on between the parties. Rabah was said to have acknowledged that the fee was payable as a debt, in Rabah's 2016 income tax return and BAS for the quarter ending 31 March 2016. Alternatively, the plaintiff sued in quantum meruit for a reasonable fee for the construction services provided to Rabah. By its Commercial List Response, Rabah denied the existence of a contract, the debt and the quantum meruit claim.
In February 2021, the plaintiff filed a motion for discovery. On 9 April 2021, orders were made for limited discovery, being documents in respect of any contract between 316 Group and Rabah to provide services in relation to the Burwood development, documents evidencing Rabah's acknowledgement that a fee of $14.8 million was a debt payable to 316 Group and documents referring to the value of the services provided by 316 Group. On 30 April 2021, Rabah provided discovery of 26 documents, none of which related to the matter of interest to the plaintiff. The documents did not include any verified financial records for Rabah.
On 24 May 2021, Hammerschlag J noted his preliminary view that the Commercial List Response did not comply with Practice Note SC Eq 3 in that it did not disclose in any meaningful way the issues which the defendant believed were likely to arise but rather stated the general issue. His Honour gave leave to the plaintiff to file an application to strike out the Commercial List Response.
In June 2021, the defendant filed an Amended Commercial List Response, which pleaded a more detailed agreement between Nouredeen and Youssef by which Rabah would appoint 316 Group to act as project manager for the Burwood development. In August 2021, the plaintiff filed an Amended Commercial List Statement, effectively re-asserting some of the suggested arrangements between 316 Group and Rabah, as pleaded in the Amended Commercial List Response, by adding those arrangements to the terms of the contract pleaded by the plaintiff.
On 21 March 2022, Hammerschlag J made further orders for discovery in respect of Rabah's March 2016 BAS, 2016 tax return and financial statements, and any amended assessments of the BAS or tax return. In addition, Rabah was required to discover documents and correspondence between Rabah and East St Developments, Metro Tipper Hire, Lion Civil Group, Mohamad and Omar in respect of moneys paid to 316 Group and the terms on which the moneys were paid.
Rabah provided further discovery of six documents, including Rabah's financial statements and income tax return for the 2016 financial year, together with its BAS for the March 2016 quarter. The further discovery did not include any documents or correspondence with East St Developments, Metro Tipper Hire, Lion Civil Group, Mohamad or Omar concerning monies paid to 316 Group.

[2]

DEBT CLAIM

The plaintiff's first claim was in debt. The plaintiff contended that 316 Group and Rabah had entered into a contract, which was either implied or could be inferred from their course of conduct. As to the terms of the contract, the plaintiff repeated some of the features of the arrangement as alleged by the defendant. Specifically, 316 Group would be appointed as project manager to provide construction and project management services to Rabah in relation to the Burwood development, including coordinating with the builder, engaging subcontractors and suppliers when necessary, managing Rabah's payments to third parties, managing and coordinating the development and dealing with the builder and third parties. In addition, it was a term of the contract that, on completion of the development, Rabah would pay 316 Group for the construction and project management services a sum equal to the total amount of obligations incurred by 316 Group in providing those services together with interest calculated at 8% per annum.
On completion of the development, 316 Group charged a fee of $14.8 million, which Rabah acknowledged as a debt payable in its 2016 tax return and March 2016 BAS. However, Rabah had not paid any part of the fee. The plaintiff advanced a claim in debt for the outstanding sum of $14.8 million due to 316 Group.
In closing submissions, the plaintiff also sued by indebitatus assumpsit, being a quasi-contractual claim distinguishable from a common law claim in debt: Young v Queensland Trustees Ltd [1956] HCA 1; (1956) 99 CLR 560 at 567, 569 (per Dixon CJ, McTiernan and Taylor JJ); Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 at 230 (per Brennan J). Where an action indebitatus assumpsit was not pleaded, it is not necessary to consider that submission further.
The plaintiff relied on the March 2016 BAS and unsigned 2016 financial statements for both 316 Group and Rabah, together with Rabah's 2016 income tax return, as evidence of a debt owed by Rabah to 316 Group as prima facie evidence of the transactions recorded, where the presumption under section 1305 of the Corporations Act 2001 (Cth) had not been displaced. These documents were "financial records" within the meaning of section 286 of the Corporations Act and therefore prima facie evidence of the transactions they record: section 1305; Advanced Holdings Pty Limited as Trustee for The Demian Trust v Commissioner of Taxation [2021] FCAFC 135; (2021) 113 ATR 508 at 552 ([169]) (per Logan, McKerracher and Perram JJ); Australian Securities and Investments Commission v Rich [2005] NSWSC 417; (2005) 191 FLR 385 at 455 [311] (per Austin J); Federal Commissioner of Taxation v Cassiniti [2018] FCAF 212; (2018) 266 FCR 385 at 405 [71]-[72] (per Logan J).
The plaintiff submitted that Rabah took the benefit of the development without paying 316 Group. Rabah obtained taxation benefits, being deductions for construction "costs" incurred but not remitted, as well as GST input taxation credits. Notwithstanding the transactions recorded in the financial records of both companies, Rabah now says that it does not owe any amount to 316 Group and that the "fee" was actually repayment of amounts owed by 316 Group to Rabah. The financial records do not evidence a loan between Rabah and 316 Group. The suggestion that $14,800,000 was not a "fee" but the repayment of loans was inconsistent with the documentary evidence and the position adopted by Rabah for taxation purposes. Rather, the fee of $14,800,000 represents a debt owed to 316 Group for services supplied to Rabah pursuant to the contract between the companies. This amount can be recovered by the plaintiff as a debt owed to it as the assignee of the cause of action.
As pleaded in the Amended Commercial List Response, Nouredeen and Youssef agreed that Rabah would appoint 316 Group to act as project manager for the Burwood development. The purpose of the agreement was that, as a newly formed entity, 316 Group would benefit from the exposure to the industry provided by its role as a project manager for the development, use the development as evidence of its development experience, which would allow it to tender on future opportunities. 316 Group, having no funds of its own, would receive loan funds from Rabah to allow 316 Group to pay obligations incurred. Rabah would deposit loan funds into 316 Group's bank account until the development was completed. Interest on the loan would be 8% per annum. On completion of the project, 316 Group would repay the loan and interest in full. Further, on completion of the project, 316 Group would issue an invoice to Rabah for services rendered in a sum equal to the total amount owing at the time for the loan and interest. The principal and interest of the loan, being offset against the costs for services rendered by 316 Group to Rabah, would effectively render the transaction financially neutral at the completion of the project. 316 Group would be solely responsible for maintaining its own financial and tax affairs.
Further, Rabah contended that the total principal sum disbursed to 316 Group for the loan was $11,714,850. This loan and outstanding interest was to be discharged by 316 Group on completion of the development. While 316 Group did not render an invoice on completion of the project, any amount charged could only have been charged in accordance with the agreement, with the effect that the amount was offset by the loan amounts payable to Rabah. Alternatively, if Rabah was found to owe any amount to 316 Group, then Rabah claimed a setoff against any amounts owing by 316 Group to Rabah pursuant to the loan.
The defendant submitted that the plaintiff's claim was commercially absurd: where Rabah had funded the development, why would Rabah agree to pay $14.8 million to 316 Group? It was said that the plaintiff had made no attempt to explain why a company in Rabah's position would agree to pay $14.8 million in these circumstances. The plaintiff had not put forward any explanation of what it said was the true purpose of the contract alleged. No case of fraud against the ATO was pleaded. The absurdity was said to be demonstrated by Mr Bell's evidence that the value of project management services was, at most, $442,680.
The defendant submitted that, while the arrangement described by Nouredeen and Youssef was unorthodox, it was corroborated by the documents. Specifically, it was said that the documents evidenced that Rabah caused $11.89 million to be transferred to 316 Group. This submission was based on a schedule annexed to the defendant's written submissions. I have already made findings in respect of each of the transactions referred to in this schedule. The total constructions costs of the development were said to be $13,454,545.46 (which I note is the $14.8 million fee exclusive of GST). The difference between these amounts was said to be the costs incurred by Rabah directly for work undertaken on the development, being demolition and excavation work in early 2014 (this is doubtful: see [34]). The defendant submitted that the total value of the loans made by Rabah to 316 Group were incorrectly recorded in the books of both companies. As a consequence, Youssef's estimate of the offsetting liability was inaccurate.
The defendant submitted that the calculation of the quantum of the alleged debt was inconsistent with the plaintiff's pleaded case. Where the plaintiff, in the Amended Commercial List Statement, had essentially pleaded the contract as described by Nouredeen, it could not now claim a debt on some other basis. It was said to follow that the only amounts payable to 316 Group were the amounts transferred by Rabah to cover the costs of the development. Although the plaintiff pleaded that the contract entitled 316 Group to charge 8% per annum on the costs of the development, this term was said to be unsupported by the evidence (this submission appears to overlook the affidavit evidence of Nouredeen and Youssef) and inherently implausible, as was the suggestion of any set-off (which I note appears to have had its genesis in the Commercial List Response).
The defendant submitted that the loans recorded in 316 Group's ledger omitted the $1 million loan from Omar, the seventh ANZ drawdown and a further drawdown of $194,985.41 (which was not a drawdown: see [67]). As such, the defendant submitted that there was an error in the books of account of 316 Group, which were nonetheless said to corroborate the arrangement described by Nouredeen and Youssef. Both accounts reflected mutual debts between 316 Group and Rabah, which was said to be persuasive evidence that the arrangement existed and that both entities operated in accordance with it. Further, 316 Group recognised the loans as being from Rabah regardless of whether the funds came from the ANZ, Rabah, Lion Civil or Omar (I think it would be more accurate to say that 316 Group's account do not identify who the loans were from, whether it was Rabah or anyone else). The defendant submitted that 316 Group was not entitled, under the terms of the agreement, to unilaterally demand a figure from Rabah which was unconnected with the amount of loan funds given to it by Rabah.
The defendant submitted that the figure of $14.8 million was Youssef's estimate of the extent of 316 Group's liability to Rabah under the arrangement. Pursuant to the arrangement, that liability would be wholly set-off against a fee to be charged to Rabah by 316 Group. Youssef's estimate of the loan amount of $12.5 million was relatively close to the correct loan figure, said to be $11.89 million. The methodology was said to be consistent with the arrangement, albeit the defendant sought to distance itself from the interest component of that arrangement. Either way, it was submitted that, under the arrangement, there would be no net debt owing by Rabah to 316 Group. The accounts of both companies were said to be 'broadly' consistent with this arrangement. There was no tax benefit where Rabah claimed a tax deduction of some $13.5 million for construction costs, not $14.8 million, and there was no evidence that the construction costs were less than $13.5 million.

[3]

Conclusion

There is no dispute that there was an agreement between Rabah and 316 Group; the controversy is as to its terms. The plaintiff embraced some of the terms proffered by the defendant, but not others. I conclude that Nouredeen and Youssef initially planned to undertake the Burwood development together, through Rabah. However, Youssef did not come up with his half of the money. When development consent was obtained, Nouredeen replaced Youssef as a director of Rabah. It may well be that Youssef wanted to continue to have a role in the project; whether the brothers discussed this to the level of detail now suggested, including discussing the proposal with Mr Hassan, seems less likely. More likely, any discussion about the arrangement between Rabah and 316 Group took place when 316 Group was incorporated some 18 months later.
Once Rabah was in a position for the development consent to become operative, 316 Group was incorporated. The name chosen for the company indicates that it was intended to have a role in relation to the development of the Burwood property, given the correspondence of the name with the property's street address. Whilst Nouredeen and Youssef were both directors and equal shareholders, the company's principal place of business was Youssef's address. I accept that Youssef ran the company. It is likely that Nouredeen knew that he was a director and shareholder in 316 Group: see [32].
I accept that Youssef used his work on the Burwood project as his practical training, when obtaining a building licence. But I do not think this was the reason that 316 Group was incorporated, where the necessary practical experience was gained by Youssef working for Mr Zeitoun: see [92]. Nor do I accept that 316 Group was established so that Youssef could "run money through [the] company [to] look financially stable" and thereby obtain finance or win work for his future career as a builder. The suggestion that 316 Group was a mere contrivance to give Youssef credibility in his future business endeavours seems like a lot of trouble to go to. Nor was it clear how 316 Group's payment of invoices would achieve the objective of "getting the company's name out to the industry". A more likely and straightforward explanation is that 316 Group was incorporated for the purpose suggested by the very name of the company, that is, to provide services in respect of the Burwood development, and so I find.
Further, the contemporaneous documents indicate that Youssef did project manage the Burwood development. The successful tender was addressed to Youssef: see [35]. Youssef was named as the owner's representative in the building contract: see [35]. Youssef was referred to throughout the quantity surveyor's eight reports to ANZ, whilst Nouredeen was not mentioned: see [42]-[43]. Youssef corresponded with ANZ: see [53], [57] and [59]. As the development neared completion, ANZ even sought a personal guarantee from Youssef: see [62]. That is, Youssef, and 316 Group, did more than just pay invoices.
The bank statements are also important here, evidencing not only the source of funds for the development but the roles undertaken by the various parties in relation to the development. It is apparent from the bank statements for Lion Civil and Rabah that, throughout the development, Lion Civil remained Nouredeen's main business enterprise, whilst the property development was a more confined endeavour. Descriptions on Lion Civil's bank statements indicate that the company was undertaking work at a number of sites throughout this period. It would be unsurprising in these circumstances for Nouredeen to have delegated the task of project management for the Burwood development to Youssef.
Further, 316 Group's bank statements corroborate its role as project manager of the Burwood development. Mr Bell regarded the bank statements as providing the best indication of 316 Group's involvement in the project management of the Burwood development. The nature of the transactions indicated to Mr Bell that payments were being made for incidental tasks associated with running a construction site. Payments were made for what appeared to be trade packages, which Mr Bell expected to be payable by the builder, given the lump sum payment of the building contract. I accept Mr Bell's evidence.
Having regard to the building contract, 316 Group's bank statements and the progress drawdown reports, Mr Bell was of the opinion that 316 Group was the primary entity responsible for management of the construction works. The fact that Rabah had retained a builder did not detract from Mr Bell's opinion, where the builder's job is to execute their own contract, not to manage the works on behalf of the developer. Somebody has to manage the builder as the builder cannot manage themselves; there is always a representative of the developer managing the process of the builder, the trades and other interactions as required. Whilst the tasks required to be undertaken by a construction manager may reduce, depending on the level of skill or interest of a developer, the role of a construction manager remains.
Likewise, based on Mr Ward's review of 316 Group's draft financial statements, the Ledger Entries Report and CBA bank statements, it was clear to Mr Ward that 316 Group was involved with Rabah in the development of the Burwood property. The majority of the transactions on 316 Group's bank statements appeared to be associated with building and development costs. 316 Group made payments for, and received payments from, Rabah.
I conclude that 316 Group was established to project manage the Burwood development, and did so. Turning to the terms of the agreement in respect of any fee which 316 Group may render for this service, I do not doubt that Nouredeen, Youssef and Mr Hassan discussed how the financial arrangements between Rabah and 316 Group would be conducted, at least when 316 Group was incorporated. I infer that Mr Hassan's evidence as to the agreement would not have assisted the defendant, given the centrality of Mr Hassan to the defendant's version of events and his unexplained non-appearance. Further, the terms of the agreement as described by the brothers are unlikely to encapsulate what was discussed as the time, for three reasons.
First, the agreement as described by the brothers makes no sense. An agreement which involved Rabah charging 8% interest per annum to 316 Group was never going to be "financially neutral" or to have a "nil outcome on both sides". Rather, it would have the outcome that 316 Group was obliged to repay Rabah more than it had received. Nor is it clear why the borrower would invoice the lender for interest. If the lender paid the invoice, then the lender would be paying interest on monies which it had lent.
Second, under the agreement as described by the brothers, 316 Group had no means of paying interest, as the only funds it would receive were loans from Rabah. It is most unlikely that the brothers agreed to an unworkable arrangement.
Third, where a project manager is provided with funds from the owner with which to undertake a development for the owner, it is entirely unclear why the project manager would pay interest to the owner in respect of those funds. Whilst it was clearly envisaged that 316 Group would charge an amount to Rabah in excess of the funds provided by Rabah, it may well be that the brothers did not understand Mr Hassan's explanation of the basis for the additional amount. More likely, the additional amount charged by a project manager would be for its services provided.
Post-contractual conduct is an aid to finding what the terms of a contract were: Lym International Pty Limited v Marcolongo (2011) 15 BPR 29,465; [2011] NSWCA 303 at [124]-[126] (per Campbell JA which whom Basten JA and Sackar J agreed). Subsequent conduct may also indicate what was important or essential to the transaction and indicate the parties' contractual intention: Queensland Phosphate Pty Limited v Korda and Shepard (as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269 at [37] (per Tate and Beach JJA and Sifris AJA). Post-contractual conduct may also amount to an admission against interest as to the terms of the contract: JR Consulting & Drafting Pty Ltd v Cummings (2016) 239 ALR 625 at 637; [2016] FCAFC 20 at [54] (per Bennett, Greenwood and Besanko JJ).
Looking at post-contractual conduct, 316 Group in fact undertook the role of a project manager for the owner, Rabah. The owner (and others) provided funds to the project manager, which the project manager used to pay development expenses. These funds flowed through the project manager's bank account and were recorded in its general ledger. At the conclusion of the development, the project manager "charged a fee … for the construction of the project": see [73]. This transaction was overseen by Mr Hassan, the architect of the arrangement and, thus, presumably consistent with the arrangement which he had commended to the brothers. Rather than paying the owner interest on funds provided, the project manager charged a fee for its services. One might think that charging a fee for services is unremarkable; paying interest on funds provided by the owner to effect the development would be highly unusual.
The size of the fee indicates that it included development expenses and, presumably, an uplift to reflect the value of the project manager's services. Whether the uplift was 8% per annum or calculated as described by Youssef (at [102]) does not much matter.
The preparation, execution and lodgement by 316 Group and Rabah of BAS and tax returns, in which 316 Group "charged a fee … for the construction of the project," is post-contractual conduct which sheds light on the terms of the agreement between Rabah and 316 Group. 316 Group reported the revenue from this fee and, further, that the fee had not been paid but was an asset in the form of a receivable. Likewise, Rabah claimed the corresponding expense and deduction, also reporting that the fee had yet to be paid and was recorded as a current liability in "Trade creditors."
Each of the March 2016 BAS, the 2016 financial statements and Rabah's 2016 income tax return record a consistent position. These documents were prepared by Mr Hassan, who was fully appraised of the arrangements between Rabah and 316 Group. As such, the documents likely reflected those arrangements. Further, the very nature of BAS and income tax returns is that the taxpayer must declare that the contents of the documents are true, and acknowledge that falsity may expose the person making the declaration to criminal prosecution. That is, such documents are not executed lightly. The contents likely reflected the correct position at the time.
Having regard to the brothers' evidence of the oral contract, which was unclear and logically uninviting, as opposed to the clear post-contractual conduct, I conclude that Rabah appointed 316 Group as project manager for the Burwood development. Rabah would provide the funds for the development, which would be deployed by the project manager and recorded in its accounts. On completion of the project, the project manager would charge a fee for construction of the project, which fee included the development expenses and an uplift. Rabah agreed to pay this fee.
I do not accept that this arrangement was commercially absurd. The fact that the fee included total construction costs with an uplift, rather than simply the project manager's fee, may have been necessary to transfer the total cost of the development from 316 Group's books of account to Rabah's. To the extent that the project manager was obliged to repay loans, it could do so with the funds provided by the owner on payment of the fee. Indeed, the project manager had no other means of repaying the loans. The fact that at least some of these loans were from the owner would simply mean that funds would pass backwards and forwards. The only reason why the arrangement has become commercially absurd is that the owner has not paid the fee, thus the project manager cannot repay the loans, and any cycle of funds has been interrupted by the project manager's winding up.
Nor do I accept that, where I have found that the terms of the agreement differed from those asserted by the defendant and partially re-asserted by the plaintiff, that the plaintiff's case must fail. Obviously enough, the purpose of pleadings is to ensure that a party's case is understood so that no party is taken by surprise: Uniform Civil Procedure Rules 2005 (NSW), rule 14.14. Procedural fairness also requires that the parties be held to their pleaded case and that any relief be confined to that properly pleaded: Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 286-287 (per Mason CJ and Gaudron J); Gould & Birbeck & Bacon v Mount Oxide Mines [1916] HCA 81; (1916) 22 CLR 490 at 517 (per Issacs and Rich JJ). However, the factual substratum of a case may change during trial as further evidence is given during cross-examination or existing documentary evidence takes on a new light when viewed against the body of evidence as a whole. A divergence from the facts which emerge during trial, and those pleaded, does not necessarily disentitle a plaintiff from the relief sought: Leotta v Public Transport Commission of New South Wales (1976) 9 ALR 437 at 446 (per Stephen, Mason and Jacobs JJ); Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 at 664 (per Murphy, Wilson, Brennan, Deane and Dawson JJ).
Here, the relief claimed by the plaintiff has not changed. To the extent that the terms of the agreement between Rabah and 316 Group have been found to differ from the terms asserted by the defendant and partially re-asserted by the plaintiff, the defendant cannot be taken by surprise where the evidence on which those terms relied was adduced by the defendant, albeit not ultimately accepted in its entirety. Any failure to amend its pleading of the terms of the agreement to accord precisely with the facts which emerged during the course of evidence does not, in these circumstances, preclude the plaintiff from seeking judgment on its unchanged cause of action in reliance on the facts ultimately established by the evidence.
As Austin J explained the application of section 1305 in Australian Securities and Investments Commission v Rich (2009) 75 ACSR 1; [2009] NSWSC 1229, the company's books are prima facie evidence of the matters stated in them, but the weight of that evidence is to be measured in accordance with the common sense of the tribunal of fact; the prima facie evidence may be outweighed by other evidence: at [397]-[398]. See also Whitton v Regis Towers Real Estate Pty Ltd (2007) 161 FCR 20; [2007] FCAFC 125; Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377; [2008] VSCA 93; In the matter of Shot One Pty Ltd (in liquidation) [2017] VSC 741 at [243]-[244]; In the matter of Pulse Interactive Pty Limited (in liquidation) (2019) 134 ACSR 461; [2019] NSWSC 22.
Here, 316 Group and Rabah's financial records, individually and in combination, evidence a debt of $14,800,000 (including GST) owed by Rabah to 316 Group. Whilst I have analysed the additional evidence proffered by the defendant as to why these records may not record the true position, I am not satisfied that the financial records are incorrect. 316 Group and Rabah's books record a fee charged in accordance with the terms of the agreement between the companies. 316 Group has completed the work which it was contracted with Rabah to perform. Rabah has failed to pay what was agreed. 316 Group is entitled to sue for what is owed, either on the contract or on the debt arising on performance of the contract: Pavey & Matthews Pty Ltd v Paul at 230 (per Brennan J). The plaintiff has established this claim.

[4]

SET-OFF

By the Amended Commercial List Response, the defendant contended that, if it was found to owe an amount to 316 Group, it claimed a set off "pursuant to the Agreement." The defendant submitted that any set-off would be for the full extent of the loans made by Rabah. Evidence that the loans to 316 Group were understated was said to be compelling. Where there could be no dispute that Rabah funded all of 316 Group's costs of the development, there was said to be no basis to find that the understated loan balances were accurate.
The plaintiff conceded that Rabah made loans to 316 Group in order to pay developers, but the quantum of the loans, and the nature of any loan agreement, was in dispute. In the alternative, the plaintiff submitted that the amount of any loan from Rabah to 316 Group was likely recorded in Rabah's 2016 financial statements as a non-current asset described as "Other assets" of $8,732,500. A comparable amount was recorded in 316 Group's 2016 financial statement as a non-current liability described as "Financial liabilities" of $8,829,560.25.
The plaintiff submitted that any set-off must arise under s 553C of the Corporations Act. Subsection 553C(2) was said to disentitle Rabah from claiming a set-off as, at the time of providing the loan to 316 Group under the terms of suggested agreement, Rabah had notice of the fact 316 Group was insolvent. 316 Group had no income except for the money lent to it by Rabah. 316 Group was obliged to pay 8% interest on all amounts paid to it by Rabah. Further, by receiving funds from Rabah to pay suppliers and contractors, 316 Group incurred GST and income tax debts. Nouredeen was aware of each of these matters, which had the consequence that 316 Group was insolvent from inception. Were the Court to form the view that set-off was not available under section 533C, then Rabah would be entitled to lodge a Proof of Debt in the liquidation of 316 Group and rank pari passu with the ATO in respect of recovering any amounts owed to it by 316 Group.
Further, the plaintiff submitted that a set-off under section 553C required mutuality, that is, that the credits, debts, or claims be between the same persons: Gye v McIntyre [1991] HCA 60; (1991) 171 CLR 609 at 623. Some of the loans were by third parties. Rabah has failed to prove that these loans were made on behalf of Rabah. Rabah's evidence rose no higher than Nouredeen's assertions that he arranged for funds to be transferred to 316 Group, with some ad hoc documents in respect of the $1 million from Omar. Rabah had not explained what the $1 million represented, that is, whether it a loan from Omar to Rabah or Rabah's income. If these amounts were in the nature of income payable to Rabah, then this would be income derived by Rabah for taxation purposes when it is dealt with in any way on its behalf or as it directs: Income Tax Assessment Act 1997 (Cth), section 6-5(4). Rabah must explain whether it has returned as income any of the amounts allegedly transferred at its direction.
The defendant submitted that section 553C had no relevance in the context of a set-off defence: Hastie Group Ltd (In Liq) v Multiplex Constructions Pty Ltd (formerly Brookfield Multiplex Constructions Pty Ltd) (No 3) [2022] FCA 1280 at [[243] (Middleton J). Further, the exception to set-off in section 553C(2) would not apply as it could not be said that Rabah was on notice of any insolvency. There was no basis to believe that 316 Group could not meet its GST and tax obligations, where it was in receipt of significant GST cash refunds. I agree that section 553C does not apply in the circumstances of this case, which is concerned with the debt owed to 316 Group under the terms of its agreement with Rabah, rather than determining the appropriate amount which may be admitted in a proof of debt.

[5]

Conclusion

I take the pleading - set off "pursuant to the Agreement" - to mean that Rabah relies on a contractual right of set-off sourced in its agreement with 316 Group. The common law recognises a contractual right of set-off where the parties have agreed that, in certain circumstances, money owing to each of them may be automatically, or at a party's election, set-off: National Australia Bank Ltd v Idoport Pty Ltd [2007] NSWSC 1349 at [45] (per Young CJ in Eq). Contractual set-off "does the arithmetic in the sense of combining credits and debits between the parties. In the result, the liability of a party is restricted to the resulting balance": Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 at 737 (per Hammond J).
Contractual rights of set-off are commonly found in bankers' agreements with customers relating to multiple accounts and commercial contracts including, effectively, clearing house arrangements: Commercial Factors v Maxwell Printing at 373. There were few reported cases of contractual set-off: see, for example, Opal Maritime Agencies Pty Ltd v The Proceeds of Sale of the Vessel MV "Skulptor Konenkov" (2000) 98 FCR 519; [2000] FCA 507 at [161]; British Eagle International Airlines Ltd v Compagnie Nationale Air France (1975) 1 WLR 758 and Commercial Factors v Maxwell Printing.
Whether there is a contractual right of set-off depends "solely upon the construction of the contract that the parties have made": National Australia Bank v Idoport at [47]. In the absence of an express term dealing with set-off, contractual right of set-off may also arise from custom or be inferred from conduct: Southern Textile Converters Pty Ltd v Stehar Knitting Mills Pty Ltd [1979] 1 NSWLR 692, 698 (per Sheppard J); Commercial Factors v Maxwell Printing at 739 (per Hammond J); S.R Derham The Law of Set-Off (4th edition, 2010) at 16.02.
Here, the alleged agreement was oral. After speaking with Mr Hassan about the proposed arrangement between Rabah and 316 Group, Nouredeen said to Youssef, "Rabah can lend the money to your company to pay for the construction. Then at the end you can issue an invoice to cancel out the loan."
Again, post-contractual conduct assists in determining whether this was a term of the contract, or to infer a contractual right of set-off from conduct. In May 2016, 316 Group charged a fee without any deduction for the amounts recorded in its "Loans" account. Rabah recognised the fee in full and without deduction of any set-off, when filing its BAS three months' later in August 2016. Rabah made no complaint that 316 Group's fee was incorrectly calculated or failed to take into account a set-off for Rabah's loans. Almost a year later, in June 2017, Rabah lodged its 2016 tax return which claimed, as a deduction, 316 Group's fee in full. No steps have been taken by Rabah in the subsequent six years to amend either the BAS or income tax return to correctly record 316 Group's fee after set-off of Rabah's loans.
I accept that, if Nouredeen said the words he described, this may found a contractual right of set-off albeit, that the agreement was somewhat unclear. However, significant doubt attends the reliability of Nouredeen's evidence of his conversation with Youssef (and generally). Further, the parties' post-contractual conduct tells strongly against the existence of such an agreement. Given the contemporaneity of the entries in 316 Group and Rabah's March 2016 BAS, the companies' 2016 financial statements and Rabah's 2016 tax return, these records are a more reliable guide as to what was agreed at the time, than Nouredeen's affidavit sworn five years' later. On balance, I am not satisfied that the parties agreed that 316 Group's fee would be set-off against Rabah's loans. There was no contractual right of set-off.
If I am wrong about this, then quantification of any set off is problematic. Whether a particular payment to 316 Group was a loan is not always clear. The bank statements record numerous payments to and deposits by family members. As such, the significance of any single payment or deposit is not obvious in the absence of a description in the bank statement, for example, that a particular deposit was a loan to the payee. For example, in September 2015 numerous payments were made from 316 Group's CBA account to Mohamad. Whether the payments to Mohamad were loan repayments or payment for services in respect of the development is not known.
316 Group's unsigned financial statements and ledger do not advance matters greatly. Based on Mr Ward's review of the draft financial statements, the ledger entries report and CBA bank statements, the transactions in the bank statements were recorded in the general ledger and the financial statements were prepared using the amounts recorded in the ledger. However, the general ledger does not provide detailed descriptions of the entries, transactions or account titles; nor do the financial statements.
Specially, the Ledger Entries Report details transactions on the "Loans" account, but not the identity of the lenders. 316 Group's balance sheet as at 30 June 2016 records financial liabilities of $8,829,560.25 but, as earlier mentioned, is likely inaccurate. In particular, whilst Nouredeen maintained that all loans made to 316 Group - whether by Rabah or third parties - were effectively Rabah loans, I am not prepared to simply accept his assertion in the absence of evidence from the third-party payors. I infer that the evidence of these third-party payors would not have assisted Rabah.
The state of the evidence is insufficient to enable me to calculate the amount of any set-off, where the onus of proof in this regard is on Rabah. This defence fails. Of course, the various lenders who advanced funds to 316 Group would be entitled to submit a proof of debt to the liquidator of 316 Group in respect of their loans.

[7]

Conclusion

As to whether there was a joint venture, in United Dominions Corp Limited v Brian Pty Limited [1985] HCA 49; (1985) 157 CLR 1, Mason, Brennan and Deane JJ considered the nature of a joint venture at 10: The term "joint venture" … connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. … The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a "joint venture" and what should more properly be seen as no more than a simple contractual relationship may, on occasion, be blurred.
More recently in Gibson Motorsport Merchandise Pty Limited v Forbes [2005] FCA 749, Crennan J noted that the recognisable and common characteristics of joint ventures include, at [80]: 1. Participants hold proprietary interests in the assets of the joint undertaking, often, but not necessarily, as tenants-in-common … 2. Participants exercise joint control of the undertaking. 3. Participants contribute to the joint undertaking, not necessarily equally; such contributions may be disparate: Canny Gabriel Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 at 327; Television Broadcasters Limited v Ashton's Nominees Pty Ltd (No.1) (1979) 22 SASR 552. 4. Participants in the joint undertaking enjoy rights and assume obligations, which are often several, and calculated by reference to ownership of shares and/or contributions made. 5. Participants have a joint (or community of) interest in the performance of the undertaking's purpose: Cummings v Lewis (1993) 41 FCR 559 at 314/315 (per Cooper J). 6. Participants associate in the undertaking for mutual commercial gain which can be mutual profits.
Her Honour noted that these characteristics could be "found in various permutations and constellations such that it is not appropriate to attempt to isolate which characteristics would be both necessary and sufficient for the constitution of a joint venture agreement" and it was always a question of fact whether any particular undertaking constituted a joint undertaking for mutual commercial gain: at [81].
The arrangements between Rabah and 316 Group do not bear the recognisable and common characteristics of joint ventures described in Gibson Motorsport. Rather, Rabah and 316 Group each performed a distinct function. Rabah alone held the property. Rabah provided funds for construction. 316 Group oversaw the development. The companies, and the brothers, did not assume joint obligations. I am not satisfied there was a joint venture. The plaintiff's alternative claim fails.

[8]

QUANTUM MERUIT

It is also not strictly necessary to consider this claim, which the plaintiff brought in the alternative. I will do so briefly. Mr Bell was asked to opine on the amount of reasonable remuneration that would be payable to 316 Group, on the assumption that it was appointed by Rabah to provide project management services for the development of the Burwood property. In arriving at his opinion, Mr Bell relied on the contemporaneous documents which the plaintiff had managed to obtain with respect to the development of the property. Mr Bell then had 61 documents to hand, most of which did not specifically relate to project management services. Based on his experience, Mr Bell expected that a number of other documents would exist. Mr Bell focussed on the builder's tender submission, the building contract, 316 Group's bank statements and the progress drawdown reports. In particular, Schedule 2 to the building contract included labour rates, including $85 an hour plus GST for Director/Principal.
Mr Bell entered the transactions from 316 Group's bank statements into an Excel spreadsheet and sorted the payments that were identifiable as related to trade packages. He compared these payments to the budget included in the progress drawdown reports to check that the payments corresponded with the contract sum. Having established that the payments were referable to the Burwood project, Mr Bell recorded the days shown in the bank statements where it was shown that 316 Group was engaged in project management services. He then extrapolated the results for the period not covered by the bank statements, where progress was documented in the progress drawdown reports. Mr Bell then applied a rate that was appropriate to the periods where he assumed project management services were provided. Where the construction certificate was issued on 22 May 2014, Mr Bell expected that project management services were required on a fulltime basis from then onwards, until the period covered by the bank statements. In total, 93 weeks of project management services were required.
In Mr Bell's experience, project management of construction works involves long hours, typically in the order of 56 hours a week, being 5,208 hours for the project in total. Whilst the hourly rate for project management services can vary significantly depending on the nature of the project and the qualifications, skills and experience of the individuals involved, Mr Bell considered that the level of skill and experience necessary to perform these tasks would be similar to those of the builder engaged in the works. Where the builder charged $85 an hour plus GST for Director / Principal, in his opinion, this was a reasonable rate for project management services. At this rate, a reasonable fee for 316 Group was $442,680. Mr Bell accepted that the fact that Youssef was in the process of obtaining his building licence at the time may be relevant to his skill level, it was more about licencing and compliance and "doesn't really tell me what his skill level is … only that he was seeking licencing as a builder." Mr Bell did not attach any particular significance to this fact when carrying out his task.
Mr Bell prepared a second expert report, taking into account Nouredeen's description of the period in which 316 Group was engaged on the project and the average hours per week. Based on these assumptions, reasonable remuneration payable to 316 Group for services provided in relation to the development was $85,680 plus GST. However, Mr Bell considered that these hours were unlikely to be sufficient to satisfactorily project manage a project of this scale. While Mr Bell assumed that Youssef was working on the site to attain the hours necessary to become a licenced builder, he considered that the hourly rate which he had used remained applicable. In Mr Bell's experience, the level of project manager in a project is usually commensurate with the level of the person responsible for the contract being administered. Absent any other information, Mr Bell used the builder's rate in the contract, which Mr Bell considered was the best indication of what an appropriate rate was for the services of a project manager for this job.
The plaintiff submitted that the Court would prefer the opinion expressed in Mr. Bell's first report, as the assumptions in that report most accurately reflected the amount of work that would be performed by 316 Group in providing services in connection with the Development. The second report adopted assumptions based on Nouredeen's evidence that, even though Youssef was participating in the development in order to obtain experience in the building industry, he only worked 12 hours per week.
Against this, Youssef said that 316 Group did not carry out the construction of the development. Rather, Rabah engaged a builder to carry out construction services and organised for much of the work to be done. Nouredeen said that 316 Group's role in the development involved receiving invoices from subcontractors and paying those invoices using funds provided by Rabah and attending the site during the build to provide general assistance. Youssef was the only person working for 316 Group. Nouredeen said Youssef attended the site about six days a week or 12 hours a week. Youssef also engaged a bricklayer subcontractor, but did not engage any other subcontractors. Youssef was also employed at the time as a general manager for another company, Rad-1 United Plumbing and Drainage Pty Ltd.
Nouredeen said his role included engaging architects and engineers to assist with the plans and development applications, undertaking preliminary civil works - including demolition and removal of the sheds on the site, the car ovens, concrete - and excavation. Nouredeen met with the builder and gave instructions. He met with the builder and subcontractors and gave his recommendations to the builder about subcontractors. Before 316 Group became involved, Nouredeen said he made payments to suppliers or subcontractors. When ANZ advanced further funds on each drawdown, he transferred those funds to 316 Group. He also made telephone calls to make arrangements for work done by Lion Civil.
According to Nouredeen, Mr Zeitoun's role as builder included meeting with subcontractors and reviewing their tenders, engaging subcontractors and ensuring that they were paid, meeting with Nouredeen to discuss the progress of the development, making sure the build was proceeding in accordance with the plans and visiting the site, generally each day. In addition, Mr Zeitoun employed a foreman, who was on site each day from Monday to Saturday, managing the site and supervising tradespeople on site.
The defendant submitted that, where both parties agree there was a contract between Rabah and 316 Group, there was no room for 316 Group to charge a fee based on quantum meruit: Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 at [14]-[18] (per Kiefel CJ, Bell and Keane JJ). Mr Bell's evidence was said not to provide a proper basis for any such fee. He made no allowance for the benefit obtained by 316 Group from being involved in the development. His first report was based on an overstated role of 316 Group. His second report overstated the qualifications and pay rate of Youssef.

[9]

Conclusion

It is only necessary to consider this claim in the event that there was no agreement between Rabah and 316 Group to pay 316 Group for its project management services. If my findings in respect of the agreement are wrong, "It is the very fact that there is no genuine agreement … that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution": Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498 at 529 (per French CJ, Crennan and Kiefel JJ); Pavey & Matthews Pty Ltd v Paul at 227 (per Mason and Wilson JJ).
In order to establish a quantum meruit claim, it is necessary to prove that the defendant has received or retained a benefit, the benefit was obtained at the plaintiff's expense; and, there is an element of recognised injustice that demonstrates that it would be unjust for the respondent to fail to make restitution: Hegarty v Keogh (No 2) [2023] SASCA 30 at [183] (per Livesey P, Doyle and Bleby JJA). Whether the failure to make restitution would be unjust is not determined by a subjective evaluation of what is unfair or unconscionable; there must be some qualifying or vitiating factor falling into some particular category which renders the retention of the benefit unjust: Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [150] (per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ). The 'free acceptance' of a benefit from a service provider, where the recipient has made an express or implied request for that benefit and the service provider would expect to be paid, is one such category: see Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3) [2014] WASC 162 at [56]-[90] (per Edelman J) (noting that there remains some debate as to whether 'free acceptance' is an unjust factor where no request has been made: N C Seddon and R A Bigwood, Law of Contract (11th edition) at [26.8]).
In determining whether the service provider expected to be paid, the Court is not concerned with actual state of mind of the parties but whether the recipient, as a reasonable person, should have realised that a person in the service provider's position would expect to be paid: Vasco Investment Managers Ltde v Morgan Stanley Australia Ltd [2014] VSC 455 at [347] (per Vickery J); Hegarty v Keogh (No 2) at [198]; Angelopoulos v Sabatino (1995) 65 SASR 1, 12-13 (per Doyle CJ). Further, the unenforceable contract may be relied on as evidence demonstrating whether what was done was done gratuitously: Hegarty v Keogh (No 2) at [186].
Here, Rabah has freely accepted and incontrovertibly benefited from the services rendered by 316 Group. The only question is whether a reasonable person in Rabah's position would have realised that 316 Group would expect to be paid. Nouredeen and Youssef's evidence that 316 Group did very little is unreliable. I infer that Mr Zeitoun's evidence would not have assisted the defendant. Rather, the contemporaneous records indicate that the company provided project management services: see [157]-[162]. 316 Group worked on the Burwood project for two years. Mr Bell's opinion was that a project of this scale would require a project manager to work 56 hours a week for 93 weeks.
Whilst the brothers said that Youssef initially did not ask for a fee for 316 Group's services - where the benefit to the company was work experience or getting its name "out in the industry" - I have concluded that this evidence is unlikely: see [156]. After discussing the matter with Mr Hassan, the brothers agreed that 8% per annum would be charged on total loans made by Rabah to 316 Group, said to be interest. As earlier discussed, this evidence is also unlikely and makes no sense: see [163]. More likely, the additional charge by 316 Group on top of the funds provided to effect the development was the project manager's fee for service. That is, Rabah expected to pay for 316 Group's services.
In the circumstances, I consider that 316 Group is entitled to recover reasonable remuneration for its services. That remuneration is calculated in Mr Bell's first report, where his second report is based on the assumption that Nouredeen's evidence is correct. That is an assumption which has not been established.

Parties

Applicant/Plaintiff:

LCM Operations Pty Ltd

Respondent/Defendant:

Rabah Enterprises Pty Ltd

Legislation Cited (6)

A New Tax System (Goods and Services Tax) Act 1999(Cth)

Corporations Act 2001(Cth)ss 286, 553C, 1305

Income Tax Assessment Act 1997(Cth)s 6-5(4)

Environmental Planning and Assessment Act 1979(NSW)

Uniform Civil Procedure Rules 2005(NSW)

Civil Procedure Act 2005(NSW)

Cases Cited (57)

(in liquidation) (2019) 134 ACSR 461; [2019] NSWSC 22 In the matter of Shot One Pty Ltd (in liquidation) [2017] VSC 741 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 JR Consulting & Drafting Pty Ltd v Cummings (2016) 239 ALR 625 Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3) [2014] WASC 162 Leotta v Public Transport Commission of New South Wales (1976) 9 ALR 437 Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377; [2008] VSCA 93 Lym International Pty Limited v Marcolongo (2011) 15 BPR 29,465; [2011] NSWCA 303 Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 National Australia Bank Ltd v Idoport Pty Ltd [2007] NSWSC 1349 Opal Maritime Agencies Pty Ltd v The Proceeds of Sale of the Vessel MV "Skulptor Konenkov" (2000) 98 FCR 519; [2000] FCA 507 Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 Payne v Parker [1976] 1 NSWLR 191 Queensland Phosphate Pty Limited v Korda and Shepard (as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269 Ronchi v Portland Smelter Services Ltd [2005] VSCA 83 Sino-Resource Imp & Exp Co Ltd v Oakland Investment Group Ltd [2018] QSC 98 Southern Textile Converters Pty Ltd v Stehar Knitting Mills Pty Ltd [1979] 1 NSWLR 692 United Dominions Corp Limited v Brian Pty Limited [1985] HCA 49; (1985) 157 CLR 1 Vasco Investment Managers Ltde v Morgan Stanley Australia Ltd [2014] VSC 455 Whitton v Regis Towers Real Estate Pty Ltd (2007) 161 FCR 20; [2007] FCAFC 125 Young v Queensland Trustees Ltd [1956] HCA 1; (1956) 99 CLR 560 Texts Cited: S R Derham The Law of Set-Off (4th edition, 2010) N C Seddon and R A Bigwood, Law of Contract (11th edition, 2017) Category: Principal judgment Parties: LCM Operations Pty Ltd (Plaintiff) Rabah Enterprises Pty Ltd (Defendant) Representation: Counsel: Mr LE Edwards / Mr J Nixon (Plaintiff) Mr DP Robinson SC / Mr MA Collins (Defendant)

Jones v Dunkel

The plaintiff submitted that the Court should draw an adverse inference in respect of the defendant's failure to call its accountant, Mr Hassan, its builder, Ahmed Zeitoun, and third parties who were said to have transferred funds to 316 Group at Rabah's direction: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 at 308 (per Kitto J). The defendant submitted that no adverse inferences should be drawn.
I agree that Mr Hassan is a person who it would be natural for the defendant to call; he may be regarded as "in the camp" of the defendant or "a witness likely to be friendly to the interests of the other party": Payne v Parker [1976] 1 NSWLR 191 at 201-202 (per Glass JA); Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 343 (per Kirby P with Mahoney and Clarke JJA agreeing). Mr Hassan was a central character and the former accountant for Nouredeen, Youssef, Rabah and 316 Group. The defendant's failure to call this witness was not explained. I readily infer that Mr Hassan's evidence would not have assisted the defendant's case.
As to third-party payors, Omar and Mahomed are Nouredeen's brothers and 'in his camp.' Other third-party payors were acquainted with Nouredeen and said to have acted at his direction when transferring funds to 316 Group. It is unclear from the contemporaneous records whether some of these payments were loans and, more specifically, whether the lender was the third party or Rabah. The accounting entries which record these payments are devoid of detail. Whilst Nouredeen asserted that all of these loans were effectively from Rabah, the matter could have been clarified if the payors had given evidence. There was no explanation as to why the third-party transferors were not called, save for the principal of Metro Tipper Hire, who has since passed away. I infer that their evidence would not have assisted the defendant.
As to Mr Zeitoun, it is not necessary for a party to call an unnecessary witness: Apand Pty Limited v The Kettle Chip Co (1994) 52 FCR 474 at 490 (per Lockhart, Gummow and Lee JJ). What evidence could the builder have given which would be relevant to a fact in issue? Whilst the plaintiff broadly accepted the nature of the arrangement asserted by the defendant - Rabah would pay 316 Group for construction and project management services at, effectively, cost plus 8% per annum - the defendant went further to contend that 316 Group did not, in fact, provide project management services. Rather, the purpose of the arrangement was for Youssef to obtain work experience, including by working under Mr Zeitoun. A person who could shed light on both matters is the builder. There was no explanation as to why Mr Zeitoun was not called. Where the builder was retained by Rabah, I agree that he was in the defendant's camp. I infer that his evidence would not have assisted the defendant.

Documents

A party's failure to produce documentary evidence to corroborate their account, where they might be expected to be in possession of such documents, may also give rise to an inference that such documents as they may be expected to have would not support their account: Jones v Dunkel at 320 (per Windeyer J), citing with approval Wigmore on Evidence (3rd ed., 1940, Little, Brown and Co.), ("the failure to bring before the tribunal some circumstance, document or witness …"); Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 at [134] (per Callinan J); Ronchi v Portland Smelter Services Ltd [2005] VSCA 83 at [44] (per Eames JA, with whom Buchanan JA agreed, noting that "the Jones v Dunkel principle can equally apply to missing documents as to missing witnesses"); Challenger Property Asset Management Pty Ltd v Stonnington City Council (2011) 34 VR 445; [2011] VSC 184 at [131]-[132] (per Croft J); Sino-Resource Imp & Exp Co Ltd v Oakland Investment Group Ltd [2018] QSC 98 at [112] (per Henry J).
The plaintiff was a stranger to events and put forward a largely documentary case, based on the material it had been able to obtain via the compulsory processes of this Court and the Federal Court of Australia. The defendant produced little by way of documentation, either in discovery or evidence. The defendant submitted that this was because the arrangements were oral and there were no documents.
The evidence indicated, however, that the defendant may have had records but did not collate or adduce the records. When Nouredeen was asked whether he kept any records at the time of transfers from Rabah to 316 Group, he said "I can't remember, I would've maybe had a bank slip or a deposit or maybe got a photo sent to me or an email, or maybe a bank …". Nouredeen said he had invoices at the office or in garage storage. As to whether he had ever given these documents to his solicitors, "They never asked for them I think."
Accepting that family companies may operate with a degree of informality, the lack of documentation in this case remains stark, particularly where Rabah appears to have used a bookkeeper (see [29]) and both companies used an external accountant. Where documents concerning the defendant's finances may have been expected to be brought forward to corroborate its defence but were not, I infer that such documents would not have assisted the defendant.

[2011] VSC 184

[1916] HCA 81

[2017] VSC 741

[2014] WASC 162

[2008] VSCA 93

[2000] FCA 507

[2017] VSCA 269

[2005] VSCA 83

[2018] QSC 98

[2014] VSC 455

[1956] HCA 1

(1995) 65 SASR 1