Maurice Tarabay v Fifty Property Investments Pty Ltd

Maurice Tarabay v Fifty Property Investments Pty Ltd - [2009] NSWSC 617 - NSWSC 2009 case summary — Zoe

CATCHWORDS : TRADE AND COMMERCE - Trade Practices Act 1974 (Cth) - s 51AA(1) - unconscionable conduct within the meaning of the unwritten law - the plaintiff and a company associated with the defendants were parties to a building contract - the company denied that the plaintiff was party to the contract asserting that the plaintiff's deregistered company was the party rather than the plaintiff himself - certain of the defendants were knowingly involved in the denial - the plaintiff averred that the denial was unconscionable conduct within the meaning of the unwritten law because the plaintiff and the other party to the building contract had acted on the assumption or conventional basis that the plaintiff was a party, the denial was in the circumstances unconscionable and the other party would have been estopped from making the denial - held that the other party had not engaged in any unconscionable conduct because there was no assumption contrary to fact, on which the plaintiff relied because the plaintiff was party to the building contract - Trade Practices Act 1974 (Cth) - s 82 - Damages suffered by conduct in contravention of the Act - held further that even if the conduct of the other party to the building contract did fall within s 51AA of the Act, the plaintiff had not established that he had suffered any loss by the conduct complained of - the defendants were not liable even though they knowingly participated in the denial - TORTS - miscellaneous torts - interference with contractual and other relations - whether the third defendant had induced a party to breach its building contract with the plaintiff - held that the claim for inducing breach of contract failed as the third defendant had not induced any breach of the building contract, the third defendant had not intended to induce any breach of contract and even if the third defendant had intentionally induced a breach of contract, the plaintiff did not suffer any loss as a result of the defendant's conduct.

[20]

19 An ACN (or Australian Company Number) is a number given by the Australian Securities and Investments Commission to a company on registration. 20 M & L Tarabay Pty Ltd was the plaintiff's company. It was deregistered on 20 November 2002. The ACN on the building contract is that of the deregistered company. 21 The building contract contained a section entitled "The Agreement and Particulars of Contract". It identified the builder as "Maurice Tarabay". 22 The parties were in dispute as to when the building contract was signed. 23 Both Maria's and Cameel's evidence was that it was signed on the date which it bears. Cameel says he signed it in Maria's presence. Maria says she attested his signature. 24 The plaintiff's evidence, on the other hand, was that it was signed on or about 7 January 2004, that is, about two years after the date it bears. According to him, in mid 2001 he purchased two copies of the BC4 form of contract, filled out in pencil some of his particulars and handed the document, in that form and unsigned, to Maria at her Ashfield office. 25 He says that in early November 2003 Maria asked him to sign a tripartite Deed of Mortgage and Assignment ("the Deed") (about which more is said below) with the Company's mortgagee. He says he was reluctant to do so, and that he had a conversation with Maria in which he referred to the fact that the building contract had not yet been signed. He says that Maria told him that the Deed would only apply if the building contract was signed. He says he then signed the Deed. 26 He says that in early January 2004 he purchased two further copies of the most recent BC4 form and filled in the details, including the date 7 January 2004, and then on that day met with Maria at her office. 27 He says that Maria proffered for his signature what appeared to be the original form he had given her from which his pencilled insertions had been erased and replaced with insertions in what he believed was Maria's own handwriting in ink. He recounted in specific terms a conversation on that date during which he says he told Maria that he could not sign it because she had 2002 in it as the date, because the price was wrong (in that it did not reflect the change that had been made on 3 November 2003) and because several months earlier he had his company deregistered because it had not been used for a long time. He says Maria assured him that the reference to M & L Tarabay Pty Ltd was only on the cover page and only appeared as a business name and that she did not want to change it because, according to her, the home warranty insurers and mortgagees both had copies of it. He says that he then signed the building contract. 28 Maria's evidence was that in or about mid 2001, the plaintiff showed her an original building contract which had been filled in using a pencil. She photocopied the document. The plaintiff kept the original with the pencil markings. She says the plaintiff attended her office on 31 January 2002 with another original building contract, the details of which were already filled in, in pen. She says that she witnessed the execution of the building contract, the date on it is in her handwriting, and that she filled in the witness details. 29 I accept the evidence of Maria and Cameel, and I reject the evidence of the plaintiff with respect to when the building contract was entered into. 30 The evidence established (and it was ultimately not seriously contested by the plaintiff) that on 1 November 2003 Maria sent a copy of the executed building contract (that is, with the plaintiff's signature and bearing the date 31 January 2002) to quantity surveyors engaged on the project. This means that the building contract could not have been signed in January 2004 and that the conversation which the plaintiff dates as having occurred on 7 January 2004 could not have occurred then. The plaintiff's version of events leaves no scope for a finding that the building contract was signed before 7 January 2004 and the evidence of Maria and Cameel leaves no scope for a finding that it was signed later than 31 January 2002. No party contended for any other alternative. The plaintiff's version is clearly wrong. Apart from this, the Deed, which the plaintiff signed on 11 November 2003, defines "Building Contract" to mean "the building contract made the 31st day of January 2002". This is a recognition that the building contract was in existence by then and bore the date it bears. Also, M & L Tarabay Pty Ltd was voluntarily deregistered on 20 November 2002. It was thus in existence on the date that Maria and Cameel say the building contract was signed and the reference to it would not have been eccentric. 31 It follows (and I find) that the asserted conversation in early November 2003 in which the plaintiff says he referred to the building contract as not having been signed, did not occur. 32 Counsel for the plaintiff did not offer any explanation for how the plaintiff came to give the evidence that he did, other than to submit that the plaintiff's recollection was mistaken. I do not accept this submission. The plaintiff's evidence was specific, giving a detailed explanation for how he came to sign a document which made reference to his company. There does not seem to me to be room for a mistake which might explain away that evidence. 33 I find that the building contract was entered into on 31 January 2002. Financing of the project 34 As at June 2003 the property was mortgaged to Permanent Trustee Company, securing a loan to the Company of $1.59 M. 35 In June 2003 the sisters and their parents personally borrowed money from Westpac Bank. The mortgage to Permanent Trustee Company was discharged with these funds. 36 From this time the Company was indebted to the sisters to the tune of approximately $1.6 M. 37 On 3 November 2003, in a letter, the plaintiff provided a final lump sum price of $6,821,582. 38 In order to finance the project, the Company obtained a facility of $12.5 M from Donovan Oates Hannaford Mortgage Corporation Ltd ("the mortgagee") and mortgaged the property to, and charged all of its assets and undertaking in favour of, the mortgagee. 39 The mortgagee required additional security in the form of the Deed which, amongst others, provided for the assignment to the mortgagee of the rights of the builder and the Company under the building contract. 40 Licha and Cameel personally guaranteed the Company's obligations to the mortgagee. They also personally lent the Company money. 41 The mortgagee appointed Newton Fisher and Associates, quantity surveyors, to certify progress claims by the plaintiff under the building contract.

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49 What is not in dispute is that the notes are a genuine recording of the Company's (and accordingly the defendants') version of events. 50 The notes record that as early as August 2004, there were complaints about delays by the plaintiff in carrying out the work under the building contract. 51 The notes record that on 14 September 2004 it was expected that building would be complete in May or June 2005. 52 The notes record various assertions by Maria and Cameel that there were not sufficient workers on site, particularly formworkers. Notes of 19 March 2005 record that Maria told the plaintiff that there should be more bricklayers. They also record the plaintiff saying that the work would be finished by June. Notes of 1 July 2005 record a meeting at which the plaintiff, Maria and Cameel were present and at which Maria complained that there was a lack of workers on site. They also record the plaintiff stating that he was going to have a lot more workers on site and that he should complete the work in two to three weeks. Notes of 15 July 2005 record that the plaintiff said he needed two to three weeks and that Maria replied that some two weeks ago he had said the same thing. They also record that whilst at the site, the plaintiff received a call from the contractor tiler who had gone to Lebanon. 53 Notes of 29 July 2005 record that an independent certifier carried out an inspection and said that the top of the building was not built according to plan and that the plaintiff told him that it was too ugly and could not be designed the way it was on the plan, which is why he made minor changes. The notes record the independent certifier saying that he was going to issue the Company with "an order" because it needed to do a s 96 application to Council. (This was a reference to s 96 of the Environmental Planning and Assessment Act 1979 (NSW) which concerns modifications to a Development Consent). 54 Notes of 1 August 2005 record Maria telling the plaintiff that if the tiler did not get enough workers he was not going to be completing the job in four weeks, and saying that there was a lot of work to be done and that he needed more workers. 55 Notes of 3 August 2005 record a meeting between the plaintiff, Maria, Licha and a strata manager. They record the plaintiff saying that the building would be finished in four to five weeks. They also record the plaintiff telling Maria and Licha that the tiler was going to be staying late from then on and so was the painter and the electrician. 56 Notes of 5 August 2005 record Maria asking for a meeting off the site and that she met the plaintiff at a coffee shop in Leichhardt. They record her saying that the way things were proceeding on the site was unacceptable and that the Company was now faced with extending the loan term with the financier at substantial cost. They record a complaint that the plaintiff did not ensure sufficient workers were on site to complete the work according to schedule. They also record that the plaintiff was going to try and do something about it urgently. 57 Notes of 6 August 2005 record that Maria and the plaintiff walked around the project to make a list of work which needed to be completed. 58 Notes of 8 August 2005 and 9 August 2005 record ongoing issues about the sufficiency of workers on site and delay. 59 Notes of 19 August 2005 reflect a high level of tension at a meeting between the plaintiff and his son Danny Tarabay on the one hand, and Maria and Licha on the other. They record Maria saying they would like to know when he was going to finish the job, the plaintiff becoming angry and saying that he was doing the job and would finish it when he finished it. They record Danny Tarabay saying that the developer delayed them three months when they were excavating the sewer. They record Danny Tarabay stating that the plaintiff was entitled to be paid. They record the meeting ending with the plaintiff saying he was leaving the job and not coming back. 60 There are references in the notes to various claims for variations being made by the plaintiff. 61 On 25 August 2005, Cameel on behalf of the Company engaged a quantity surveyor, Mr Greg Brandtman, to advise on whether certain claims for variations which had been made by the plaintiff were proper and whether an adjustment in favour of the Company for monies paid to him should be sought. 62 On 30 September 2005 the plaintiff made progress claim number 24 for $260,064.87. The claim stated that it was made under the Building and Construction Industry Security of Payment Act 1999 (NSW). This is an enactment which facilitates the payment of progress claims under building contracts. It contains provisions for the adjudication of disputed claims. 63 On 5 October 2005 the Company responded to various claims for variations which had previously been made. Some were disputed in part, and others in their entirety. 64 On 6 October 2005 Maria briefed Mr R Zikmann, barrister, to advise as a matter of urgency, generally and in particular whether the Company had the right to terminate the building contract in the light of the "builder's alleged extensions of time of the construction period and his continued refusal to provide a date of completion of all the construction works." Counsel was briefed with a significant body of documentation. The Deed was not briefed. 65 On 13 October 2005 Cameel forwarded to Newton Fisher progress claim 24 for assessment. The claim was assessed by Newton Fisher at $202,271. 66 On 21 October 2005 Ashfield Municipal Council responded to an application for strata subdivision which the Company had made. The Council's position was that the strata plan which had been submitted did not comply with the conditions of consent, one of which related to an amendment which was required to the storm water construction certificate, which had not been done. 67 On 21 October 2005 Mr Zikmann provided written advice, principally in relation to appropriate responses to the plaintiff's claims for payment and as to the appropriate contents of a notice of default. Amongst others, Mr Zikmann suggested that the Company write to the plaintiff formally notifying him that they were in dispute "regarding his claims for variations and his generally (sic) failure to proceed with due diligence". Mr Zikmann strongly advised that the Company: "…proceed only with reference to what both parties regard as being the contract. To do otherwise will be to place the client at risk of being held to have repudiated the contract they are calling upon the Builder to perform." 68 On 21 October 2005 the Company served notice of default on the plaintiff requiring it to "complete the works to practical completion" by 19 November 2005. The notice was addressed to "Mr Maurice Tarabay T/AS M & L Tarabay" and was signed on behalf of the Company by Licha and Cameel. 69 Amongst others, it asserted that the plaintiff had "failed to complete the Works by the end of the construction period (and the extension of time sought in your letter dated 30 March, 2003) specified in the Contract". (The reference to the letter dated 30 March 2003, was a reference to the wrongly dated letter of 30 March 2004, in which the plaintiff claimed a six week extension). 70 Also on 21 October 2005 the Company served on the plaintiff a payment schedule under the Building and Construction Industry Security of Payment Act, in relation to progress claim 24. This is a document which responds to a payment claim under that Act. The Company asserted a nil balance payable. 71 On 24 October 2005 the plaintiff wrote a number of letters to the Company. 72 In one, he responded to the Company's payment schedule of 21 October 2005, rejecting the Company's position. He also asserted that under the building contract he was "entitled to suspend the works on site". 73 In another, he responded to the notice of default, asserting amongst others that excessive delays had been caused by the Company. 74 In a third, he claimed an extension of time and an adjusted contract completion date of 24 June 2006. 75 In a fourth, he referred to having obtained legal advice and asserted, with respect to certain of the progress claims he had made, that payment schedules had not been received within the time period prescribed under the Building and Construction Industry Security of Payment Act. This letter ended as follows: "Accordingly, we give you notice that works will be suspended on and from Thursday 27 October 2005 pursuant to clause 20 of our contract and section 15(2)(b) of the Building and Construction Industry Security of Payment Act." 76 In a letter dated 25 October 2005 the plaintiff provided to the Company a list of asserted delays, and potential breaches of contract, of the Development Consent and of the Building and Construction Industry Security of Payment Act.

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77 On 26 October 2005 Mr Zikmann provided further advice in writing in the form of a facsimile to Maria. It is appropriate to set it out in full: "Attached please find a draft letter in reply (sic) the Builder's letter claiming it has a right to suspend work under the security of payments legislation and the Contract. As advised in our telephone conference my enquiries suggest that there may be very real difficulties for the Builder on account of the legal entity who undertook to do the work but who have only today been found to have been deregistered. The significance of these issues are spelt out in my draft letter and are self explanatory. I believe I have put sufficient in my draft to make the Builder take a hard look at his current position (including purported suspension). This being the case I did not feel it necessary to include an exhaustive list of all that is potentially wrong with its payment claims. I decided instead to give a few examples alluding to the fact that there are other difficulties. I did this to impress upon him the enormity of the difficulties he might otherwise face if this dispute is not quickly resolved. As indicated the drafting of Notices of Default has now become somewhat problematic. I will however do the best I can to prepare suitable drafts for you to use if this eventually becomes necessary. Please let me know as soon as possible whether I will be required on Monday or any other day next week for the dispute resolution conference. This being to enable me to plan my time. I look forward to discussing the draft letter and the matter with you in general in due course." 78 A draft letter was attached to the advice. 79 A letter in the form advised by Mr Zikmann dated 28 October 2005 was sent to the plaintiff. It was signed by Cameel on behalf of the Company. It is not necessary to set it out in full. Essentially it took the point that the building contract had been entered into not between the Company and the plaintiff but rather between the Company and M & L Tarabay Pty Ltd, which had been deregistered as a trading entity on 17 February 2003. It also took the position that the plaintiff's various payment claims were not valid payment claims under the Building and Construction Industry Security of Payment Act, amongst others, because the building contract relied upon by the plaintiff was not one to which he was party. 80 The letter ended off with an invitation to reach a mutually acceptable resolution to the dispute. 81 On 31 October 2005 Mr Zikmann provided a draft second notice of default in accordance with Maria's instructions. 82 A second notice of default was served on the plaintiff on 31 October 2005, again signed on behalf of the Company by Licha and Cameel. It was in the following form: RE: CONSTRUCTION OF 42 HOME UNITS AT 403-409 LIVERPOOL ROAD, ASHFIELD SECOND NOTICE OF DEFAULT This Notice of Default is issued pursuant to A. clause 24(a) of the contract dated 31 January, 2002 between Fifty Property Investments Pty Ltd of 4/48 Hunter Street, Sydney ("the Owners") and Maurice Tarabay trading as M & L Tarabay Pty Ltd ("the Company"), ACN 001 112278 (deregistered without notice to the Owners on 17 February, 2003), of 43 Hocking Avenue, Eaarlwood NSW; and B. any contract which my (sic) otherwise be claimed by either the Company or the Partnership to exist (but which is not admitted by the Owners), between Fifty Property Investments Pty Ltd of 4/48 Hunter Street, Sydney ("the Owners") and M & L Tarabay ABN 95 200 546 579 ("the Partnership") for the construction of 42 Home Units and Town Houses at 403, 407 and 409 Liverpool Road, Ashfield NSW "the Works". DETAILS OF DEFAULT You are hereby notified that the Owners consider you to be in default in the following respects: 1. The Company was deregistered after execution of the contract dated 31 January, 2002, before completion of the Works and without notice to the Owners; 2. The Company and/or the Partnership have failed to proceed with and to complete the Works with due diligence and in a competent manner"(sic); 3. The Company and/or the Partnership have wrongfully and without reasonable cause suspended the Works before Practical Completion; 4. The Company and/or the Partnership have by words and conduct, intimated that they are unable and/or unwilling to complete the Works; 5. In addition to 4 above the Company has also abandoned the Works. The defaults of the Company and the Partnership has caused and continues to cause the Owners to suffer sever (sic) inconvenience, stress and economic loss. The suspension is ongoing and the Owners are obliged to mitigate their losses.

[26]

ACTION REQUIRED You are required, within 5 days after this Notice has been served on you, to rectify the above defaults. Notice is hereby given that you are required to: 1. Immediately, and without pre-condition, to recommence work and proceed with due diligence and in a competent manner to Practical and Final Completion of the Works; and 2. To notify the owners in writing: a. that the suspension of the Works has been lifted with immediate effect and without pre-condition; b . that you will henceforth proceed to diligently complete the Works with all necessary expedition and without any further delays or suspensions; c. of the proposed date for Practical Completion, together with a programme setting out the remaining activities forming part of the Works; d. that you agree to the issue of any disputed variations being stood over for binding independent expert determination after Practical Completion has been achieved; e. that you will enter into a binding deed on acceptable terms to the Owner, to formalise the arrangements between the Owners, the Company and the Partnership, on account of: (i) the deregistration of the Company and subsequent construction of parts of the Works by the Partnership, (all which occurred without notice to the Owners); (ii) liability for any part of the Works already constructed by the Partnership; (iii) the obligations of the Partnership in regard to any remaining part of the Works required for Practical and Final Completion; (iv) the arrangements and agreed mechanisms for dealing with issues which remain in dispute including and not limited to claim variations, any remaining payment claims and/or determination of the adjusted contract sum. FAILURE TO REMEDY DEFAULTS If the defaults 2, 3 and 4 (as listed above) shall continue for 5 days after this Notice has been served on you by the Owners of the Company and the Partnership, then the Owners, (without prejudice to any other rights or remedies which they may have at law) will regard themselves as entitled, without further notice to either the Company or the Partnership: a. to determine the contract with the Company and any alleged contract with the Partnership concerning the Works; and b. to take possession of the site and the Works; and c. to have any remaining work forming part of the Works completed by another builder; and d. to recover any additional costs incurred by the Owners as debt due to them by the Partnership. Such costs include (but not limited to): (i) any additional financing costs incurred on account of the suspension, termination and delayed completion of the Works; (ii) any addition construction costs incurred on account of the termination of any contract with the Company and/or the Partnership for the Works, and the completion of the Works by another builder; (iii) any additional consultant and legal costs incurred on account of the suspension and termination of any contract with the Company and/or the Partnership for the Works, and the completion of the Works by another builder; (iv) any costs or losses incurred by the Owners on account of the inability of the Owners to sell some or all of the units forming part of the Works in an efficient manner and for a price which would otherwise have been achievable had the completion of the works not been delayed or affected by the termination of any contracts with the Company and/or the Partnership; (v) any other costs reasonably incurred by the Owners arising out of or connected with the termination of any contract with the Company and/or the Partnership for the Works. DATED this 31st day of October 2005

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(sgd) _________ Cameel Bechara Director" 83 On 31 October the plaintiff wrote to the Company in the following terms: "This is in response to your letters dated 27 and 28 October 2005 regarding suspension of works and a dispute resolution conference. The contract executed between Fifty Property Investments Pty Limited and Maurice Tarabay is indeed valid, and we confirm that works on site are and will continue to be suspended until such time as the dispute is resolved. In relation to a dispute resolution conference, we note the following: · under clause 26 of our contract, the meeting should have occurred "within five business (sic) after the giving" of a notice of a dispute; · you ignored our request for a meeting within that period which was to occur last Tuesday 25 October 2005, even though you previously agreed to attend a meeting and requested that we suggest a time and venue; · the spirit of the contract, and indeed any dispute resolution, is to attempt to resolve the dispute prior to, and without, legal representatives being involved. Nonetheless, we are still prepared to attend a dispute resolution conference. I invite you to attend a conference on site at 2pm on Wednesday 2 November 2005, without the attendance of legal representatives. We consider that an on-site conference is most appropriate given that is where works took place. Furthermore, we do not think that the attendance of any legal representatives is appropriate as debate around the merits of each party's legal arguments will not be conducive to resolving the dispute. Please confirm your attendance at the conference." 84 On 1 November 2005 the Company proffered, without prejudice to its rights, a draft agreement which it said it considered set out a reasonable and fair minded process for dealing with the issues of disagreement. 85 On 2 November 2005 the parties met on site, but did not resolve their differences. 86 On 4 November Maria received further advice from Mr Zikmann. Amongst others he advised: "We need to put in place a without prejudice paper trail which can be used as evidence that every reasonable attempt at resolving things was exhausted. I am not sure whether the proposal we sent the builder was sent "without prejudice". If not I suggest you send it again making it clear we now reserve the right to put it before any court in evidence if the matter is not settled promptly." 87 A letter in the form of the draft response prepared by Mr Zikmann and signed by Cameel was sent to the plaintiff on 4 November 2005. It is not necessary to set it out in full. Amongst others it stated: "The purpose of this letter is again to advise that unless you agree to enter into meaningful discussions leading to a deed which clearly sets out our respective rights and obligations I will be left with no choice but to terminate any dealing with yourselves regarding the above project. … You appear to fail to appreciate that the absence of a Contract between the partnership and the developers means that there is no established basis for any current and future dealings regarding the project. It is in everybody's interests and commercially imperative that these dealing (sic) be properly formalised by way of a deed to ensure that the legitimate rights of both the partnership and the developer are properly protected. This will not be addressed by simply paying the partnership money." 88 The plaintiff took the position (in my view reasonably) that he was not prepared to enter into the proffered agreement, but would agree to resume work immediately if an acceptable amount of money was offered. 89 On 4 November 2005 the plaintiff informed the Company that the second notice of default amounted to a repudiation of the building contract and that he was considering whether to accept that repudiation and treat the building contract as at an end. 90 On 7 November 2005 Mr Zikmann forwarded a draft notice of termination to Maria in accordance with her instructions. 91 On 7 November 2005 the Company served on the plaintiff a notice of termination of the building contract. 92 A few minutes later the plaintiff served his own notice of termination on the Company in the following terms: "I refer to your two letters sent by facsimile to me on 4 November 2005, the first being two pages received at 9.24am and the second being 15 pages received at 1.49pm. Your conduct amounts to the clearest repudiation of our contract and I elect to rescind the contract forthwith. This letter hereby rescinds the contract between us dated 31 January 2002. I require reasonable access to the site to remove my tools, possessions and any documentation and the like. I also advise you that I intend to apply to disconnect electricity to the site at 10am on Tuesday 8 November 2005, and on that day arrange for removal of the fencing and cancellation of any insurances. I also intend to inform immediately all relevant authorities in relation to my rescission and to advise the home warranty insurer and the lender. You may contract me by telephone to arrange for a suitable time for handing over of keys." 93 The plaintiff left the site on about 7 November 2005 and never returned. 94 On 18 November 2005 the plaintiff commenced these proceedings. Initially he claimed damages from the Company for breach of the building contract, alternatively payment for work done on a quantum meruit basis. Post-contractual events 95 On 17 January 2006 the mortgagee wrote to the Company noting that the loan had expired, that interest for January 2006 had not been paid and asking for details of either refinance or whether an extension of the loan was required for a further short term. 96 The Company obtained an interim occupation certificate for the units on 19 January 2006. It employed another builder to complete the work and, in the proceedings, cross claimed for damages. 97 On 7 February 2006 the mortgagee served the Company with notice of default under s 57(2)(b) of the Real Property Act 1900 (NSW) requiring it to pay over $13.5 M within one month, failing which it would exercise its power of sale. 98 Ultimately the mortgagee took possession of 21 of the 42 units. It on-sold five of those units between 22 June 2007 and February 2008. The evidence did not establish the present position with respect to the remaining of those 21 units. It seems that they remain in the possession of the mortgagee. The Court was informed from the bar table (and there was no dispute) that the mortgagee itself was subsequently placed under a winding up order. 99 The other 21 units (nos 1-8, 17, 27 and 32-42) were bought from the Company by Herberton under a series of contracts dated 24 February 2006 for prices totalling $8.645 M. This series of transactions was facilitated by the sisters borrowing money from various financial institutions. Of the total purchase price payable by Herberton to the Company, about $6.605 M was paid on behalf of the Company to the mortgagee reducing the debt to the mortgagee. The remainder (about $2.039 M) was dealt with by setting it off against the loans which the sisters had originally made to the Company to discharge the debt to Permanent Trustee Company. This was done by having the books and records of the Company and Herberton reflect that the loan by the sisters was from Herberton (i.e. by treating them as having assigned their rights against the Company to Herberton) and then setting off the balance of the purchase price owed by Herberton to the Company against that loan. All of these units were subsequently on sold by Herberton.

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100 On 24 August 2006 the Company was placed under voluntary administration. Mr Geoffrey Reidy was appointed administrator. 101 On 21 September 2006 the Company went into liquidation and the administrator became liquidator. 102 On 6 October 2006 the plaintiff amended his Summons, discontinuing the proceedings against the Company and citing the present defendants. 103 The liquidator abandoned the Company's cross claim against the plaintiff presumably because of a lack of funding to pursue it. 104 On 2 February 2009 the liquidator lodged final accounts. They show secured and unsecured creditors totalling more than $10 M. There is no prospect of any dividend to the plaintiff or any other unsecured creditor. 105 Towards the end of the hearing, the parties agreed that as at the date the building contract came to an end the Company owed the plaintiff a total of $1,394,574 comprised of $1,172,076 for variations and $222,498 for progress claim 24. 106 A faint submission was put on behalf of the defendants that the plaintiff owed the Company money (because the Company had to employ another builder to finish the job in light of the plaintiff's breach) but neither the existence nor the quantum of such a claim was established on the evidence. THE PLAINTIFF'S CLAIMS 107 Mr I Faulkner SC together with Mr N Furlan of counsel appeared for the plaintiff. 108 Mr J L Glissan QC together with Messrs AJ Bowen and WJ Wilcher of counsel appeared for the defendants. 109 The plaintiff's case was opened on the basis that he was bringing three claims: a firstly, a claim for damages against Cameel, Licha and Maria on the basis that the Company's denial that the building contract was with the plaintiff was conduct which was unconscionable in contravention of s 51AA of the Act, and that Cameel, Licha and Maria were persons knowingly involved in the contravention within the meaning of s 75B of the Act; b secondly, a claim for damages against each of the defendants on the basis (as I understood it) that they had in 2006 knowingly participated in further unconscionable conduct of the Company by procuring it to persist in the denial of any contract with the plaintiff, and then engaging in a concerted plan to have the Company sell 21 units to Herberton at an undervalue, with a view to putting it beyond the Company's ability to pay the plaintiff monies owed to him under the building contract; and c thirdly, a claim in tort for damages against Maria for unlawfully intentionally interfering with the contractual relations between the plaintiff and the Company by inducing the Company to breach the building contract by denying that the plaintiff was a party to it. 110 The second claim faced insuperable difficulties upon which it is not necessary to elaborate. This became evident during final submissions, and it was properly abandoned. As it was the only claim brought against Giselle, Dianne and Herberton, the proceedings against them are to be dismissed. 111 During the hearing, a fairly significant amount of time was devoted to issues which pertained only to this claim, such as the assertion of sales by the Company to Herberton at an undervalue and the efficacy of how those sales and related transactions were dealt with as between them. Those issues are now no longer necessary to resolve. 112 I will deal with the remaining two claims in turn. THE UNCONSCIONABLE CONDUCT CLAIM The plaintiff's case 113 This claim was articulated as being one "essentially" of estoppel. By this was meant that the conduct complained of as being unconscionable within the meaning of the unwritten law (as contemplated by s 51AA(1) of the Act) was a departure or attempted departure from an assumption which, in the circumstances, was or would be unconscionable. 114 It was put as follows: a the Company's denial that the plaintiff was the builder under the building contract was unconscionable because it was a departure, or an attempt to depart, unconscientiously from the subject matter of an assumption which the plaintiff had adopted, namely that the building contract was between him personally and the Company, such as would give rise to an estoppel precluding the Company from denying that the plaintiff was the builder; b the unconscionable denial was one of the reasons the Company failed or refused to pay the plaintiff the amount owed to him under the building contract; c the plaintiff suffered loss "by" that conduct, the loss being the amount owed to him under the building contract as at 28 October 2005 when the Company made its denial; and d Cameel, Licha and Maria aided and abetted the Company's contravention or were directly or indirectly knowingly concerned in and party to it and are therefore personally liable for the plaintiff's loss. The law 115 It suffices to set out only briefly the principles of law which are to be applied. They are the following: a the phrase "unconscionable conduct within the meaning of the unwritten law" as used in s 51AA of the Act describes various grounds upon which equity has traditionally intervened to vindicate the requirements of good conscience: ACCC v C G Berbatis Holdings Pty Ltd & Ors (2003) 214 CLR 51 at 72 per Gummow and Hayne JJ; The Commonwealth v Verwayen (1990) 170 CLR 394 at 446 per Deane J; b the central principle of the doctrine of estoppel is that the law will not permit an unconscionable (or unconscientious) departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to: The Commonwealth v Verwayen at 444 per Deane J; c for the departure to be unconscionable the party concerned must have played such a part in the adoption of, or persistence in, the assumption that that party would be guilty of unjust and oppressive conduct if it were now to depart from it. Cases where departure would be unconscionable include where that party has induced the assumption by express or implied representation, has entered into contractual or other material relations with the other party on the conventional basis of the assumption or knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so: The Commonwealth v Verwayen at 444 per Deane J; d estoppel by conduct does not of itself constitute an independent cause of action. The assumed fact or state of affairs (which one party is estopped from denying) may be relied upon defensively or it may be used aggressively as the factual foundation of an action arising under ordinary principles, with the entitlement to ultimate relief being determined on the basis of the existence of that fact or state of affairs. In some cases, the estoppel may operate to fashion an assumed state of affairs which will found relief (under ordinary principles) which gives effect to the assumption itself (for example where the defendant in an action for a declaration of trust is estopped from denying the existence of the trust): The Commonwealth v Verwayen at 445 per Deane J; e in order to recover damages under s 82(1) of the Act the plaintiff must prove that loss or damage was suffered "by" conduct in breach of the Act. This is to be understood as taking up the common law practical or common-sense notion of causation: Wardley Australia Ltd & Anor v The State of Western Australia (1992) 175 CLR 514 at 525; and f it is sufficient that the conduct complained of be identified as one factual cause for an event which is the subject of litigation, in this case the plaintiff's loss. The conduct complained of does not have to be the only cause: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 128 per Gaudron, Gummow and Hayne JJ.

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125 Under cross examination Maria was not prepared to accept that from the outset she dealt with the plaintiff on the basis that he was the contracting party and gave evidence that she formed the view at the time the building contract was signed that Mr Tarabay was personally not the contractor. Cameel gave evidence that before the Zikmann advice his understanding was that they were dealing with a company "under Mr Tarabay". I do not accept this evidence. The subsequent conduct of both Maria and Cameel, on behalf of the Company, is inimical to it. 126 For example, Maria's brief to Mr Zikmann referred to the builder as "Maurice Tarabay of M & L Tarabay" and the notice of default signed by Licha and Cameel on 21 October 2005 was addressed to "Maurice Tarabay T/AS M & L Tarabay." 127 In my view it is more likely than not that the actual or precise identity of the contracting party on the plaintiff's side was not an issue to which either Maria or Cameel actually turned their minds until Mr Zikmann raised it. The document the Company executed, however, reflects the plaintiff as the builder. 128 Given there was a contract with the plaintiff, the denial by the Company was not a departure or an attempt to depart from an assumption to which it would (or could) be held by an estoppel, but rather simply a misconceived repudiation of the building contract which the plaintiff could either accept or reject. 129 It was put on behalf of the plaintiff that even if the building contract was with (and found to be with) him, the plaintiff could nevertheless establish an entitlement to an estoppel with the consequence that the denial was unconscionable. 130 This proposition is unsustainable. 131 The fact that the parties were operating on the basis that they had a contract does not elevate the Company's breach or repudiation of it to unconscionable conduct. There is no room for the operation of an estoppel. 132 It should also be borne in mind that the conduct complained of is not that the Company had induced the plaintiff to do work on a false assumption by which he suffered loss (which would be a claim based on misleading or deceptive, rather than unconscionable conduct), but that the denial of the building contract between them was unconscionable. 133 In support of the proposition that there could at the same time be findings of a contract between the plaintiff and the Company and unconscionable conduct in the manner articulated, reliance was placed on the decision of the English Court of Appeal in Amalgamated Investment and Property Co Ltd (in liquidation) v Texas Commerce International Bank Ltd [1982] QB 84. 134 It was submitted that the Court there found that the plaintiff was entitled to succeed as a matter of construction, but that the Court went on nevertheless to find an estoppel. This, it was put, meant that the plaintiff could have both the contract and an estoppel. 135 The case concerned a guarantee given by the plaintiff company to the defendant bank securing monies lent to the plaintiff's subsidiary. The loan, however, was channelled not through the bank but through a subsidiary of the bank in the Bahamas. For this reason the terms of the guarantee did not catch it because the monies were not lent to the plaintiff's subsidiary by the bank itself. Lord Denning M.R. held that the guarantee had to be construed in the general setting of the negotiations between the parties and that that setting, correspondence between them and the guarantee showed that the plaintiffs were contractually bound to the bank to discharge the indebtedness of the plaintiff's subsidiary to the bank's subsidiary. His Lordship held further that since the parties had acted upon the agreed assumption that the plaintiff was liable for the loan, the plaintiff was estopped by convention from denying that it was bound to discharge the indebtedness of its subsidiary to that of the bank.

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136 His Lordship held (at 120 and following) that the parties should be held to the interpretation which they themselves put upon the instrument. However, after saying that where parties have by their course of dealing adopted a conventional basis for the governance of the relations between them, they are bound by it, His Lordship went on to say: "I care not whether this is put as an agreed variation of the contract or as a species of estoppel. They are bound by the "conventional basis" on which they conducted their affairs. The reason is because it would be altogether unjust to allow either party to insist on the strict interpretation of the original terms of the contract - when it would be inequitable to do so, having regard to dealings which have taken place between the parties. That is the principle upon which we acted in Crabb v Arum District Council [1976] Ch 179, 187. It is particularly appropriate here - where the judges differ as to what is the correct interpretation of the terms of the guarantee. The trial judge interpreted it one way. We interpret it in another way. It is only fair and just that the difference should be solved by the course of dealing - by the interpretation which the parties themselves put upon it - and on which they conducted their affairs for years." 137 Firstly it may be observed that Amalgamated Investment and Property Co Ltd (in liquidation) v Texas Commerce International Bank Ltd was not a case where the assumption was whether as between the parties to the litigation there was or was not a contract at all. The dispute was as to how the contract operated, hence His Lordship's statement that the result could be achieved either as a matter of variation of the contract or as a matter of the conventional basis upon which the parties acted. The existence of a contract and an estoppel effective to hold the parties to an assumption (contrary to the terms of the instrument) as to how it is to operate are not mutually exclusive. 138 Secondly where there is a clear legal conclusion in favour of the plaintiff (whether it be who the contracting parties are or on the construction of an instrument - depending on the issue in question) there is no room for an estoppel or any need for one, because there is no relevant assumption inconsistent with the fact which is required. Nothing which His Lordship said is to the contrary. Given that estoppel is to protect against departure from an assumption which is contrary to the fact, this is not surprising. 139 Thirdly, estoppel precludes departure from an assumption. Estoppel does not constitute an independent cause of action. It may operate to fashion an assumed state of affairs which will found relief under ordinary principles giving effect to the assumption itself: The Commonwealth v Verwayen at 445 per Deane J; see too GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd [2000] FCA 875 at [3] per Gyles J. In Amalgamated Investment and Property Co Ltd (in liquidation) v Texas Commerce International Bank Ltd, it worked to fashion a building assumption that the loan was covered by the guarantee. 140 In the present case, estoppel would preclude the Company from denying having contracted with the plaintiff. It would operate to fashion the assumption (if indeed there was no building contract between them), that there was one. 141 But the plaintiff had the building contract anyway. 142 The plaintiff's problem stems from the fact that he is, contrary to established authority and principle, seeking to rely on an unconscientious departure from an assumption as an independent cause of action when his true case is one in contract. Recourse to s 51AA(1) of the Act does not overcome this intrinsic difficulty. 143 It follows that the plaintiff has not established unconscionable conduct on the part of the Company in contravention of s 51AA(1) of the Act.

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149 During submissions when the plaintiff was put to having to identify when he suffered the loss, the date of his loss was identified as the date of the denial. 150 But the plaintiff's position immediately before and after the denial was no different and, certainly the denial did not cause him to lose the amount he was owed under the contract. 151 He could have sued under the contract for the amount due to him. The denial in no way eroded that right. 152 That he suffered no loss in the manner he asserts is further demonstrated by the fact that had the Company's conduct complained of not occurred, the plaintiff would have been in a position of having the building contract with the Company (without a dispute that he was the builder). The only loss suffered by that conduct might be any expense incurred and time wasted in establishing, in a suit against the Company, that he was the contracting party. 153 Thirdly, viewed as a matter of causation in a practical and commonsense manner, the conduct complained of did not cause the plaintiff the loss he asserts. 154 The true cause of the plaintiff's loss is that he had the building contract with the Company under which he did work but for which he will not be paid because the Company is insolvent and cannot pay him. 155 Finally, the Company's denial was not the cause, or even a cause of his not being paid. He was not paid because the guiding minds of the Company decided not to pay him. 156 As at 28 October 2005 and before the denial was made, the parties were already in deep dispute. It was not put that on the evidence the Court is in a position to find that the Company's position on the plaintiff's delay was either without foundation or not in good faith. The plaintiff's submissions were not directed to seeking a finding on a final basis that the Company's complaints were either unfounded or could not reasonably have been made. 157 The following exchange took place during Maria's cross examination: "Q. I just want to put this to you finally in relation to the contract issue. As at the end of October 2005, it is correct, isn't it, that you strongly suspected in your own mind that the contract was in fact with Maurice Tarabay? A. No, I did not. Had I not received Mr Zikmann's advice, the contract unfortunately would still have been terminated based on Mr Tarabay's failure to complete the works and based on his failure to provide proper invoices for provisional sums and based on his failure to agree on variations but most importantly, his failure to complete the works. There was no reason why we couldn't have proceeded if that was the case on that basis."

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168 In Fightvision Pty Ltd v Onisforou at 534-5, the Court of Appeal said: "A finding of inducing breach of contract carries with it a finding that the defendant's actions caused the breach of contract and the loss which flowed. It does not matter that the contract breaker yields readily or before the inducement was willing to break the contract: Woolley v Dunford (1972) 3 SASR 243 at 290-291; Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots [1991] 1 VR 637 at 659. But it may be possible for the defendant to establish, according to the commonsense notion of causation in March v E & M H Stramare Pty Ltd (1991) 171 CLR 506, that inducing the breach of contract was not the cause of the loss because the loss would have been suffered in any event." 169 Where it is clear that the Company would have taken the same steps anyway, the actions of Maria will not have been the effective cause of the loss; Jones Bros (Hunstanton) Ltd v Stevens [1955] 1 QB 275. Consideration 170 There was no issue before me that there was a contract (the building contract) between the plaintiff and the Company. 171 There was also no issue that the Company's denial of a contract with the plaintiff was a breach of the building contract. 172 The first issue which arises for determination is whether that breach was procured or induced by Maria. I do not consider that it was. 173 The evidence did not establish that what she did amounted to procuring or inducing the breach. 174 Although Maria had a close and intimate involvement with the project, she was neither a director nor officer of the Company. She was acting in the capacity of its solicitor. Mr Zikmann's advice was conveyed to her in that capacity. 175 The point that was taken did not emanate from Maria and the letter dated 28 October 2005 taking the point was drafted by counsel and sent under the hand of Cameel. 176 There was no evidence that Maria herself gave any advice separate from that of Mr Zikmann with respect to the breach. 177 Whether Mr Zikmann's advice was followed (or hers if she gave it) was for the directors. 178 Cameel was not Maria's cipher. In relation to letters which she prepared his evidence (which I accept) was he would have checked them, made some amendments and instructed her to proceed.

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179 Licha's affidavit evidence was that he and Cameel "acted on Mr Zikmann's advice". His oral evidence was to the same effect. 180 According to Cameel, "it was important that we take into account Mr Zikmann's advice". Clearly they did. 181 There was no suggestion that they were overborne in any way by Maria to take the point or that they did not exercise their own judgement with respect to the course that the Company took. 182 I do not think that it can be fairly said that Maria induced the breach and the plaintiff has failed to establish that she did. 183 I am also not satisfied that the necessary element of intention to induce a breach was present on the part of Maria. 184 Counsel's advice was that there may be very real difficulties on account of the legal entity who undertook to do the work and which had been found to have been deregistered. 185 This advice was presumably based on the face of the building contract which referred to the deregistered company and its ACN. 186 Maria's evidence was that she had no reason to believe that counsel's advice was incorrect. 187 It was put against her that no barrister could reasonably have formed the view that on its face and on its construction M & L Tarabay Pty Ltd was the builder and that she was aware that it was given on "grossly imperfect information" because there had been no observations to counsel on the point, she had not instructed him that she was present when the building contract was signed, she had procured signature by the plaintiff of the Deed, she knew insurance was taken out in his name, a cheque in favour of his company had been altered to reflect him as the payee, he had made claims for payment and had been paid and instructions had been given to him with respect to variations by her. 188 In my view the point was not a particularly meritorious one and it was wrong. But the face of the building contract did make reference to M & L Tarabay Pty Ltd and gave its ACN so that there was some basis for the point to be taken. In addition, given the then adversarial position of the parties, the taking of the point to obtain commercial leverage was understandable. 189 I do not consider that no reasonable barrister could have advised as Mr Zikmann did on the material with which he was briefed at the time. 190 Recognising that the existence of counsel's advice was a significant hurdle for the plaintiff in establishing actual intention on her part to induce the breach, it was put that Maria was recklessly indifferent or wilfully blind to the truth that the plaintiff was the builder under the building contract especially having regard to the fact that counsel had not been briefed with the Deed. 191 During cross examination it was put to Maria that she knew the Deed referred to the plaintiff as the builder at the time it was entered into. Her evidence (which in this respect I accept) was that she did not turn her mind to it at the time. 192 There was no cross examination about her state of mind with respect to the Deed at the time she briefed Mr Zikmann, at the time he gave his advice or at the time at which his advice was acted upon. There was no cross examination about why the Deed was not briefed. 193 There was cross examination to the following effect: "Q. Did you consider that Fifty's conduct over that period, that is of dealing with Mr Tarabay on this site and having regard to documents of the kind that I have just given you today, that there may be an admission at law that between Fifty and him that he was the contractor? A No, I didn't. As I said, I had no reason to believe that Mr Zikmann's advice was wrong. Q. Could I suggest to you that a reason to review it was that you had not given Mr Zikmann a large number of documents that had come into existence between Fifty and Mr Tarabay? A. No, I disagree with that. Mr Zikmann was given a lot of material by me that made reference to Maurice Tarabay trading as M & L Tarabay, including the contract on the first page." 194 Maria briefed Mr Zikmann with a significant volume of material. The initial brief concerned delays and variations. His advice about the identity of the builder came a few days later and apparently unsolicited (except perhaps to the extent that he was briefed to advise generally). 195 The Deed may have been relevant to these issues because it had provisions requiring the parties to give notice to the mortgagee before terminating the building contract for breach, but those were provisions in favour of the mortgagee rather than between the parties to the building contract. Yet the Deed was not briefed when advice was initially sought. 196 No rational explanation was proffered on behalf of the plaintiff as to why Maria would not have briefed Counsel with the Deed had it been present in her mind at the time or had she perceived that it was relevant, let alone critical. 197 The observations to counsel referred to the builder as Maurice Tarabay trading as M & L Tarabay and the first notice of default settled by counsel was addressed in the same way. Counsel was clearly briefed with material which indicated that the dealings between the parties might be inconsistent with the construction he was attributing to the building contract.

At a glance

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Judgment (48 paragraphs)

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Legislation Cited (4)

Cases Cited (9)

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