[2011] HCA 11
Mann v Paterson Constructions Pty Limited (2019) 267 CLR 560
[2019] HCA 32
Maria Saravinovska v Krste (Chris) Saravinovski
Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964
Category: Principal judgment
Parties: In proceedings 2019/153341
Source
Original judgment source is linked above.
Catchwords
[1959] HCA 8
Kuhl v Zurich Financial Services (2011) 243 CLR 361[2011] HCA 11
Mann v Paterson Constructions Pty Limited (2019) 267 CLR 560[2019] HCA 32
Maria Saravinovska v Krste (Chris) SaravinovskiChris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964
Category: Principal judgment
Parties: In proceedings 2019/153341
Judgment (29 paragraphs)
[1]
Summary
This judgment resolves, at least as to fundamental matters and some accounting issues, a dispute between two neighbouring families about the terms on which they agreed to purchase and develop two properties in Sans Souci. The venture was conceived in trustful amity, conducted in poorly documented confusion, and concluded in unrelenting acrimony.
The parties declined to follow advice from a solicitor, Mr David Glamcevski, given at the outset that they should record the terms of their arrangement in writing. They have now had to leave it to their lawyers and the Court to determine the legal consequences of what became a commercial debacle, much of which could have been avoided or at least simplified if Mr Glamcevski's entirely correct advice had been followed.
The Court has heard two sets of proceedings. The principal proceedings concern the legal relationship between some or all of the parties (the Partnership Proceedings). The second action is a money claim begun in the Local Court and then transferred to this Court (the Local Court Proceedings). The Partnership Proceedings concern a venture between the plaintiff, Nanevski Developments Pty Ltd (Nanevski Developments) and the first defendant, Mr Ken Slaveski, to purchase and develop two properties in Sans Souci. Nanevski Developments is the defendant in the Local Court Proceedings.
Nanevski Developments is a building and development company owned and operated by the Nanevski family, which comprises Mr Ivan Nanevski, his wife Mrs Makedonka Nanevski and their son, Mr Tom Nanevski. Ivan and Makedonka are directors of Nanevski Developments and Tom, although not a director of Nanevski Developments, is the company's Project Officer.
Mr Ken Slaveski and his wife, Mrs Biljana Slaveski, are directors of Mega-Top Cargo Pty Ltd (Mega-Top), which is the fourth defendant in the Partnership Proceedings and the plaintiff in the Local Court Proceedings. Mega-Top operates a freight forwarding and customs broking business, of which Nanevski Developments was a repeat client. Ken and Biljana are also the parents of Mr James Slaveski. Biljana and James are respectively the second and third defendants in the Partnership Proceedings.
Throughout these reasons, and without intending any disrespect, I shall refer to the parties who are natural persons by their given names. I shall also refer, where necessary, to Tom, Ivan, Makedonka and Nanevski Developments collectively as the Nanevski parties, and to Ken, Biljana, James and Mega-Top as the Slaveski parties.
The first property to be developed was at Riverside Drive (Riverside). It was eventually registered in the names of Ken (as to 1%) and James (as to 99%) as tenants-in-common. Riverside was purchased at auction on 7 February 2015 for $2.7 million, with Tom making the successful bid, although his name would not come to be recorded on the title. The purchase of Riverside settled on 8 May 2015.
The second property was at Vista Street (Vista Street). It was eventually registered in the names of Ken and Biljana as joint tenants. Vista Street was purchased at auction on 28 March 2015 for the price of $6.05 million, with Tom again making the successful bid. The purchase of Vista Street settled on 31 July 2015.
The central issue in the Partnership Proceedings is whether the relationship between the parties was a partnership or something to like effect. Declarations are sought as to interests in property, together with claims in conversion and quantum meruit. By a cross-claim, the Slaveski parties seek, in general terms, an accounting arising from whatever the Court finds the basic legal relationship between the parties to have been. In the Local Court Proceedings, Mega-Top brings a money claim against Nanevski Developments in relation to certain formwork and building supplies.
Tom deposed to the following conversation with Mr Glamcevski on or around 4 February 2015, which was not challenged under cross-examination and was corroborated by Mr Glamcevski's oral evidence (as to which see paragraph [163] below):
"Tom: David, I'm going to send you through a marketing contract for a property that is going to auction in Sans Souci on Riverside Drive. I'm going to be purchasing and developing this property with my friend Ken Slaveski who I think you've met. Ken doesn't want to be on title but wants to be an investor with me in the partnership. The company will be the other half of the partnership and Nanevski Developments will appear on title.
David: Tom I'm your lawyer. Really Ken should get his own lawyer and you need to draft a document that sets out what is to happen with this partnership.
Tom: I know David but Ken wants to save money and just use one lawyer. He trusts me and I trust him. We're old friends.
David: Tom I can't say this strongly enough. If this goes south I won't be able to act for either of you. As a solicitor I've seen these sorts of arrangements go very bad even between old friends or family. You need to get everything documented.
Tom: David I know what you're saying but I trust Ken like a brother. He is my next door neighbour and we're family friends. Maybe we will look at getting something drafted later on but at the moment I want you to write to the vendor's solicitor and see if we are successful at auction if they will accept a longer settlement period and a smaller deposit, say 5%.
David: Ok Tom I will do this, but I really think that Ken needs his own lawyer."
This evidence epitomises a number of elements which characterised these proceedings. First, and as has been noted already, the apparent informality of the commercial arrangements between the parties, marked by little or no documentation; second, a substantial degree of dispute as to what was said during particular conversations; third, the critical role of Mr Glamcevski as an independent witness; and, fourth, the rapid breakdown of what were obviously once close relationships between the members of the Nanevski and Slaveski families.
Another aspect of these proceedings was the complexity and density of the facts which the parties asked the Court to consider and find. On the Nanevski parties' case, those facts were said to prove their overarching contention that Nanevski Developments entered into a partnership, or an equivalent joint venture agreement, with Ken and/or Biljana and/or James Slaveski as at the respective times that Riverside and Vista Street were purchased, notwithstanding that Nanevski Developments was not registered on the title to either of the properties. It follows, according to the Nanevski parties, that Nanevski Developments holds a 50% beneficial interest in each of the properties, which is held on trust by Ken and James (as to Riverside) and by Ken and Biljana (as to Vista Street) respectively.
In answer to the Nanevski parties' "overarching contention", the Slaveski parties asserted that the "joint undertaking" between Ken and Nanevski Developments was only to take effect upon "each party contributing 50% to the cost of acquisition of the propert[ies]". On the Slaveski parties' case, the facts go to proof that "equalisation" of contributions between the joint venturers did not occur, such that no partnership (entailing equal beneficial interests in Riverside and Vista) ever came into existence between Nanevski Developments and Ken.
It is convenient, in summary, to note that the following concessions were made by counsel for the Slaveski parties during the course of closing submissions (both written and oral):
1. There is no serious contest that Riverside and Vista Street were purchased with the expressed intention of the parties that some joint enterprise would be undertaken in their development for sale. That was said to be on a '50/50 basis'. Just what that means is unclear;
2. In respect of Riverside, that Nanevski Developments held equity of at least $67,500 in the property (Tcpt, 8 October 2021, p 406(31)); and
3. In respect of Vista Street, that Nanevski Developments had contributed the sum of at least $1.124 million towards the purchase price.
In light of these concessions, the Slaveski parties maintained their principal argument that, absent an "equalisation" of contributions to the purchase of each property, Nanevski Developments did not receive a beneficial interest in half of each property. Instead, it was argued that the "minimum equity" for the Court to do justice between the parties was to impose a charge on each property in the sum of Nanevski Developments' contribution to the purchase price.
Senior Counsel for the Nanevski parties contended that, as a matter of law, an equitable charge is an inappropriate remedy in circumstances where it was conceded that Nanevski Developments held a proprietary right (i.e. a beneficial interest) in both Riverside and Vista Street, such that the quantum of such an interest, as opposed to its character, was the primary issue before the Court. So, too, it was submitted that reliance upon the concept of the "minimum equity" is inapt in these proceedings.
I should also record that in answer to a request from the Court, each party submitted a list of issues said to arise for determination by the Court. The Nanevski parties' list had 36 questions and did not refer to the Local Court Proceedings. The Slaveski parties' list had 23 questions. While there was clearly overlap between the questions posed, the parties were unable to agree on a joint list. Moreover, the parties' final submissions did not specifically address either of their lists. I intend no criticism in making that observation. In these reasons the Court will address the matters that were specifically raised in the parties' final written and oral submissions rather than the lists which, in fairness, were prepared before the real issues in dispute were ultimately crystallised by the course of the hearing.
In summary, for the reasons set out below, the Court has generally preferred the evidence of Mr Glamcevski and the contemporaneous documentary record (which also largely corroborates the evidence of Tom on critical issues) to conclude that there was a partnership between Nanevski Developments and Ken for the purchase and development of Riverside and Vista Street. Subject to any specific agreement otherwise, the parties rights and liabilities fall to be determined by reference to the Partnership Act 1892 (NSW) (the PA). Ken, James and Biljana hold their respective legal interests in those properties on trust for that partnership, which will now have to be wound up under the control of a receiver, who will also have to conduct an account between the partners as part of that winding up. The Court also makes a number of specific findings concerning payments and other allowances that will be relevant to that account.
Dr E M Peden SC and Mr P Knowles of Counsel appeared for the Nanevski parties. Mr C Robinson of Counsel appeared for the Slaveski parties.
[2]
Facts
The Court finds the facts to be as set out in what follows. Most of those facts appear from contemporaneous documents. Many others were uncontroversial or could not be seriously disputed. Where the Court makes findings below about matters that were seriously in dispute, there is a reference to where the Court's reasons for that finding can be found. Such findings will also have been made with the benefit of the Court's conclusions about the credit of the critical witnesses (see paragraphs [148] to [160] below), generally accepting the evidence of Mr Glamcevski and Tom, but not the evidence of Ken (unless against interest, inherently likely or corroborated by an independent witness or contemporaneous document).
Nanevski Developments was incorporated in June 1998. It is a private family company, of which Ivan and Makedonka are directors. Tom is not, and was not throughout the relevant period, a director of Nanevski Developments. Instead, he is employed by the company as a Project Manager, in which capacity he works full-time and is responsible for the day-to-day operations of the business and the advancement of its projects. Nanevski Developments had built and developed duplexes, villas, townhouses and single dwelling houses in the St George area in suburbs such as Sans Souci, Ramsgate and Ramsgate Beach.
At the time of the hearing Tom was 51 years of age and has lived with his parents since 2009. Ivan is 78 years of age and, along with Makedonka, is no longer involved in the day-to-day activities of Nanevski Developments. This is qualified by two matters to which Tom deposed without challenge:
"12 [Ivan and Makedonka] do make the final decisions about which projects Nanevski Developments will take on. I give my advice and recommendations about those projects which they generally accept.
…
14 I also report to my parents and seek approval where there is going to be significant unexpected costs or delay on a project going beyond what was understood when the project was agreed to. These discussions are generally with my father, given his experience in the building industry, but they sometimes involve my mother also."
From around 2006 until August 2018, at which point the tensions simmering between Tom and Ken reached their climax, which in turn has culminated in the present proceedings, the Slaveski and Nanevski families were next door neighbours in Sans Souci.
Ken is, and throughout that period was, a director and the company secretary of Mega-Top, which carried on business as a freight forwarding contractor and licensed customs broker. In the course of those operations, Mega-Top operated a warehouse and a fleet of small trucks and drivers, providing limited transportation and delivery services within Sydney. At all relevant times, Mega-Top employed Ms Grace El-Turk as its Financial Controller.
As at October 2014, Nanevski Developments had commenced construction of a nursing home on a site that it owned at Lawson Street, Sans Souci (Lawson Street).
Over time, the relationship between Ken and Tom developed from that of neighbours to that of friends. Their conversations would often touch upon matters of business, including the development of Lawson Street.
It is not in dispute, and forms an aspect of the cases advanced by both sets of parties, that Nanevski Developments engaged the services of Mega-Top for the importation of items including scaffolding, steel and windows which were intended to be used in the development of Lawson Street. For example, on 17 December 2014 a customs broker at Mega-Top sent an email copied to Ken which included:
"2X FCL's currently has a customs hold, please book on the last free day for now as the client cannot receive this anyway until 31/12, you may also have to store these for a few days.
Also to be delivered by sideloader to … LAWSON ST SAN [sic] SOUCI (residential) empty block of land, thank you."
Another factual matter not in dispute was that, for a period, Ken and Biljana experienced marital difficulties and were separated. However, there was disagreement between the parties as to the duration of that separation, being whether it extended beyond January 2015, as Ken deposed. Nothing turns on when co-habitation resumed. There is certainly evidence that animosity from Ken towards Biljana was still active in 2015 (see paragraph [69] below).
Tom gave evidence of the following conversation "towards the end of 2014":
"Ken: Tom, you seem to have been making a fair bit of money with your developments recently. If something comes up and you see a good property in the area that you are thinking of developing I'd like to come in on it with you.
Tom: I only operate through [Nanevski Developments] so I'm not going to do anything on my own. However I would be willing to have a look at a partnership joint venture arrangement if a suitable property in the area came up.
Ken: Tom, you know that Biljana and I have split. She is now living in our other property located at Banksia. She would never have let me look at doing a development with you but now she's no longer on the scene this would be a great opportunity for me.
If the divorce goes through it would be also an opportunity for me to hide a bit of money.
Tom: Ok Ken there's a few about. They don't come up often. I'll let you know if I see something suitable."
This evidence was not challenged in cross-examination and the Court finds this conversation occurred.
In early 2015, the principal of Raine & Horne, Sans Souci was Mr Ray Fadel, who was known to Tom from previous transactions.
During January 2015, Mr Fadel telephoned Tom and they had this conversation:
"Mr Fadel: Tom, I think there's a site you might be interested in. It's a deceased estate. I don't have the listing yet but I expect to get it shortly.
Tom: Ok can you at least tell me the address.
Mr Fadel: Look Tom, we are not meant to give that information out but go and have a look at a little old blue house on Riverside Drive, Sans Souci."
Following this conversation, Tom attended Riverside and inspected its exterior, which elicited concern as to whether it might be subject to a heritage designation. This concern was allayed following a further telephone conversation with Mr Fadel, who undertook to provide a copy of the contract for the sale of Riverside to Tom.
At some time prior to 21 January 2015, Tom got in touch with Ken and had this conversation:
"Tom: Ken. Are you still interested in buying a site together?
Ken: I'm interested in investing.
Tom: I've been speaking to Ray Fadel who has the agency for Raine and Horne. There's a property which is a deceased estate which he is confident he is going to get the listing which is about to hit the market.
It's on Riverside Drive and I've gone and inspected it and I think it has huge potential to develop the site. If there is no heritage listing we could potentially put two duplexes on the site or a number of townhouses depending on what Council is able to approve.
Through Nanevski Developments I have had a fair bit of experience with dealing with the local Council so I think that we can at least develop the site for two duplexes if there is no heritage listing and we are able to do a demolition.
Ken: Ok Tom well let's get a contract as soon as we can and see if it's a possibility."
On 21 January 2015, Mr Fadel emailed a copy of the contract for the sale of Riverside to Tom.
Tom also deposed to having this conversation with Ken at some time prior to 4 February 2015:
"Tom: Ken, I've done my homework, I've done my research. I'm confident that we can put at least two luxury duplexes on this site. With the river frontage we should be able to get a good price for it.
Ken: I am interested in investing and developing this site with Nanevski Developments.
Tom: I will do the bidding at the auction and I will bid on behalf of you and me.
Ken: I don't want my name on the property because of Biljana. We will have to have Nanevski Developments on title.
Tom: Ok Ken that's no problems.
I will ask my lawyer David Glamcevski if he can request a longer settlement period and we will see if we can reduce the deposit. I've done it previously when purchasing properties.
Ken: Ok I'm happy for you to liaise with David. You know what you are doing and I trust you."
On Tom's evidence, this conversation was followed shortly thereafter by another to the following effect:
"Tom: We will develop [Riverside] in partnership, will contribute equally, be responsible together for the expenses and share the profits. I will be able to construct it through Nanevski Developments.
Ken: This block should allow us to develop two luxury duplexes with pools. We will need to get the development applications going. Tom, with your experience are you able to begin this process?
Tom: Yes, I can. I can do the consultancy process as well as the construction process. Before the DA is lodged Ken a survey will have to be conducted as well as a geotechnical report. Architects and engineers will also have to be engaged and plans will be submitted with the DA.
Ken: Tom, how will we account for your time?
Tom: For the consultancy work which will involve a lot of toing and froing with Council, architects, planners etc I will charge $120 plus GST per hour. For the construction work which I will do through Nanevski Developments we will charge for cost of material and labour at cost plus 30%.
Ken: That seems fair Tom and you will be able to do it cheaper as you will be the builder and pass on the materials at cost price.
Tom: Exactly Ken. We will save money there.
Ken: We will contribute mortgage payments and invest monies for the development equally.
Tom: Yes and I will do the building on top of that.
Ken: How much do you think we should go to at auction Tom?
Tom: I wouldn't go anything above $2.5 million. If we get to $2.5 we should pull out.
Ken: Ok Tom remember I don't want to be on title and you be the registered bidder when we get there alright.
Tom: Alright. I want to use my solicitor David Glamcevski. I think you might know him Ken.
Ken: I'm happy to use your lawyer Tom if that's who Nanevski Developments uses to keep the expenses down instead of us both using our own lawyers. If we use one then we do not get charged for the lawyers talking to each other."
Whether conversations to the effect of those recorded in paragraphs [34]-[37] above and in paragraph [41] below occurred between Tom and Ken was a significant point of contention between the parties. The Court finds those conversations did occur. The reasons for that finding are set out in paragraphs [166]-[169] below.
On 4 February 2015, Tom's solicitors, McGrath, Dicembre & Company (the responsible solicitor being Mr Glamcevski) wrote to the solicitors for the vendor of Riverside:
"We refer to the abovementioned matter and advise that we act for Tom Nanevski the prospective Purchaser of the abovementioned property.
We are informed that the property is listed for Auction this Saturday, 7 February 2015.
We are instructed our client requests that if he is the successful bidder at the auction that the Contract be amended so that our client:
(a) pays only a five percent (5%) deposit on exchange; and
(b) settlement is delayed for a minimum period of six (6) months from the date of exchange.
We request that you obtain instructions in relation to the above matter and advise whether or not the above amendments are accepted [sic] to your client in the event that our client is the successful bidder at the auction.
We await your reply."
There was no dispute that both Ken and Tom attended the auction for Riverside on 7 February 2015 and that Tom put the bids. Mr Fadel issued a receipt in Tom's name for $135,000 paid by cheque (on whose account is not entirely clear) and described it as "5% deposit balance on settlement" in relation to Riverside, which the Court infers was pursuant to an acceptance of Mr Glamcevski's request set out in the previous paragraph.
This conversation then occurred, on Tom's evidence, between Ken and Tom:
"Ken: Tom you know my situation with Biljana. I want to hide some money and I need to do it fast. If I put this property in one of the kid's names she won't go after it.
Me: This is totally different to what we agree to!
Ken: My son James has never owned a principal place of residence. My accountant has advised me to purchase the property in James' name so no capital gains would be applicable on the land. If you agree to this it will give us significant saving when we sell the property but I will also be able to borrow at residential rates compared to you getting commercial rates.
This won't change anything in relation to the partnership. Nanevski Developments will still be 50% owner with me.
Me: Okay I will agree to this. We will need to let the agent know straight away. I will let my solicitor David know.
Ken: Yes please do."
On 7 February 2015, James, as purchaser, executed the contract for sale of Riverside.
On 9 February 2015, Tom delivered to Ken a bank cheque for $67,500 made out to Ken.
Ms El-Turk's private bank statement for 9 February 2015 records a debit of $135,000 with the reference "Ken" and a deposit of $67,500 to her account, again with the reference "Ken".
While Ms El-Turk was not called as a witness, the Court received into evidence as admissions certain parts of an affidavit Ms El-Turk had sworn on 15 May 2019 in relation to Corporations List proceedings brought by Nanevski Developments against Mega-Top in this Court. There was no dispute that Ms El-Turk was the financial controller of Mega-Top under the direction of Ken. She managed Mega-Top's accounts and also made payments from Ken's personal accounts, in addition to sometimes advancing her own funds to Mega-Top. The relevant admissions in relation to Riverside are (and the Court finds):
1. On or about 9 February 2015, Ken told Ms El-Turk that the cheque for $67,500 he received from Tom was for 50% of the deposit for Riverside.
2. Records maintained by Ms El-Turk on behalf of Ken record the $67,500 payment as a contribution to the purchase price of Riverside.
3. Nanevski Developments also paid an amount of $1,650 for tree trimming at Riverside.
4. Prior to settlement of Riverside, Ken told Ms El-Turk that Tom had given him a cheque for payment of his (Tom's) share of the deposit.
On 11 February 2015, Mr Glamcevski wrote to James concerning the purchase of Riverside, including:
"We have pleasure in confirming that contracts in respect to your purchase of the abovementioned property were effectively exchanged on the 07th February 2015 at the gross purchase price of $2,700,000.00
A deposit in the amount of $135,000.00 was paid on exchange.
Stamp Duty in the sum of $134,010.00 is now payable on the contract and Transfer failing which penalties apply at 13% per annum. So that we may attend to the payment of Stamp Duty on your behalf as soon as possible thereby avoiding a fine being imposed for late payment we would be obliged if you could provide us with a BANK Cheque for this amount drawn in favour of the OFFICE OF STATE REVENUE."
In mid-February 2015, Tom gave Ken $100,000 in cash towards the purchase of Riverside. The reasons for this finding are set out in paragraphs [178] to [187] below.
On 4 March 2015, Tom emailed Mr Glamcevski concerning Vista Street, asking "Can you please see if you can get me 12 months settlement and 5% deposit if successful at auction".
Ms El-Turk's bank statement for 5 March 2015 records a credit from "Mega Cargo" described as "Loan repay" in the sum of $47,782.15. This is but one example of many where Ms El-Turk appears to have made loans to and received repayments from her employer Mega-Top, all apparently effected through her role as the company's financial controller.
On 6 March 2015, Mr Glamcevski wrote to the solicitors for the vendor of Vista Street:
"We refer to the abovementioned matter and confirm we act for a prospective purchaser of the above property.
We have been instructed to request the following amendments to the contract should our client be the successful bidder.
1. Completion date to be twelve (12) months.
2. Exchange on o (sic) 5% deposit
3. Special condition 36 rate to be 7% p/a
4. Special condition 37 delete"
In mid-March 2015, Tom gave Ken $50,000 in cash towards the purchase of Riverside. The reasons for this finding are set out in paragraphs [178] to [187] below.
Sometime before 25 March 2015, Tom contacted Ken to ask if the latter would be interested in joining in the purchase of Vista Street. Ken's affidavit evidence was that Tom said "Would you like to join me in a 50/50 partnership in the purchase of [Vista Street]?". Tom's affidavit evidence was that after telling Ken about Vista Street, the latter said "I would be interested that we can develop it on the same terms as Riverside". There was no dispute that whatever their arrangement was in relation to Riverside, it also came to apply to Vista Street.
A further admission from Ms El-Turk's affidavit (see paragraph [45] above) is that on or about 25 March 2015, Ken asked Ms El-Turk to transfer $175,000 to Nanevski Developments for his share of the deposit payable if Vista Street was successfully purchased at auction. An email from Ken to Ms El-Turk of 25 March 2015 making that request was in evidence.
The auction for Vista Street took place on 28 March 2015. There was no dispute that both Ken and Tom were in attendance and that the latter again put the bids, acquiring the property for $6,050,000 in the name of Nanevski Developments.
The unchallenged evidence of the real estate agent, Ms Pollard, was that the $302,500 deposit for Vista Street was paid on the day of the auction by a bank cheque for $150,000 and a company cheque from Nanevski Developments for $152,500.
In late March or early April 2015, Tom gave Ken $50,000 in cash towards the purchase of Riverside. The reasons for this finding are set out in paragraphs [178] to [187] below.
On 2 April 2015, Ken sent Tom this text message:
"Tom
Don't me til (sic) to my staff I'm involved in Riverside and Vista Street
Don't tell my staff"
On 9 April 2015, Mr Glamcevski wrote to the proper officer of Nanevski Developments (marked for Tom's attention) concerning the purchase of Vista Street:
"We have pleasure in confirming that contracts in respect to your purchase of the abovementioned property were effectively exchanged on the 28 March 2015 at the gross purchase price of $6,050,000.00.
A deposit in the amount of $302,500.00 was paid on exchange.
Stamp Duty in the sum of $318,260.00 is now payable on the contract and Transfer failing which penalties apply at 13% per annum. So that we may attend to the payment of Stamp Duty on your behalf as soon as possible thereby avoiding a fine being imposed for late payment we would be obliged if you could provide us with a BANK CHEQUE for this amount in favour of the OFFICE OF STATE REVENUE."
Ms El-Turk's bank statement for 28 April 2015 records a withdrawal described as "Loan" of $100,000.
On 2 May 2015, Ken emailed Tom concerning the purchase of Riverside:
"Hi Tom,
I am signing the NAB loan documents on Weds for the Riverside Drive property.
The loan is for $1,960,000.00
Below are the various interest rates the NAB are offering.
Let me know which one is suitable.
4.30% is variable so if the rate drops on Tuesday we can take advantage.
We will also need to pay $369,500.00 each for the balance on the property on settlement.
Purchase price $2.7m
Less deposit paid $135,000.00
Less loan from NAB $1,960,000.00
Plus Stamp duty applicable $134,000.00
Balance owing $739,000.00
50/50 split $369,500.00 each"
I interpose that the fact Ken was asking Tom which interest rate is "suitable" is evidence of the understanding which the Court finds that he had that both parties would be liable for the loan as between themselves.
On 3 May 2015, this text message exchange took place between Ken and Tom:
"TOM: Ken the weight of the scaffold from China is approx 4 tonne what's the difference between air and sea transport
KEN: Hey tom
If the length of each piece is less than 3 meters then it's possible by airfreight. The airfreight rate is USD3.85/kg plus export handling charges in China and local clearance charges in Sydney approx AUD $0.63 cents per KG Seafreight is much cheaper
TOM: Ok some lengths of the aluminium pipe are between 1m up to 9m and the staircases for the scaffold are fixed then it has to come by sea
KEN: Correct
TOM: One forty foot will be plenty
TOM: There preparing the contract this week so I can pay half now and the other half while I'm there when it gets packed in container
KEN: Ok
TOM: I've also asked Paul to prepare the window schedule for riverside so I can order them and bring back at the same time for lawson is clear anodised aluminium good with you in colour
I have a sample I can show you that I brought back from maco [Macedonia]
KEN: Sounds good. Ok with me. There will be a lot of windows so it should be a good saving.
TOM: Of course
Just need your warehouse if possible to store them
KEN: Ok"
Ms El-Turk's bank statement for 5 May 2015 shows an internet withdrawal with the reference "OSR" (the Office of State Revenue) in the sum of $134,010.00, which the Court finds is for the stamp duty on the purchase of Riverside.
Mega-Top's general ledger headed "Loan Grace El-Turk" records transactions between Ms El-Turk and Mega-Top between 7 January 2015 and 6 May 2015 totalling $350,000.
Ms El-Turk's bank statement for 7 May 2015 records a withdrawal of $300,000 which the Court finds relates to the Riverside settlement. Her bank statement also includes a number of credits which are described as "Megacargo Loan Repay", which the Court finds are references to repayments to her by Mega-Top of funds she had advanced to it.
Ken's bank account statement for 7 May 2015 includes a debit of $308,016.35 with the particulars "Property Settlement".
Although dated 1 May 2015, there was no dispute that this was an error for 11 or 12 May 2015, Mr Glamcevski wrote to James confirming that settlement of "Your purchase of the abovementioned property …[Riverside] was effected on the 8th May 2015" and enclosing a settlement statement. The settlement statement recorded an allowance for a deposit of $135,000 (being 5%).
On 20 May 2015, Tom and Ken had the following text message exchange:
"KEN: Hi tom
Expecting $500k from Hong Kong money tonight from my mobile phone customer and will draw another $300k from the Megatop overdraft.
I Will ask for my Kuma ["godmother" in Macedonian] to pay the balance of $250k I lent them.
I'm having trouble getting money from Biljana at this stage.
TOM: Ok I hope I'm not causing you too much hassle
KEN: All good
Will do everything possible and glad to assist.
TOM: Thanks ken wont' be forgotten I'll pay you interest as well
KEN: No interest.
The company Megatop can write it off.
TOM: I'm getting the window schedule for riverside emailing to maco [Macedonia] so they can send with the nursing home ones"
On 21 May 2015, Ken sent text messages to Tom which included:
"KEN: Hey tom
I asked my Kuma for the $250k plus $250k from my overdraft plus Hong Kong money $250 …. Total $750k so far.
Billie [Biljana] and I are not working out and she won't budge on releasing money to me.
She is still stubborn and I don't want that because it was the reason I split from her in the first place.
TOM: I don't want to cause you grief ken
Tell Biljana I'll pay her better interest that she's getting and I'll give her the deeds to lawson st
KEN: Don't worry about her. She is an idiot. Can't put brains in statues."
The evidence included minutes of meeting which Ken admitted he prepared for Mega-Top of a meeting dated 22 May 2015 at which he, Bilyana and Grace were present. The first item was:
"Loan to Nanevski Development
Mega-Top Cargo agrees to lend Nanevski Development $500,000.00 for the purposes of their Nursing Home development at Lawson Street, Sans Souci.
Tom Nanevski requested this loan and will pay it back with interest once his company has secured funding from their bank. Anticipated the loan will be for duration of maximum 6 months. Interest will be charged at 4.5% paid at the end of the term.
The loan will be paid from the Mega-Top Cargo overdraft."
On 25 May 2015, Ken emailed Grace at 10.44am:
"Hi Grace
I'll probably go with the venture in Vista st.
Will apply with council for townhouses (probably 8).
Each would go for min $2.5m each minimum worst case scenario (Total $20m)
Land plus stamp duty $6.350m plus building cost $3.5m …. Total cost approx. $10m.
On Saturday 1300 square meters land in Alfred st Ramsgate sold for $4.0m auction. Its two streets back from Ramsgate beach up the road from Coles. DA approved for 6 x townhouses.
Vista st is 2200 square meters backing on to the water.
I will throw in $500k now and another $500k when I get the NAB money.
I have also requested my lawyers to demand half of the $1.8m Billie has received which is/should be in joint names until settlement is reached.
Settlement on the property is end of June.
Can you arrange $300k received from peter ($200k last week and the cheque today for $100k) and further $200k from the Suncorp to the following account.
St George
BSB [XXX]
Account [XXX]
Nanevski developments
Worst case if it isn't approved for townhouses, it can be subdivided into 6 lots, two lots or built for over 55's retirement but that's more complicated."
At 12.09pm on 25 May 2015, Ken sent this text message to Tom:
"I have 500k Tom
Looks like the balance from the nab next week plus from my HKG client.
You may want to get Greg to provide the balance $600k and we can sort it out next week.
I'm really sorry but the $250k from my Kuma is tied up and I will have 50% of billies money soon because I am entitled to it.
I'm really really sorry!!!
Grace has your bank details
sending through today."
Three different bank records, all dated 25 May 2015, record total transfers with reference "Ken Slaveski" from Mega-Top to Nanevski Developments totalling $500,000.
Mega-Top's bank statement for 25 May 2015 includes a deposit to the account of $100,000.
Also on 25 May 2015, Ken emailed Mr Jeff Schembri, a financial consultant, which included:
"Tom asked if you can start working on a residential loan for Vista st.
I will go in with Tom 50/50 on the venture.
Maybe arrange for a valuation this week if possible.
Let me know your thoughts.
Try and do your best to get a good interest rate."
Mr Schembri replied:
"No Problem.
I will get onto it..
Presume that we are looking at 80% of the Purchase price … or the Valuation..
Got to say though it may be hard to get a housing loan for this as you both need to prove a capacity to service principal and interest which is going to be very hard..
I could look for 80% lend but it definitely may be looked at as a commercial transaction … rates are very good though and the servicing requirement will not be as tough ..
As an example … If I got the same rates for this as I got for Magatop (sic) it would at 4.34% today with $100 per month Service Fee. That's pretty good considering we are getting a home loans for around the 4.39% - 4.5% mark at present
Give me a call to discuss..
The structure etc…
Is it going to be you and Tom as joint borrowers with the property in Joint Names or are each borrowing 50% with the property securing the transaction for each of you by way of a guarantee.
Not too difficult but need to know how we are going to approach it."
Ken sought advice from a business consultant, Mr Mark Bonney, about how to structure the purchase of Vista Street. On 3 June 2015, Mr Bonney emailed Ken and Mr Schembri, including:
"Ken and Jeff
Facts
Vista $6m
Buying 50/50 with builder.
Funds being introduced by Ken Slaveski super fund and Tom builder entity
Funding for land purchase initially and future development. …
Rules of conduct - you are getting legal advice on preparing a unit holders agreement Setting up the different vehicles, Company and Trust etc will require Legal Advice as will other matters associated with this transaction … I have a good lawyer who specialises in this type of transaction who I could get to quote if you like .."
Ken accepted that he gave the instructions set out under "Facts" to Mr Bonney. He also acknowledged that he did not take Mr Bonney's advice about obtaining legal advice for the purposes of preparing a unitholder's agreement. The subject of the email was "Slaveski Super fund Property purchase and development using SMSF".
Mr Schembri obtained a valuation report for Lawson Street as at 16 June 2015 which described the property as "The property comprises a vacant parcel of land that has been excavated for basement parking". The report included photographs showing the site had been "excavated and piled".
It appears that difficulties with obtaining finance caused a delay in the settlement of the purchase of Vista Street and, ultimately, a change in the purchaser.
On 19 June 2015, Makedonka contacted Mr Glamcevski. They had a discussion in Macedonian. Mr Glamcevski recorded the attendance in a file note under the hearing "Nanevski Developments - purchase [XX] Vista Street":
"19 June 2015
Telephone attendance with Makedonka Nanevski
She was enquiring about the status regarding the settlement, explained to her that settlement was in due today, 19 June 2015. Tom apparently has almost finalised the finance arrangements but looks like he may not be able to get the whole amount because of Companies accounts and financials being not up to date.
I explained to her that in accordance with previous discussions Ken and Biljana Slaveski will be put on title so as accommodate funds noting that they were joint venture partners anyway, they contributed equally to the deposit.
She said to me that she would prefer if Ken and Biljana took over the whole matter themselves. She and Ivan are too old, they would just rather finish off the Nursing Home Centre and the other Riverside property.
Told her they've committed now, Contracts have been exchanged and in fact the matter in for settlement there is not much they can do about it now.
Potentially I thought that there was great potential in making profits in relation to this development with which she agreed. Told me that if it is at all possible to remove Nanevski Developments out of the Contract and they will make their own private arrangements via a joint venture agreement with the Slaveski' s in relation to contributions and sharing of profits.
I explained to her that the best way to do that is to remain on title as registered owner, just for example one day if Ken and Biljana have a family law dispute then being on title Ken and Biljana can just fight about their share and not touch the Company share.
Being just a joint venture you can still claim an equitable interest but then you become involve in their proceedings."
Also on 19 June 2015 at 11.17am, Mr Glamcevski emailed Tom and Ken concerning Vista Street:
"Dear Tom, Ken and Biljana
As per recent discussions regarding this matter I have now finalised relevant documentation including Deed of Rescission, fresh Contract and Transfer which will effectively result in the purchaser of the property being Nanevski Developments Pty Ltd as to a half share and Ken and Biljana Slaveski as to the other half share as joint tenants as per our discussions.'
At this stage I am waiting for approval of the draft documents from the Vendor's Solicitors.
I confirm my advices also that as part of the agreement as you can appreciate the Vendors will be insisting on penalty interest being paid nothing that settlement of the purchase was due today, 19 June 2015.
Penalty interest in accordance with the Contract is running at $1,408.90 per day. In this regard therefore please ensure that your financier organises documentation and is ready to proceed to settlement as a matter of urgency. …"
At 12.56pm on 19 June 2015, Ken emailed Mr Glamcevski and Tom:
"Hello David, Tom
Will the vendor accept 100% ownership KB Slaveski?
$175k of the deposit to secure the purchase was under Slaveski which may be evidence enough to suggest I was involved in the purchase and owner. If that's the case, then maybe we can use this as leverage to secure the asset under Slaveski without the risk of defaulting. We can argue it was always intended to include Slaveski as an owner whether 50% or 100%.
The reason I ask is that we can secure a loan with the CBA under my personal name over almost overnight. This will avoid having to pay the exorbitant penalty fees for late settlement and private lenders fees/interest rates.
Securing a loan in joint names/ownership under slaveski and nanevski will be very difficult if not impossible.
I am not sure what other solution is available.
This morning I sent an email to my contact at Suncorp to see what he can do in joint names Slaveski and Nanevski. Hopefully they will accept.
An agreement can be drafted between Slaveski and Nanevski going forward so that both parties benefit from the joint venture.
Your feedback would be greatly appreciated."
On 24 June 2015, Mr Glamcevski wrote to the solicitors for the vendor of Vista Street:
"We refer to the abovementioned matter and to previous communications herein.
In particular we refer to numerous discussions with Mr. Stockman in relation to the matter and confirm our instructions in relation to the matter as follows:
1. First and foremost our clients have instructed us to convey to your clients their gratitude for entertaining these changes in relation to the current contractual arrangements. The changes as advised and considered will result in substantial benefit to our clients in relation to what they propose to do with the subject property.
2. As discussed with Mr. Stockman the Purchasers will now be Ken Slaveski and Biljana Slaveski as joint tenants with no reference to Nanevski Developments Pty Ltd. On our instructions this is designed so as to enable settlement to occur as has been aimed for Friday, 26 June 2015. In this regard unfortunately as per our discussions the Writer is unable to recommend and our clients are unable to accept time being of the essence in relation to same. The Writer has discussed the matter with Mr. and Mrs. Slaveski and the representatives of Nanevski Developments Pty Ltd at great length. Whilst the Writer's clients have been assured by the incoming Mortgagee, particularly the Commonwealth Bank can be ready without forty-eight (48) hours the Writer unfortunately does not hold such confidence primarily based on previous experience with representations being made by Banks in relation to their abilities to meet deadlines. In this regard our clients will endeavour and are endeavouring to make sure that settlement will take place by Friday, 26 June 2015, time not being of the essence. However in the Writer's respectful view it is more likely than not that this matter will be ready for settlement some time during the course of next week. This is the Writer's opinion for the record. …
For the records our clients are also aware that the Notice to Complete requires completion of the Contract by 10 July 2015. For the record neither Nanevski Developments Pty Ltd nor Mr. and Mrs. Slaveski intend or wish for settlement to take place anywhere near or close to the timeframe of the Notice to Complete. …"
Mr Glamcevski's evidence, which the Court accepts, was that the reference to "our clients" was to Nanevski Developments (Tom, Makedonka and Ivan) and Ken and Biljana.
On 29 June 2015, Mr Glamcevski emailed Tom and Ken about the subject "Nanevski Developments Pty Ltd" and including:
"Dear Tom/Ken
Further to our discussions regarding this matter I can confirm that I have received further communications from the vendors solicitor and now have amended all documents to reflect the new purchasers as being Ken and Biljana. …
On this point and purely on a cautious note it is my respectful view that Nanevski Developments Pty Ltd should ensure in any event that if necessary it is ready to proceed to completion under the existing Contract which as you are aware is subject to a Notice to Complete requiring settlement by the 10th July 2015. I make this point on the basis that if for any reason Ken and Bilijana are unable to complete by the 10th July 2015 the company Nanevski Developments Pty Ltd be able to proceed to completion of the purchase to avoid the risk of rescission of the Contract for not complying to the Notice to Complete and the forfeiture of the deposit already paid and pursuit of the balance of the 10% deposit against Nanevski Development Pty Ltd.
As indicated this is my advice and purely on a caution basis as we do not want a situation where something happens or Ken and Bilijana or their bank is not ready by the 10th July 2015 and Nanevski Developments is called upon the settle and Nanevski Developments cannot settle because they have relied on the expectations that Ken and Bilijana will be purchasing the property. Please ensure that you take appropriate action and if you need me to get involved in any form please let me know. I note however your advices that finances in respect of the purchase by Nanevski Developments Pty Ltd of the property are in order and on your instructions in the past Nanevski Developments Pty Ltd is in an position to proceed to settlement and has finance approval but the change was precipitated by the fact that under the new arrangement substantial savings in respect to interest and other costs will be realised by the joint venture partners."
On 6 July 2015, Mr Glamcevski forwarded to Ken and Tom a letter from the vendor's solicitors in relation to Vista St which included:
"If our clients are minded to grant the extension sought then one of the conditions will be the immediate payment into our trust account of the balance of the 10% deposit … Your clients should not be under any misapprehension as to the result of either there being no agreement for the extension of the time for settlement or in the alternative no settlement effected in accordance with the Notice to Complete already served. If this were the case our clients will, on Monday next, terminate the contract, forfeit the deposit and then take proceedings for interest, damages and the like."
On 8 July 2015 at 11.43am, Mr Glamcevski emailed Ken, Biljana and Tom:
"Just to let you know I just got off the phone with the vendor's solicitor regarding the extension of time.
The extension of time has been granted to the 31st July 2015.
In accordance with the agreement however the balance of the 10% deposit has to be paid now.
Biljana & Tom can you please organise the payment of a further $302,500.00 into the Agent account. I would prefer if possible for a bank cheque in favour of McGrath St George or is you wish to do a direct debit please provide me with details including deposit slips etc, so I can show the vendor's solicitor that the payment has been made."
Mr Glamcevski's evidence, which the Court accepts, was that he had referred in the email to "Biljana & Tom" because he understood they were contributing equally.
By email sent at 4.55pm that day copied to Biljana and Tom, Ken replied "I will get grace to arrange the bank cheque".
The evidence included a receipt signed by the real estate agent Ms Pollard in relation to Vista Street dated 9 July 2015 for $302,500 which noted "Received from Tom Nanevski, Nanevski Developments Pty Ltd".
On 9 July 2015 at 9.55am, Mr Schembri emailed Ken, including:
"Things are progressing well with vista. Had to sort out something about the contract in order for the bank to order a valuation but the solicitor wrote a letter and I believe that was satisfactory for the valuation to go ahead. Anyway I haven't heard anything to the contrary.
Just had Tom on the phone having a go at me. Mainly about Lawson and Greg and that I told him that it would all be ok etc. I said that I only relayed Gregs comments that he felt he could arrange the finance. Anyway I told him that the investors are reluctant to lend against Lawson but GREG is still trying to source finance.
He also told me that he got an email from you saying that finance was not approved and that you were upset.
I said that I was unaware of anything like that and asked him to send me the email so I can understand what he is talking about. He said that he won't send it though so I'm not sure what he is on about.
Is everything ok. My last conversation with NAB was that the application was progressing well pending the hiccup with the valuation but as I said earlier I believe that has been resolved following the work with David.
If you get a chance please get back to me to clarify what Tom was talking about."
Later that evening, Ken (who was overseas at the time) replied to Mr Schembri, including:
"Don't worry about Tom. I asked him to look at getting finance approved for Lawson st ASAP in case there is a hiccup with my application …even if he goes to his Chinese lenders (if Greg can't) and gets a loan so he can pay something towards Vista St.
If Greg can assist it would be great. Tom will then dump a good portion of that towards Vista and it will relieve me from having to pay cash towards the balance of the 20 pr 30% required.
It would help immensely if the valuation from NAB comes in close to the purchase price.
I guess the sooner the application goes through the better … so I can minimise the penalty fees I am paying for the late settlement."
On 28 July 2015 at 3.55pm, Mr Glamcevski emailed Biljana, Ken and Tom confirming that settlement of the purchase of Vista Street would occur within a day or two. His email continued:
"Of note are the total settlement figures.
I enclose herewith settlement sheet on which you will note the balance due and owing on settlement to be $5,500,609.52.
I note that you have secured from NAB the sum of $4,360,000.00 leaving a balance due on settlement of $1,140,609.52.
As are you aware in addition to an amount of $364,010.00 is due and payable for stamp duty in favour of the Office of State Revenue.
In addition to this we are awaiting receipt of the tax invoice for the vendors solicitors for all the additional costs incurred and shall advise you of same once received. We will also calculated our costs and disbursements in relation to our involvement in this matter as well.
I thought that I would bring this to your attention so that whatever arrangements need to made (sic) insofar as securing the balance of purchase monies needed are attended to in the next day or two."
Later that evening, Ken emailed Tom and Biljana with the subject heading "Vista Street/NAB Loan":
"Hello Tom
Purchase price 6,050,000.00
Stamp duty 364,000.00
Total cost to purchase Vista Street property $6,414,000.00
NAB WILL LEND KEN SLAVESKI $4,355,000.00 ($4,360,000.000 less bank fees of $5330.00) BASED ON 80% VALUATION OF $5,445,000.00
Kens contribution so far as follows:
$500k (payment by Ken to Tom to secure Vista Street) 500,000.00
$175k deposit paid at Auction 175,000.00
$302.5k deposit paid July balance of the 5% as request by seller 302,500.00
TOTAL 977,500.00
Toms contribution so far
$127.5k deposit paid by auction
Balance owing on Settlement $1.454m
Balance of kens share $52000.00
Balance of toms Toms (sic) share $1402000.00
Kens share is $52000.00 ………………$1,029.500.00 less already paid of $977,500.00
Toms share is $1,402,000.00 ……… $902000.00 ($1029500.00 less what he has paid of $127500.00) plus the $500,000.000 (which was paid by Ken Slaveski towards Vista Street which is sitting in account.
Payable is $52000.00 (Ken) plus $1,402,000.00 (Tom)
Total $1,454,000.00 (excluding the penalty fee for late settlement)"
On 3 August 2015, Mr Glamcevski wrote to Ken, Biljana and the proper officer of Nanevski Developments referring to the settlement of "Your purchase" of Vista Street. Mr Glamcevski's evidence, which the Court accepts, was that he was instructed by all of them to send the information, which included the settlement sheet, to both the Nanevski and Slaveski interests. The letter included a document headed "Cheques on settlement":
"CHEQUES ON SETTLEMENT
Proceeds in respect of abovementioned settlement were provided as follows.
1. Stockman & Evans Trust Account
(NANEVSKI DEVELOPMENTS PTY LTD) $996,570.00
2. Stockman & Evans Trust Account
(NAB LOAN) $4,332,895.22
3. Stockman & Evans Trust Account
(MR & MRS SLAVESKI) $171,654.65
4. Stockman & Evans
(VENDORS SOLICITORS COST FOR
EXNTESION OF TIME AND RESCISSION
OF CONTRACT) $4,501.20
5. Kogarah Council (NAB) $4,076.42
6. Sydney Water (NAB) $177.93
7. Department of Trade and Investment (NAB) $139.70
8. Office of State Revenue
(MR & MRS SLAVESKI) $364,010.00"
On 18 August 2015, Ms El-Turk sent an email to Tom, copied to Ken with the subject heading "Reconciliation" and including:
"Attached please find reconciliation for the purchase of Vista Street.
After everything has been taken into account the total that is owed by you to Ken is $475992.44.
I trust the attach (sic) will assist and should you require further information please do not hesitate to contact me.
Also can you let me know when you will be making payment and I will give you the account details for the transfer."
The attachment set out a reconciliation in relation to Ken and Tom's respective contributions in relation to the purchase of Vista Street, premised upon an obligation upon each of them to contribute as to 50% including as to their liability for any loans. This reconciliation refers to $500,000 as "advanced by Ken to Tom for Lawson".
On 19 August 2015, Grace El-Turk sent an email to Tom, copied to Ken with the subject line "NAB Loan documents":
"Hi Tom,
Please find attached loan documents for both Vista and Riverside.
1/. Vista … NAB valuation came in at $5.45m…80% was $4.360m
As mentioned last at the time, $17381.00 for mortgage stamp duty was incorrectly deducted by the NAB on settlement but then re-credited (as per attached latest statement shows the $17381.00 going back in). It has been shown in the spreadsheet as a cost on settlement which it was. However, we have the $17381.00 available now to re-draw.
2/. Vista … I attach a letter from the NAB dated 14th August advising their home loan rate will increase to 4.45% despite there being no increase by the reserve bank.
3/. Riverside … attached is the NAB loan document for $1.960m
Please note the $500k advance and the balance of the deposit $302500.00 which was paid from Mega-Top Cargo overdraft which is the reason for the interest charge. It was billed at 4.5% which is at cost.
Mega-Top Cargo has also funded $809k being the balance required on settlement for Riverside less the $67500.00 being your deposit … Balance $741500.00. Interest per annum $33368.00 (50/50 $16684.00 each, $1390.00 per month paid by each party)
I have also asked the bank for details of the loan payment and the date it will be due and will email you once I receive the reply."
On 3 September 2015 Mr Glamcevski, acting on instructions he received from Ken and Tom, wrote to another solicitor in relation to Vista Street:
"Thank you for your email of 3 September 2015. My clients are not interested in granting an easement and require a response to their request for the removal of the encroachment and what steps your client proposes in relation to same.
My clients are a Joint Venture partnership. On title however pursuant to the agreement between my clients are Mr and Mrs Ken & Biljana Slaveski who are registered on Title to the property."
Mega-Top's bank statement for 9 September 2015 records a deposit of $100,598.04 and then two deposits on 10 September 2015 totalling $910,000.
On 3 December 2015, Ken emailed Tom, including:
"Really need to settle the freight account for the steel (Tony's portion of $40k) and also the balance of the Vista st settlement ($278k) so I can pay back $100k of this I borrowed from Mega-Top overdraft and the balance $178k to Biljana as I promised her several months ago.
The Macedonia window shipments will only get Mega-Top into further debt …. Duties, freight, GST and delivery.
Can you look into it as a matter of urgency so I can clear things up and get rolling on the windows ASAP"
The evidence included a copy of a cheque drawn on Nanevski Developments bank account dated 8 April 2016 payable to Ken for $275,000. It was signed by Ivan and Tom said that the cheque was written out by him in Ken's presence.
On 13 April 2016, there was this text exchange between Ken and Tom:
Ken: "I managed to have the cheque not go through I asked my business banker and she said she will not process it
Tom: Ok thanks just needed to sort a tax bill you will be able to bank it on Monday plus I need to give you more cheques to cover the steel"
On 13 April 2016, Tom emailed to Ken an estimate for the demolition of the existing house at Riverside of $15,004.
On 14 April 2016, Ken submitted a building approval form in relation to Riverside. This described Ken as the applicant and was signed by Ken and James as the owners. It indicated that Tom would be carrying out the work. However this gave as a builder's licence number Tom's Certificate IV Building & Construction number rather than a builder's licence number. The estimated cost of the development was recorded as $850,000 and described as "demolish existing 3 bedroom house and construction of two storey attached dual occupancy".
On 25 May 2016, a construction certificate was issued in relation to Riverside by Camile Haddad, referring to Nanevski Developments as the applicant and attaching the application completed by Tom including being signed by him as the owner. The work the subject of the application and certificate was recorded as having an estimated cost of $830,000 and being for "bulk excavation, piling and shoring only".
By an invoice dated 29 July 2016 (with the due date being the same date) CF Piling Group Pty Ltd (CF Piling) sent a bill to Nanevski Developments addressed to Riverside for "design and install a secant pile wall and capping beam including bracing and dewatering" for $862,400.
On 1 August 2016, Ms El-Turk emailed Tom on the subject of "Land tax" including:
"Attached you will find the reconciliation for the Land Tax. The bill for Vista Street is $29454.67. Could you please transfer 50% of $14727.32 to Ken's bank account so that I can arrange payment."
There was in evidence a search of Nanevski Developments builder's licence which commenced on 19 September 2016 for a three year period. The licence class was "builder" and it was subject to conditions that it was "only for contracts not requiring insurance under the Home Building Compensation Fund", that condition being in place from 19 September 2016 to 31 December 2017.
In early 2017, Tom organised a surveyor to provide a report in relation to Vista Street. Mr Glamcevski's evidence, which the Court accepts, is that this occurred after Mr Glamcevski had spoken to both Ken and Tom on site and indicated that he needed a survey.
In January 2017, Mr Glamcevski arranged for Ken and Tom to attend a conference with Mr Michael Tanevski of Counsel concerning an encroachment issue in relation to Vista Street. On 17 January 2017, Mr Tanevski wrote to Mr Glamcevski providing his advice and referring to "our conference with Mr Slaveski and his joint venture partner, Mr Nanevski, on 13 January 2017".
On 10 February 2017 Ken emailed Tom on the subject "Tom Balance":
"Hello Tom,
As discussed yesterday, below is the breakdown of the outstanding at settlement for Riverside, Vista and the Megatop account as at Feb 2017.
I need this settled as I have over $763k more invested in a 50/50 partnership.
I have requested the valuation on Vista street to see where we are at and how much extra funding we can secure.
Once the payment of $763k is made and the partnership is even, we should then request for a construction loan on Riverside so we can complete the project ASAP. At the moment the slow progress is costing us interest unnecessarily for both of us.
There is so much at stake, it is in our best interest that both the projects are completed as fast as practical.
Additionally, I need to know what the building costs will be (quotation) for Riverside as it was estimated between $1.3 and 1.35m but need confirmation and also the time frame so I can plan over the next 12-24 months on future projects/investments.
Also, can you tee up a time and date to visit the architects and town planners for Vista street. We need to fully understand the costs and the time frame towards this project. There is $6.0m invested which we need to move fast to achieve maximum benefit/profit.
I am free now to work on both projects so let me know what is required and I can assist.
1/. Megatop account
Steel imports $51190.57
plus
$5334.12 Cartage for Steel, storage for steel (month of October, November, December 2015) and delivery for wood from Wetherill park (as per attached invoices and statement)
2/. Balance of 50/50 Riverside settlement $369790.60
plus
Interest for Riverside up till Feb 2017 $30126.00 on the $369790.60
3/. Balance of 50/50 Vista $275992.00
Plus
Interest on Vista up to Feb 2017 $19663.00 (the balance on day of settlement was initially $475992.00 then reduced to $275992.00 after received two separate payments of $100,000.00 each).
4/. Payment to Schembri financial $11000.00
Summary as follows:$51190.57
$5334.12
$369790.60
$30126.00
$19663.00
$11000.00
$275992.00
Total $763095.00
Regards
Ken"
On 3 March 2017, Mr Glamcevski emailed the surveyor in relation to Vista Street, including:
"Thank you for the survey reports in relation to the abovementioned property. The surveys are very helpful in allowing us to properly advise the current owners.
It is noted however that the survey report is addressed to Nanevski Developments Pty Ltd.
We advise that the property is registered in the names of Ken & Biljana Slaveski who have a joint venture agreement with Nanevski Developments Pty Ltd in relation to development of the site.
For our purposes in respect to both the said reports that you have provided us we would be pleased if you would readdress the said survey reports to the registered proprietors Ken and Biljana Slaveski of 32 Plimsoll Street, Sans Souci."
On 4 May 2017, Ken emailed Tom forwarding an email from Ms El-Turk of 1 May 2017. The subject was "Outstanding owing on Riverside and Vista". Ken's email said:
"Thank you for sorting out the old accounts last week it was much appreciated.
The balance owing is now just the principal and interest.
Below is a summary.
Let me know if you need anything. I have borrowed money from Mega-Top overdraft and need to pay it back by the end of financial year.
If you can pay cash or cheque for $150k by next Weds (before I leave for overseas) it would be great"
The summary referred to in Ken's email was an email from Ms El-Turk to Ken of 1 May 2017 which included:
"2/. Balance of 50/50 Riverside settlement $369790.60
FW: Outstanding owing on Riverside and Vista
…plus
Interest for Riverside up till end of April 2017 $34776.57 on the $369790.00
3/. Balance of 50/50 Vista $275992.00
….plus
Interest on Vista up to end of April 2017 $22849.85 (the balance on day of settlement was initially $475992.00 then reduced to $275992.00 after receiving two separate payments of $100,000.00 each)."
On 2 July 2017, there was this text exchange between Tom and Ken:
"TOM: Ken when your truck is not busy can you send it to Lawson st so the windows for the duplex can be taken back to warehouse so they don't get damaged
KEN: Ok probably Tuesday or weds"
On 3 July 2017, Ken sent Tom this text:
"KEN: Hey tom
Did you get a chance to get a loan to settle the balance owing which is now reduced to an around $660k (I'll check the exact figure)
I need to pay back to Mega-Top cargo before I lodge the 17 financials.
Can you let me know as a matter of urgency please"
On 7 August 2017, Ken sent an email to Tom asking him to look into something which had been received from Council. What had been received from Council was a letter dated 2 August in relation to Riverside enclosing a notice of intention to give an order about the works being carried out on Riverside as not being in accordance with Council's approval.
On 15 August 2017, Ken sent Tom a text which included:
"KEN: Hi Tom
Did you managed to get finance to pay the balance owing which is now down to $510k My accountant keeps asking He can't close the accounts for Megatop cargo for the last financial year until I pay the loan back to Megatop.
Can you see what you can do in the next few days
Thanks"
By a notice dated 2 November 2017, the certifier for Riverside sent a notice to Ken setting out an order requiring, among other things, the demolition or removal of two swimming pools said to have been erected without prior development consent at Riverside and otherwise to cease work on the site until various matters were complied with.
On 15 November 2017, Mr Glamcevski sent a tax invoice addressed to both Ken and Tom in relation to a dispute with a neighbour concerning Riverside.
On 22 December 2017, Ms El-Turk sent an email to Tom, copied to Ken concerning "payment" and stating "Please find bank receipt for payment made today". The bank receipt showed a payment from Mega-Top Cargo to Nanevski Developments of $50,000.
On 3 January 2018, Ms El-Turk sent an email to Tom, copied to Ken, with the subject matter "expenses" and a message "Please see the attached spreadsheet regarding the expenses. You can call me if you need to go through it." The spreadsheet is a reconciliation of liability for expenses premised upon each of Ken and Tom being liable for 50%.
On 9 January 2018, Ken sent Tom this text message:
"Hi tom
The private lender peter is asking for the size of the land as well as how many beds, rooms, square meters of the building, number of (sic) levels, kitchens, parking, etc basically as much info as possible to they can get a clear picture of the size of the project.
He suggests that we do a bogey sales contract (for example $10m, 12 or 15,) and he will use this to secure 55% private funding based on the sales contract price. This will at least give you an option B if John encina's application does not go through"
On 17 January 2018, Ken sent this text to Tom:
"Hi Tom
Can you include the balance of the capital $530k owed for the both properties when applying for the loan from the private lenders. I have the balance on spreadsheet which I will email across it's as per previous emails. This will enable me to pay back Mega-Top the loan so I can then get a construction loan from the NAB for riverside."
On 9 February 2018, Ms El-Turk sent an email to Ken and Tom with the subject "Payment" and attaching a payment report. This records a payment from Mega-Top to Nanevski Developments with the reference "Ken Slaveski" for $40,000.
On 4 May 2018, Ken sent an email to Tom on the subject of "Riverside Drive project" which included:
"As discussed earlier this week, we need to complete the Riverside project in the next 12 months.
The standard building time after DA approval should have been 12-14 months.
I also have a building company working on a quote (as a back up) but would prefer if you could handle and build the project.
There is also the matter of the investment capital which was agreed at the time would be 50/50. There is a balance outstanding of $593k (including what's owed to Mega-Top for the windows for Lawson St which has now been transferred to the loan). I have the breakdown and will email it to you early next week.
You mentioned you have finance in place which you are waiting on the green light. If the finance money is not forthcoming for the balance of the capital investment of $593,000.00 we also have the option of adjusting the shareholding.
I understand you have been busy with the nursing home but we really have to make our investment work as both of us have heavily invested money in this venture.
To minimise potential ongoing issues with the neighbours, lawyers and councils, it's a good reason why we need to complete the project quick to avoid future problems. Not to mention the bank interest on Riverside which is over $100,000.00 each so far and the project is still at the early stages.
I have approval for a construction loan in place already to enable at least the first half of the construction of Riverside drive to be completed. The bank has already approved this loan. They will release the loan once we have poured the slab.
In the meantime, can you address the issue of the balance of the investment/partnership owing of approximately $593,000.00. This needs to be sorted out ASAP so that I can pay Megatop Cargo the loan I have taken out. I cannot lodge the 2017 and 2018 financials until this loan is cleared up.
This is money (sic) has been borrowed by Ken and Biljana from Megatop which I need to return it ASAP. Megatop has taken an extended loan for $500,000.00 with the NAB for its cash flow because we have it tied up in the project.
I understand that you have the approval for a loan from a private lender. Megatop Cargo is paying 7.85% interest on the $600k overdraft to the NAB but charging ken/tom 5% interest."
There was in evidence a building contract dated 8 May 2018 between Ken and Tom in relation to Riverside where the contract price was varied from $850,000 to $749,000.
On 16 July 2018, referring to a meeting "mediated" by Mr Glamcevski at an RSL Club, Ken sent an email marked "without prejudice" to Grace El-Turk, but intended as a draft then to go to David Glamcevski, which included:
"Thank you for attending the meeting at the RSL and I always appreciate your advice on all matters legal and in particular this situation regarding the duplex project.
The purchase of the property was intended to 50/50 and Nanevski Developments to build the project.
However, as it stands, all the capital investment is from K B Slaveski…
The agreement prior to the purchase of Riverside was that both parties would invest an equal amount of our own money to secure the property and then borrow the balance from the bank…
FYI, I have unsuccessfully tried to re-value Vista Street so that we can secure additional funding…"
It then goes on with various matters that have now become the subject of dispute between the parties. I record that while marked "without prejudice", the document was included in the evidence without objection and referred to by both parties.
Ken sent a copy of this "without prejudice" email to David Glamcevski on 16 July 2018. On 23 July 2018, Mr Glamcevski responded to Ken:
"Hi Ken
Thank you for your recent email the contents of which are noted.
As you may well appreciate I am unable to comment or express an opinion as to the contents of the email due to conflict.
All that I can say is that if you and Tom are not able to resolve the matter, then being Joint Venture Partnership both of you will end up in the Supreme Court of NSW in which jurisdiction in cases like this the Court will order what is known as Taking of Partnership Accounts. This process involves the Court appointing an independent Accountant/Auditor to compile all the financials of the Joint Venture Partnership, work out who's owed what, who contributed what and thereafter dissolve the partnership by selling the partnership properties, paying debt, paying themselves which in any liquidation/dissolution of partnership can be very expensive and thereafter what is left return capital contributions to the respective partners.
I cannot therefore be involved in the matter and if it is the case that you and Tom will proceed to Court proceedings then you will have to get another Solicitor as will Tom to deal with this particular matter.
All other matters I can continue to act for both you and Tom."
The draft "without prejudice" letter subsequently formed the text of an email from Ken to Tom on 31 July 2018 regarding and setting out Ken's assertions regarding the dispute between them.
On 3 August 2018, Tom sent an email to Ken concerning Riverside which included:
"I am very surprised by this email you have sent me. I do not agree with your email. Especially, after the meeting we had with David Glamcevski over dinner at Ramsgate RSL a few days before he went overseas. In which you agreed to release funds so Riverside drive can move forward. Again, David was a witness to this conversation.
The initial agreement that we had in place between us has not been adhered to by you.
All the costs up until now I have paid for. I have not sent you a lot of the invoices that have been paid for both Riverside and Vista Street. I have tried to contact you many times via phone or text and you have not replied.
I will respond more fully to your email after Mr David Glamcevski returns.
If you wish to discuss or meet please contact me as i wish for Riverside Drive to commence immediately."
By letter date 20 September 2018, solicitors acting for Ken and James wrote to solicitors acting for Nanevski Developments. That letter, the subject matter of which was specified as Riverside, included:
"In the circumstances, our clients hereby terminate any arrangement between themselves and Nanevski Developments in respect of the building of the proposed development. In our view there is not and has never been any valid building contract but, for the avoidance of doubt, any such contract is hereby terminated."
On 18 October 2018, Mr Glamcevski sent an email to someone by the name of "Alex" who, according to Mr Glamcevski's evidence, may have been an architect. That email included Mr Glamcevski saying that "I confirm that I acted for and on behalf of Ken and Biljana Slaveski and Nanevski Developments Pty Ltd as a Joint Venture Purchase of [Vista Street]".
These proceedings were commenced by a summons filed on 16 May 2019.
[3]
Fact finding - legal principles and Jones v Dunkel
In Maria Saravinovska v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964 (Saravinovski (No 6)), I set out a summary of the principles relevant to fact finding where there are disputed facts:
"464 First, at the forefront of the Court's approach has been the oft cited statement of McClelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319:
Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously describe as 'misleading') within the meaning of s 52 of the Trade Practices Act (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction … rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court 'must feel an actual persuasion of its occurrence or existence'. Such satisfaction is 'not … attained or established independently of the nature and consequence of the fact or facts to be proved' including the seriousness of al allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding': Helton v Allen (1940) 63 CLR 691 at 712.
465 Second, the concept of actual persuasion was elucidated by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers appointed) (in liquidation) (No 2) [2011] FCA 1123; (2011) 297 ALR 56:
48 Under s 140(2) of the Evidence Act 1995 (Cth) (the Evidence Act), the Court must, in deciding whether it is satisfied that a case has been proved to the requisite standard, take into account:
● the nature of the cause of action or defence;
● the nature of the subject matter of the proceeding; and
● the gravity of the matters alleged.
When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fat has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-2).
466 Third, there is the statutory successor of the rule in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 in s 140 of the EA:
140 Civil Proceedings: standard of proof
(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:
(a) the nature of the cause of action or defence, and
(b) the nature of the subject-matter of the proceeding, and
(c) the gravity of the matters alleged.
467 Fourth, evidence is to be preferred which is inherently probable in the circumstances or is given by a witness against their interest.
468 Fifth, evidence of independent witnesses, i.e. persons who have no reason to be partisan, may be decisive in resolving the conflicting evidence of interested parties.
469 Sixth, where a witness has been found to be lying about one thing that does not automatically mean that they are to be disbelieved about everything else. The court is not bound to accept or reject a witness' evidence in its entirety. This approach was expressed by O'Loughlin J in Cubillo v Commonwealth of Australia (No 2) [2000] FCA 1084; (2000) 103 FCR 1:
118 Before commencing a detailed analysis of the evidence in this case, I desire, in the first instance, to make clear the approach that I have taken to the evidence of a witness where I have found some, but not all, aspects of the evidence of that witness to be unreliable. Simply because I find against a party or a witness on one issue and reject some part of the evidence of that person, it does not mean that what remains is tainted, or otherwise lacks probative force, with the consequence that I should dismiss all the evidence of that person. The principles enunciated in the cases indicate that the trial judge is entitled to believe part of the evidence given by a witness, and after forming an impression of each, the confidence that the judge reposes in a particular witness is assessed accordingly. Where evidence has a logical probative value, a judge will rely on it; where it contains discrepancies, displays inadequacies, is tainted or otherwise lacks probative force, the judge will, in all probability reject it or, at least, not rely on it. I mention some authorities to support those propositions.
…
121 A trial judge is not restricted in his or her assessment of a witness. By this I mean that if, on peripheral issues, the trial judge reaches conclusions adverse to the credibility of a party, it does not necessarily follow, consistently with such conclusions, that these must be findings adverse to that party on the issues that are central to the determination of the matter. There is no rule of law or practice that states that an adverse finding on any aspect in the evidence of a witness means that the whole of that witness' evidence must be rejected.
470 Seventh, and closely related to the preceding point, in Sangha v Baxter [2009] NSWCA 78 Basten JA (with whom Handley AJA agreed) cautioned against global credibility findings:
155 There are risks in making global findings about credibility of any particular witness. Because a witness has not told the truth with respect to a particular matter does not mean that other parts of her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.
156 Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, King v Collins [2007] NSWCA 122 at [44].
471 Eighth, disbelieving a witness that 'X' was the case does not mean that 'not X' has been proven. The Court respectfully adopts what fell from Gibbs J (as his Honour then was) in Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694 (citations omitted):
The fact that a witness is disbelieved does not prove the opposite of what he asserted: Scott Fell v Lloyd [1911] HCA 34, (1911) 13 CLR 230, at p 241; Hobbs v Tinling (C.T.) & Co Ltd (1929) 2 KB 1, at p 21. It has sometimes been said that where the story of a witness is disbelieved, the result is simply that there is no evidence on the subject (Jack v Smail [1905] HCA 25, (1906) 2 CLR 684, at p 698; Malzy v Eichholz (1916) 2 KB 308, at p 321; Ex parte Bear; Re Jones [1945] NSWStRp 50, (1945) 46 SR (NSW) 126, at p 128), but although this is no doubt true in many cases it is not correct as a universal proposition. There may be circumstances in which an inference can be drawn from the fact that the witness has told a false story, for example, that the truth would be harmful to him; and it is no doubt for this reason that false statements by an accused person may sometimes be regarded as corroboration of other evidence given in the criminal case: Eade v The King [1924] HCA 9, (1924) 24 CLF 153, at p 158; Tripodi v The Queen [1961] HCA 22, (1961) 104 CLR 1. Moreover, if the truth must lie between two alternative states of fact, disbelief in evidence that one of the states of facts exists may support the existence of the alternative state of facts: Lee v Russell (1961) WAR 103, at p 109.
472 Ninth, for reasons set out in Saravinovski (No 5) at [76] and following, the Court gave leave for certain of Chris' affidavits to be relied upon, notwithstanding that his loss of mental capacity meant that he could not be cross-examined. The way such evidence should be treated was considered by Hallen J in Fulton v Fulton [2014] NSWSC 619:
111 However, affidavit evidence, however good, which, for whatever reason, is not subject to cross-examination when cross-examination is required, will always be discounted, as appropriate, if the affidavit is used with leave without cross-examination. The degree to which it will be discounted may depend on various factors, including the circumstances that lead to cross-examination being dispensed with, the nature of the evidence and its centrality and degree of significance to the case. The degree of discount appropriate will be judged according to all the circumstances of the case: Re O'Neil, Deceased [1972] VicRp 35, [1972] VR 327, per Anderson J, at 333 - 334; Citibank Ltd v Liu; ABN Amro Bank Ltd v Liu [2002] NSWSC 86, per Hamilton J, at [5].
473 Tenth, the Court can only do the best it can on the evidence which it has. Some issues may need not be resolved or should not be resolved. It may be that they cannot be resolved given the nature of the evidence which the parties have adduced. This case has many similarities to the family dispute considered by Robb J in Aytul Ak-Tankiz v Ferat Ak & Ramazan Ak [2014] NSWSC 1044. Of the evidence in that case, his Honour said:
187 The principal evidence relating to these issues consisted of the uncorroborated evidence of the witnesses, or alternatively the only corroboration available was the testimony of other witnesses. The evidence distilled into the word of one witness against the word of one or more other witnesses. Most of the events relevant to the issues occurred many years ago. The evidence relevant to the issues generally consisted or a series of assertions, and counter-assertions by various witnesses. Evidence of the objective context was generally not available, so it has not been feasible to test the versions of events that were in contest by reference to the objective probabilities, based upon uncontroversial contemporary circumstances. Though the issues are not entirely irrelevant, their significance is limited, and their resolution has not been necessary for the purpose of determining the real issues in the case. Any attempt to resolve the issues by making judgments about the relative credibility of the individual witnesses on an issue-by-issue basis was likely to be based on illusory foundations."
I have applied these principles in finding the facts in this case.
For the Nanevski parties, Tom, Ivan, Makedonka, Mr Glamcevski and Ms Phillippa Wood gave evidence and were cross-examined. Their other two witnesses, the real estate agent Ms Pollard and Mr C A Derham of C F Piling were not cross-examined Other than a truck driver employed by Mega-Top, Mr George Ivanoski, Ken was the only witness for the Slaveski parties. This latter point founded a submission, advanced on behalf of the Nanevski parties, that the Court should draw an inference of the kind contemplated in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 in relation to each of Biljana, James and Ms El-Turk.
Where the evidence of a witness might be expected to have been relevant to a particular issue, and there is no proper explanation for the absence of that witness, either or both of the inferences identified by Heydon, Crennan and Bell JJ as the majority in Kuhl v Zurich Financial Services (2011) 243 CLR 361; [2011] HCA 11 (Kuhl) at 384 are available to be drawn by the Court:
"63. The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn. These principles have been extended from instances where a witness has not been called at all to instances where a witness has been called but not questioned on particular topics. Where counsel for a party has refrained from asking a witness whom that party has called particular questions on an issue, the court will be less likely to draw inferences favourable to that party from other evidence in relation to that issue. That problem did not arise here. The plaintiff's counsel did ask the plaintiff relevant questions.
There was no suggestion that any of Biljana, James and Ms El-Turk was unavailable to give evidence. There was evidence that they were all in Sydney. Biljana and James were parties who obviously could have given relevant evidence. By Ken's own admission, the various Mega-Top financial records were prepared by Ms El-Turk and she was the one who could provide any reliable financial information (Tcpt, 6 October 2021, p353(14-25)). In a case where there were serious disputes about who had paid what to whom, including funds paid by Ken, the Court has no difficulty in concluding that Ms El-Turk is likely to have been able to give relevant evidence.
The Court accepts Dr Peden SC's submission that both of the inferences referred to in Kuhl should be drawn in relation to these three witnesses: that their evidence would not have assisted the Slaveski parties' case and that the Court can draw, with greater confidence, any inference unfavourable to the Slaveski parties, if any of those witnesses appears to have been in a position to cast light on whether the inference should be drawn. As to the latter, I have not overlooked that the principle is facultative: the inference can only be drawn where there is already admissible evidence for the particular fact in issue.
[4]
The critical witnesses - Mr Glamcevski
Mr Glamcevski gave evidence in the Nanevski parties' case under subpoena. The Court Book included a summary proof of evidence, but this was not admitted as proof of its contents. Mr Glamcevski's evidence was elicited from him in the witness box.
Mr Glamcevski was admitted as a solicitor of this Court in December 1990 and at the relevant times was an employed solicitor of the legal practice known as McGrath, Dicembre & Company. He presented as an experienced solicitor and a forthright and careful witness. At various times he had acted for both the Nanevski parties and the Slaveski parties.
Mr Glamcevski was the only disinterested critical witness in the proceedings. He had no reason to do anything other than his best to tell the truth as he recalled it. The Court was left with no doubt that he was a truthful witness whose evidence could and should be relied upon.
It was submitted for Ken that while Mr Glamcevski's credit was not in issue, the Court should bear in mind that he only could give evidence of what he had been told by the parties. That is true but, in the Court's view, what he was told by the parties at the relevant times is the best evidence of the arrangements between them and to provide the primary factual basis upon which to ascertain their contractual intention objectively.
[5]
The critical witnesses - Tom
Mr Robinson's cross-examination of Tom did demonstrate some inaccuracies and exaggerations in his evidence. However, the difficulty for the Slaveski parties' attack on Tom's credit was, as I understood it, that the burden of their submissions depended upon persuading the Court that Tom had engaged in a pattern of conduct intended to mislead or deceive Ken. However, as Mr Robinson ultimately accepted, the gravamen of those allegations was never put to Tom in cross-examination. In those circumstances, the Slaveski parties' submissions on Tom's credit were little more than an assertion that the Court should find Tom was a less reliable witness than Ken.
In this same context, it is convenient at this point to record that Mr Robinson's submissions at various times referred to deceit on the part of Tom, although whether in the tortious sense or as an imprecise reference to the equitable doctrine of unclean hands was not always clear. For the avoidance of doubt, I accept Dr Peden SC's submission that neither the tort of deceit nor unclean hands had been pleaded and were no part of the case.
Even allowing for some degree of exaggeration in his evidence, the Court accepts Tom as a generally reliable witness on the essential matters in dispute. That is not to suggest that the Court adopts a position of uncritical acceptance of all of Tom's evidence. Having regard to the considerations identified by McClelland J in Watson v Foxman (see paragraph [138] above) the Court adopts the prudential approach of accepting Tom's evidence insofar as it is inherently credible or is supported by contemporaneous documentary evidence. As it happens, no essential conclusion in these proceedings solely depends upon Tom's evidence alone or upon something on which he was challenged in cross-examination.
[6]
The critical witnesses - Ken
The starting point for the assessment of Ken as a witness must be his own Counsel's description that Ken was "difficult, obstinate, argumentative". However, Mr Robinson went on to submit that while Ken "set out to argue the point with [Dr Peden SC] on just about everything she said" he wasn't dissembling (Tcpt, 8 October 2021, pp 425(44); 26(1)). Mr Robinson submitted that what might be perceived to be a seriously unsatisfactory aspect of Ken as a witness could be explained by the fact that he clearly felt wronged by what he perceived had happened.
Mr Robinson's description of Ken as "difficult, obstinate, argumentative" was, with respect, entirely accurate. However, I do not accept the explanation for his conduct proffered on his behalf. I accept Dr Peden SC's submission that Ken was a clearly unsatisfactory witness upon whose uncorroborated evidence no reliance can be placed as truthful. This is because my firm impression of Ken's evidence as he gave it, and reinforced by reviewing the transcript of his cross-examination, was that he was clearly determined not to tell the truth but to resist at every turn saying anything that might permit any recovery by the Nanevski parties.
Three examples will suffice. The first concerns the payment of the 50% deposit for Riverside, an amount of $67,500. There was no dispute that Tom went to Mega-Top's office and gave Ken a bank cheque for $67,500. Ken's position was he did not understand the purpose of the cheque - evidence that I find in and of itself incredible. He gave this evidence (Tcpt, 5 October 2021, p 263(16-18)):
"Q. You had 67,500 in the suspense account; do you agree that amount should be put towards the purchase of Riverside?
A. No. I don't agree with that."
Shortly after, I had this exchange with Ken (Tcpt, 5 October 2021, p 263(28-41)):
"Q. Can you just explain to me what the basis of your resistance is to accepting that at least 67,500 was paid by Mr Nanevski towards this property?
A. Well, your Honour, I understand; however, it was - what I can't understand is why it all happened. That's what - that's what I'm trying to get my head around is what--
Q. Well, let's not worry about why it happened. Let's just focus on why - do you or do you not accept, as you sit there, that at least 67,500 has been paid by the Nanevski interests towards the purchase of the Riverside property?
A. Well, it's a possibility, your Honour. It's a possibility that that could have been; however, I was - I wasn't sure at the time, and it could be. We are looking at - at - after settlement it happened; that the 135 didn't go through, that that could have been a possibility - a possibility, yes."
Ken was then taken to Ms El-Turk's evidence (see paragraph [44] above) that he had told her that the cheque for $67,500 was for Riverside, but was only prepared to say that "It's possible" (Tcpt, 5 October 2021, p 266(28)) or "It's possible yes. It may be true, yes, your Honour" (Tcpt, 5 October 2021, p 266(36)).
Ken was then taken Ms El-Turk's email to Tom and himself of 19 August 2015 (see paragraph [99] above) which expressly referred to Tom having paid the deposit of $67,500. Having seen that document, and acknowledging that "he trusted Grace to work out the true figures" (Tcpt, 5 October 2021, p 269(10)), he nevertheless gave this answer (Tcpt, 5 October 2021, p 269(39-45)):
"Q. Yes. So we can take it that Nanevski Developments paid $67,500 towards the purchase of Riverside?
A. It could be, yes. It could be. But what I'm saying, doctor, is that the money was always in suspense to allocate it, so we - you know, we're looking or asking if this is - well, not in this email, but we want clarification whether to allocate this as 67,500 to Riverside - and assuming that that is for Riverside, possibly."
Finally, Ken was taken to his own email to Tom of 2 May 2015 (see paragraph [60] above) in which he accepted (Tcpt, 5 October 2021, p 272(12)) that he had made the calculation in that email on the basis that each side had paid 50% of the deposit. This exchange with Dr Peden then occurred (Tcpt, 5 October 2021, p 272(14-20)):
"Q. So all the time we've spent talking about whether the deposit was paid or not, you knew, at the latest, on the second day that the deposit was being accounted for as 50/50?
A. Possibly, yes.
Q. Not "possibly", sir. Absolutely. Do you agree with that?
A. Yes."
A second example concerns whether Tom had paid Ken an amount of $150,000, reducing the balance said to be owing to $510,000. Tom was taken to his text of 15 August 2017 (see paragraph [120] above), in which he referred to "the balance owing which is now down to $510k". He then suggested that only Mega-Top or Ms El-Turk could have the necessary records to demonstrate what had been paid. I then had this exchange with Ken (Tcpt, 6 October 2021, p 353(29-44)):
"Q. So are you saying, sir, that I should not make a finding that the loan was reduced by the Nanevski interests down to $510,000?
A. What do you mean by that, your Honour?
Q. Somebody is presumably going to ask me to make some conclusions about all of this, and I just want to understand whether you accept or do not accept that between the last two SMS messages that you've been taken to, it would appear that a further $150,000 has been paid by the Nanevski interests.
A. That's correct. There would be records for that, your Honour.
Q. But you accept that this means they must have paid a further $150,000?
A. Yes. He may have paid an additional 150,000, yes.
Q. It's not a "may have". Do you accept that he must have, because it's your own document?
A. I accept, yes."
Other simple concessions in the face of contemporaneous documents were also not forthcoming. They enlisted answers such as "That's a possibility. That was an option, doctor" (Tcpt, 6 October 2021, p 297(50)). Or, finally, when asked about the delivery of windows for both Riverside and Lawson Street, Ken answered (Tcpt, 6 October 2021, p 324(40-47)):
"Q. Sir, so I suggest you knew all along the Riverside windows were coming with the Lawson Street ones?
A. I can't categorically say that they were the windows for the Riverside project when they arrived, doctor.
Q. Sir, that's not the question I asked. You knew they were coming together, the Riverside ones as prepared in the schedule and the Lawson Street ones?
A. It was my understanding, possibly, yes."
What emerged clearly from Ken's cross-examination was his now deep-seated animosity towards Tom. Ken was not prepared to make the smallest concession that might assist Tom's case, even in the face of his (Ken's) own contemporaneous records. The Court has no hesitation in concluding that Ken was not a witness whose uncorroborated evidence can be relied upon. His evidence has only been given weight where it was inherently probable, against interest or corroborated by independent evidence (such as Mr Glamcevski) or reliable contemporaneous documents.
[7]
The other witnesses
Ivan, Makadonka and Ms Wood were all witnesses whose evidence was ultimately peripheral to the central issues. No submission was made on behalf of the Slaveski parties that, insofar as their evidence was ultimately relevant, it should not be accepted.
[8]
The evidence about establishment of the commercial relationship
Ken and Tom's accounts of how they came to know about Riverside and their conversations before it was purchased were very different in many respects, not all of them material to any matter seriously in issue. The Court has preferred Tom's version because of its overall credit finding about Ken (see paragraph [170] above), and because Tom's version is corroborated by Mr Glamcevski's evidence and is consistent with the documentary record such as it is, in particular Mr Glamcevski's letter of 4 February 2015 (see paragraph [39] above) and Ken's texts about his marital issues and not wanting his involvement known at Mega-Top. The Court also draws more easily the inference that James was only nominally on the title of Riverside by reason of James' failure to give evidence.
Not only does the letter extracted at paragraph [39] above accord with the evidence that Tom would instruct Mr Glamcevski to negotiate the terms recorded therein, with Tom recorded personally as the "prospective purchaser", but Tom's relevant affidavit evidence is largely consistent with Mr Glamcevski's oral evidence-in-chief. In particular, Mr Glamcevski was not cross-examined on the following evidence as to a conference that he participated in with Tom and Ken during or around the week of 9 February 2015, that is, after the purchase of Riverside by James (and Ken) at the auction on 7 February 2015 (Tcpt, 1 October 2021, pp 169-171):
"Q Can you tell me to the best of your recollection what was actually said to you and by whom in that conference?
A The - basically on - from Ken was the fact that he was in the - well, he was going to provide the funds for the purchase, including the stamp duty, the purchase price, and they were then going to jointly contribute to the costs of the [Development Application], the building, the construction, and on Tom's side … and also acknowledged by Ken, was the arrangement where Tom would also be doing the - the work of the developer, that is, liaising with council, developers, planners, surveyors, architects, engineers, and pretty much dealing with the construction work, and they both agreed, from my recollection, that that itself had a value, and that they were going to, in their words … that they will work out at the end who put in what. More or less they'd make an adjustment in whose ever favour it was necessary, and then the end result being that whatever profits came out of it, that would be 50/50.
…
Q … do you recall them saying anything to you on the question of beneficial ownership of the property?
A No.
Q When you answered 'no' … do you recall them saying anything about the ownership of the property?
A I do. The … reference to ownership of the property was effectively that James was just on title … for the purposes of capital gains tax.
Q When you mentioned the arrangement, and I think your words were 'the joint venture'
…
A … it was 50/50 … as between Nanevski and Slaveski …
Q Do you recall those words actually being use, and if so, by whom?
A Yes … By both of them repeatedly.
Q If they said '50/50' repeatedly, did they say 50/50 of what?
A The reference to '50/50' was basically a reference to the arrangement they had insofar as the development of the property and the sharing of profits was concerned."
Secondly, when the evidence of Mr Glamcevski was put to Ken during his own cross-examination, he contended that it was "wrong" (Tcpt, 5 October 2021, p 241(39)). However, shortly thereafter, Ken gave this evidence, answering questions about discussions he had with a solicitor other than Mr Glamcevski (Tcpt, 5 October 2021, p 245(28)):
"Q It's the case, isn't it, that [he] charged you for giving advice about winding up the partnership, didn't he?
A He may have, yes.
Q That's because you told him that there was a joint venture and a partnership, didn't you?
A I use the - I may have used those terms, but I - I don't - up until this day I'm - I'm not exactly sure what those terms mean.
Q Well, it's a 50/50 deal, wasn't it?
A That's - that's layman's terms, yes. Everyone contributes 50/50.
HIS HONOUR
Q Well, is that what it means to you, sir? Everyone puts in 50/50 and everyone gets out 50/50 if there are any profits?
A Yeah. 50/50 - correct. Everyone puts in 50/50, 50%, and profits are earned at 50%."
This exchange should be read in light of Ken's earlier evidence that he and Tom "would contribute 50% towards the purchase, settlement costs and the build, and then the profits would be divided equally" (Tcpt, 5 October 2021, p 241(13-15)).
A further factor in support of Tom's evidence regarding conversations with Ken preceding the purchase of Riverside is that Tom placed the successful bid at the auction on 7 February 2015. This particular fact was entirely uncontroversial.
[9]
Findings as to the relationship between the Nanevski parties and the Slaveski parties
As I have already noted, by the end of the hearing there was no real dispute that some kind of a "50/50 relationship" had come into existence between the Nanevski parties and the Slaveski parties. The only real issues in dispute were what was the legal character of that relationship and was it conditional upon Tom having provided 50% of the capital for the purchases of Riverside and Vista Street?
The Court finds, by reference to the conversations set out in paragraphs [34] to [37] above, and having regard to the totality of the correspondence which is set out in the recitation of the facts above (including documents of which Ken was the author), that on or about 4 February 2015 a partnership came into existence between Nanevski Developments and Ken as the partners for the purchase and redevelopment of Riverside. The subject matter of the partnership was shortly thereafter extended to include the purchase and redevelopment of Vista Street. I shall refer to this in the balance of these reasons as the Partnership. The Court is well satisfied on the balance of probabilities the relationship agreed between Nanevski Developments and Ken was them "carrying on a business in common with the view of profit" as defined in s 1(1) of the PA. It was, in lay terms, an arrangement where each of Nanevski Developments and Ken was ultimately responsible as between themselves for 50% of the expenses in the hope of receiving 50% of any profit upon the sale of the two developments.
Any suggestion made on behalf of the Slaveski parties that the relationship of partnership was not intended to, and did not, arise unless and until Nanevski Developments had contributed 50% of the capital required to purchase Riverside and Vista Street is rejected. The significance of such a precondition is that had it existed, it formed the basis of the Slaveski parties' contention that the appropriate form of relief would reflect the equitable interests of the parties by reference to their contributions to the purchase price of the two properties and the improvement in the value of those properties to the extent they could be identified as being referable to the activity of either party.
Again, quite apart from the oral evidence, such a precondition is completely inconsistent with the documentary record, including documents produced by Ms El-Turk that have been set out above. It does not appear in correspondence until relations between the parties had broken down and Ken sent his email to Tom concerning Riverside on 4 May 2018 (see paragraph [128] above). It was repeated by Tom in his without prejudice email to Ken of 3 August 2018 (see paragraph [134]) above. The Court concludes that any such suggestion by Ken was a self-interested reconstruction advanced after relations between the parties had broken down.
There is nothing in the documentary exchanges between the parties before the breakdown in their relationship that supports such a precondition. The documents produced by, for example, Mr El-Turk at various points in the relationship do not support it. Those documents, and the documentary record generally, reflects the essence of what the parties had agreed, namely that they would be ultimately each liable as to 50% for the costs of the project (including loans and interest) in return for 50% of any profits.
Furthermore, the Court accepts Dr Peden SC's rhetorical submission that even if it was apparent that most, if not all of the finance, would have to be sourced through Ken, if there was any precondition of the kind which he now suggested, then why did he did not seek to withdraw from the project much earlier than he in fact did?
There was no written partnership agreement between Nanevski Developments and Ken. The terms and other incidents of the Partnership are therefore governed by the PA, save to the extent that they may have agreed otherwise. Given the Court has accepted that the conversation set out in paragraph [37] above took place, the only other specific agreement which the Court finds in relation to the Partnership is that Nanevski Developments was entitled to charge $120 plus GST per hour for consultancy work for liaising with Council, architects, planners and the like. Furthermore, the parties agreed that construction work to be undertaken by Nanevski Developments would be charged to the partnership at cost in relation to material, and in relation to labour at cost plus 30%.
Finally, the facts which have been set out above amply demonstrate that insofar as Ken, James and Biljana are registered proprietors of either Riverside or Vista Street, they were recorded as such only for the purposes and benefit of the Partnership without any intention on anyone's part that they should be beneficial owners. While that finding is based upon the facts recited above, the conclusion is drawn more easily by reason of the failure of Biljana and James to give evidence and the related finding that their evidence would not have assisted the Slaveski parties' case. It could not be, and was not, suggested that any of Ken, Biljana or James had any basis to believe that their presence on the titles of the properties was because they held their respective interests beneficially.
For the reasons given in the preceding paragraph the Court finds that Ken, James and Biljana hold their respective interests in either Riverside or Vista Street on trust for the Partnership.
The Court also accepts Dr Peden SC's submission that the Partnership has not come to an end. In particular, it was not brought to an end by the correspondence set out paragraph [135] above. This is because what was purported to be terminated by the correspondence was confined to Riverside. As the Partnership which the Court has found related to both Riverside and Vista Street, it is the development of those two properties which would constitute the "single adventure or undertaking" for the purposes of s 32(b) of the PA, which provides that the Partnership is dissolved "by termination of that adventure or undertaking".
The findings made in the preceding paragraphs will have to be given effect by a declaration of the existence of the Partnership, its dissolution by the Court under s 35(f) of the PA and the appointment of a receiver to wind up the Partnership. A declaration as to the terms identified in paragraph [172] above will also be made.
[10]
Other issues raised by the parties
Having made these fundamental findings, it is then necessary to turn to some specific issues in dispute between the parties about which submissions were made.
[11]
Cash payments of $200,000
The Court has accepted Tom's evidence that he made three cash payments totalling $200,000 to Ken after the auction of Riverside but before the settlement of the purchase. These were $100,000 in mid-February 2015, $50,000 in mid-March 2015 and a further $50,000 in late March or early April 2015.
Tom's evidence was that in mid-February 2015 Ken had asked if Tom could contribute $200,000 towards the purchase of Riverside. In answer to Tom's question of whether it should be in cash or by cheque, Tom's evidence was that Ken replied "Cash works better for me. I don't know what's happening with Biljana. We're trying to work it out but I don't know if we're going to get back together. Cash would be much better for me".
Tom was challenged about this evidence in cross-examination, but adhered to it.
There are five reasons why the Court accepts Tom's evidence and finds that Nanevski Developments contributed $200,000 in cash towards the purchase of Riverside.
First, for the reasons set out in [148] to [160] above the Court has preferred Tom as a witness of credit over Ken's evidence.
Second, and by way of corroboration, there is objective approximately contemporaneous evidence that Ken and Biljana had separated and that Ken did not want Biljana to know, at least at that time, about his investment in Riverside and subsequently Vista Street (see paragraphs [29], [57] and [69] above). In other words, the Court accepts that Ken had a motive to receive money in cash as a means of concealing it from Biljana.
Third, in the course of his cross-examination about this, Tom made clear that he was aware of the documents referred to in paragraph [185] below which attributed a $200,000 payment by Tom to Vista Street. Knowing that there was contemporaneous evidence acknowledging at least a payment of $200,000, it makes no sense that Tom would invent what would otherwise be extravagant evidence about cash payments in relation to Riverside.
Fourth, as Dr Peden SC submitted, there was evidence of cash dealings between the parties. Ken accepted that he was comfortable with receiving cash (Tcpt, 5 October 2021, p 287(11-12)). More pertinently to the present question, Ken was taken in cross-examination to the documents referred to in paragraph [187] below and this exchange took place (Tcpt, 5 October 2021, pp 288(44) -289(25)):
"Q. Do you accept that Tom paid you $200,000 in cash?
A. When?
Q. In 2015?
A. No.
Q. Do you accept he paid you $200,000 at some other time in cash?
A. He may have, yes.
Q. How much did he pay you in cash at another time?
A. I'm not sure. This could have been--
ROBINSON: I object, your Honour.
HIS HONOUR: What's the objection?
ROBINSON: When. At some other time.
HIS HONOUR: No, I'll allow the question in the light of the answer.
A. He may have paid at some other time, correct.
PEDEN
Q. So he paid you cash from time to time?
A. Cash and cheques, yes.
Q. And you trusted Grace would record it?
A. That's correct. Yes."
Fifth, the Court is fortified in drawing this conclusion because Ms El-Turk was not called to give evidence and her evidence would not have assisted the Slaveski parties.
In reaching this conclusion, I have not overlooked the documents from 2017 which refer to the payment of $200,000 towards Vista Street (see paragraph [113] and [116] above). In that regard, I make two observations.
First, notwithstanding those documents, I remain actually satisfied on the balance of probabilities by Ken's evidence for the reasons I have just set out. Having received the funds in cash, there is no evidence as to when and in what circumstances Ms El-Turk became aware of the $200,000 payment. This could only have been from Ken and when that occurred in the course of the two purchases remains unknown.
Second, even if my conclusion is wrong as to when and in what circumstances the $200,000 was paid, there can be no doubt, based on Ms El-Turk's documents, that $200,000 was received by Ken from Tom which should be credited to Nanevski Developments' account in the Partnership in determining the parties' respective contributions to their project of developing the two properties.
[12]
Nanevski Developments' payment of the Riverside mortgage
There was no challenge to Tom's evidence that Nanevski Developments paid 50% of the mortgage payments as directed by Ms El-Turk. The evidence before the Court was that it paid $229,695.84 towards the Riverside mortgage and the Court finds accordingly. Those payments ceased when Ken caused this to occur. On any winding up, each parties' ongoing obligation, as between themselves, to meet 50% of the mortgage payments will have to be taken into account.
[13]
Nanevski Developments' works and expenditure on Riverside
There was no dispute that Tom organised and supervised the carrying out of construction work at Riverside. Ken accepted that Tom organised the work (Tcpt, 5 October 2021, p 281(5)).
There was in evidence in these proceedings spreadsheets and invoices said to prove the payments made by Nanevski Developments towards Riverside. However, this aspect of the matter was not the subject of any real examination by either party. Because the Court will, in the absence of agreement by the parties otherwise, appoint a receiver to wind up the Partnership, this will also necessarily involve a taking of accounts by the receiver. The value of payments and other contributions by both parties to the benefit of the Partnership will be a matter for the receiver to the extent the parties are unable to agree what they were.
It is convenient at this point to deal with Nanevski Developments' claim in quantum meruit, including insofar as it may have extended to compensation which it could claim for consultancy work undertaken by Tom. Had the Court accepted that there was no partnership, a claim in quantum meruit could be advanced, together with (but confined as to quantum by) any applicable contract: Mann v Paterson Constructions Pty Limited (2019) 267 CLR 560; [2019] HCA 32. However, that is not what is to occur.
Having found the Partnership, upon its winding up and the taking of accounts Nanevski Developments will be entitled to claim credit for its contributions, including Tom's consultancy services at the agreed rate to the extent they can be proven to the receiver's satisfaction. The Court admitted Tom's evidence of his recollection as to how many hours he worked on the developments. However, given Dr Peden SC's indication that if the Court appointed a receiver and there was to be an accounting, the vouching of the extent of contributions would be a matter for the receiver, it is not appropriate for the Court to make any findings other than as to the terms on which Nanevski Developments could charge for Tom's consultancy services. It will be a matter for Nanevski Developments to satisfy the receiver by any of Tom's own evidence, any records or expert evidence as to the extent of the services provided by Tom.
[14]
Who paid the additional $302,500 deposit for Vista Street?
There was no dispute that, as a condition of extending the time for settlement of the purchase of Vista Street, the vendor required the full 10% deposit to be paid. Five per cent had already been paid (see paragraph [55] above).
There was also no dispute between the parties that the additional 5% - $302,500 - was paid by a bank cheque on 9 July 2015 provided by Ken through Mega-Top. The dispute was whether Tom had paid $302,500 in cash to Ken for the purposes of funding that bank cheque.
It is convenient to set out such surrounding circumstances as have been objectively proven:
1. On 29 June 2015, Mr Glamcevski confirmed his instructions to Tom and Ken that "finances in respect of the purchase [of Vista Street] by Nanevski Developments Pty Ltd of the property are in order and on your instructions in the past Nanevski Developments Pty Limited is in a position to proceed to settlement and has finance approval" (see paragraph [86] above).
2. On 6 July 2015, Mr Glamcevski forwarded to Ken and Tom a letter from the vendor's solicitors in relation to Vista Street which foreshadowed the requirement that the balance of the 10% deposit would be required (see paragraph [87] above).
3. At 10.12am on 7 July 2015 at 10.12am, there was this text exchange between Ken and Tom:
"KEN: Do you have a copy of the receipt for the 5% deposit paid on vista St.
One of the lenders wants proof of payment.
Can you ask Mcgraths to make it out to k and B Slaveski and email me a copy this morning ASAP
Thanks
TOM: David has it"
1. At 12.09pm on 7 July 2015, there was this further text message exchange between Tom and Ken:
"TOM: DO you need lift to airport ken
KEN: Thanks Tom
All good. Stephanie is taking me.
I'll call you before I board the flight in about an hour or so."
1. At 11.43am on 8 July 2015, Mr Glamcevski emailed Ken, Biljana and Tom that "In accordance with the agreement however the balance of the 10% deposit has to be paid now. Biljana and Tom can you please organise the payment of a further $302,500 into the Agent account. I would prefer if possible for a bank cheque in favour of McGrath St George .." (see paragraph [88] above).
2. By email sent at 4.55pm on the same day, copied to Biljana and Tom, Ken replied "I will get grace to arrange the bank cheque":
3. The evidence included a receipt signed by the real estate agent Ms Pollard in relation to Vista Street dated 9 July 2015 for $302,500 which noted "Received from Tom Nanevski, Nanevski Developments Pty Ltd" (the 9 July Receipt).
4. At 5.56 pm on 9 July 2015 at 5.56pm, Mr Schembri emailed Ken with the greeting "Hope that you had a good flight and arrived safely". At 9.35pm that evening Ken replied "Thanks and everything was fine and just finished a tour of real Madrid's stadium".
Ken's affidavit evidence was:
"173. On 8 July 2015 David Glamcevski sent an email to Ken, Biljana and me confirming that an extension of time for settlement of Vista St had been granted to 31 July 2015 and that the vendor required the balance of the 10% deposit to be paid. Exhibited at tab 24 of "TN-1" is a copy of that email.
174, In or about early July 2015 I had a conversation with Ken:
"Me: "Ken, David has advised me that one of the conditions to rescind the contract is that the vendor is going to require the other 5%."
Ken: "I don't have cash at the moment but if you're able to give me the cash, and I can convince Biljana, what we'll do is this. Give me the cash, I will convenience Biljana to make out a bank cheque from her money to give to you but I'll make sure that the Real Estate Agent receipts it as coming from Nanevski Developments."
Me: "OK Ken we can do that."
175. Shortly after this I went to Ken's house with $302,500 in $50 notes. Ken and I sat in his study and counted it out together on an L-shaped fabric sofa.
176. We counted out 100 $50 notes to make bundles of $5,000 then placed bands around each pile. I remember that it took about one and a half hours to count. At the time we had a conversation as follows:
Tom: "Make sure that you instruct the agent to make the receipt for the next 5% deposit out to Nanevski Developments."
Ken: "No problems. I will call the agent and tell her to do that."
177. Once we finished counting, Ken took the money and said: "I will organise for Biljana to get a bank cheque."
178. The next day on 9 July 2015 I then went and saw Biljana and Grace outside the NAB in Mascot. Biljana handed me a bank cheque made out to McGrath Real Estate for $302,500. I then went from the NAB branch to the real estate agent and handed the bank cheque to Julie Pollard.
179. Julie Pollard then handed me a receipt, a copy of which is at tab 25 of "TN-1".
…
183. Exhibited at tab 27 of "TN-1" is a copy of an email from Ken to me 28 July 2015 at 10.46pm which was headed "Vista Street / NAB Loan". [See paragraph [95] above]
184. After receiving this email I telephoned Ken and we said:
Me: "What the fuck is this email about? I gave you $300,000 so you could extract from Biljana the monies she took from your company and your super. I can see you are now including her in emails. This is bullshit you have never given me $500,000 for Vista!
Ken: "Calm down, you know my situation with Biljana. I have promised that me and her will be on title. I need this so I can show her, you know what is going on."
Me: "Do not involve me in your bullshit."
Ken: "We are paying penalty interest we need to get the bank to loan us the money. I need to present this like this."
Me: "You put us in this situation we would be on title if you had not got the judgment against my mother."
Ken: "Let's not go into that. That was someone in my office I have explained it to you and your family."
Me: "You are hardly BHP Ken, you know that it could not be done without you. You signed all the legal documents!""
Dr Peden SC submitted that the Court should accept that Tom had provided the $302,500 to Ken for these reasons:
1. The same reasons as supported the conclusion that Tom had provided $200,000 in relation to Riverside, including that Ken did not dispute that the parties had dealt in cash;
2. The 9 July Receipt, especially given that Ken was aware of this receipt and had never taken any steps to have the real estate agent reissue the receipt in another name;
3. While both Grace El-Turk and Biljana had been involved in arranging the bank cheque, given that Ken had flown overseas on 7 July 2015, neither had been called in circumstances where each would have been able to give relevant evidence;
4. Tom is likely to have had funds available given he had been advised by Mr Glamcevski to be ready to settle in case the Slaveski parties could not;
5. Tom and Ken had been notified at the latest by 6 July that further money might be required and Ken was going overseas on the afternoon of 7 July, so that there was time for Tom to provide the money to Ken before he left.
On behalf of the Slaveski parties, Mr Robinson submitted:
1. Tom's version of events was inherently incredible;
2. Tom's version of events could not be correct because he said he provided the funds to Ken on 8 July 2015, when there could be no doubt that Ken was no longer in the country at that point;
3. There was an explanation for the 9 July Receipt being in the name of Nanevski Developments. That explanation was that, at that time, the real estate agent was only aware of a contract under which Nanevski Developments was the purchaser, so that was the name that the real estate agent would have logically recorded on the receipt.
The Court does not accept Dr Peden SC's submission that any equivalence can be drawn between the $200,000 payment and the payment now under consideration. This is because while the Court was satisfied that around March 2015 Ken was trying to conceal what was happening from Biljana, that was evidently not the case by 9 July 2015. Biljana was copied on relevant correspondence.
Nevertheless, the Court accepts Tom's evidence that he provided to Ken the cash that was used to purchase the bank cheque because:
1. On its face, the 9 July Receipt is evidence that Nanevski Developments paid that sum and therefore corroborates Tom's version of events. An affidavit from Ms Pollard was read in the Nanevski parties' case in which she deposed "On 9 July 2015 I received payment of the balance of the 5%. McGrath St George were not a party to any agreement as to how the remainder of the 5% was paid and I do [sic, presumably not] know anything about that.";
2. Notwithstanding being aware of what the receipt said, Ken accepted that he had never taken any steps to have the receipt corrected;
3. If the bank cheque had not been funded by the cash provided by Tom, that would have been a matter about which certainly Ms El-Turk, and possibly Biljana, could have given evidence. Neither was called and, as I have already indicated, the Court draws both the inference that their evidence would not have assisted the Slaveski parties and more easily draws the inference already founded in the 9 July Receipt;
4. Quite apart from failing to call Ms El-Turk and Biljana, had the bank cheque been bought with funds out of Mega-Top's own resources (including the possibility of having been advanced, as sometimes appears to have been the case, by Ms El-Turk from her own funds), the Slaveski parties would have had access to bank records to make that case if it was open to them. While various bank records of Mega-Top and Ms El-Turk were in evidence, the Court was not taken to any which were said to cast light on this question.
In reaching this conclusion, I have not overlooked, in particular, Mr Robinson's submissions recorded in paragraphs [200(2)] and [200(3)] above. The Court accepts that Ken left Australia on the afternoon of 7 July 2015. That means that Tom's date of 8 July 2015 for the provision of the funds must be incorrect, but that error is insufficient to cast decisive doubt on the evidence. The Court accepts Dr Peden SC's submission that given there are least two or three days earlier on which the parties were on notice that the additional deposit may be required, there was time for the funds to be provided by Tom to Ken before Ken left for overseas. Furthermore, in his evidence Tom does not put a specific date on when he had the conversation with Ken concerning the need to provide the additional deposit other than "early July 2015".
The second matter is Mr Robinson's possible explanation for why the real estate agent, Ms Pollard, made the 9 July Receipt out in favour of Nanevski Developments. While I accept it is a possible explanation, it is unsupported by any evidence. In the absence of the author of the receipt, Ms Pollard, being cross-examined by Mr Robinson it is, with respect, no more than a speculation which is insufficient to outweigh the considerations I have identified in paragraph [202] above.
[15]
Nanevski Developments' payment of the Vista Street mortgage
There was no challenge to Tom's evidence that Nanevski Developments paid 50% of the mortgage payments as directed by Ms El-Turk. The evidence before the Court was that it paid $474,909.32 towards the Vista Street mortgage and the Court finds accordingly. Those payments ceased when Ken instructed Ms El-Turk to change the bank account in March 2019. On any winding up, Nanevski Developments' ongoing obligation to meet 50% of the mortgage payments will have to be taken into account.
[16]
Subsequent planning works and expenditure
The same conclusions on this topic are made in relation to Vista Street as for Riverside (see paragraphs [191] to [194] above.
[17]
The conversion and trespass claims
There is no doubt that Nanevski Developments left form work and scaffolding at Vista Street. In what can only be a regrettable reflection of the animosity between the parties, Nanevski Developments sues the Slaveski parties for conversion of that formwork and scaffolding and, in response, Ken and Biljana sue Tom and Nanevski Developments for trespass by reason of the scaffolding and formwork being left at Vista Street.
While these claims were pressed, such that the Court must deal with them, they were the subject of minimal evidence and relatively general submissions. As will be apparent to any reader of this judgment, the parties' forensic attentions were firmly concentrated elsewhere.
Whatever might otherwise be the merits of these claims, the Court concludes that neither side has established loss.
Tom's evidence in relation to the formwork and scaffolding, albeit admitted over objection, was:
"374. Nanevski Developments bought the formwork material from White Form and Danias Timber and the costs set out below. The formwork was used for forming up concrete slabs, concrete beams, pools, concrete upturns and downturns, form work for driveways footpaths and lift shafts. The amount of formwork removed from Vista St totalled approximately 4,500 square meters of formwork, and was valued at approximately $500,000. It consisted of.
(a) Form ply in 2.4 x 1.8m sheets: there are 60 sheets in a bundle and Nanevski Developments had approximately 60 bundles which cost and are valued at $48 per sheet: total $172,000.
(b) Different cut timbers in bearers and joists: Nanevski Developments had 1.8m, 2.4m, 2.8m, 3.2m, 3.6m, 4.2m, 4.6m, 4.8m and 6m lengths. Nanevski Developments had 8-10 bundles of each size length, a total value of approximately $250,000.
(c) Adjustable vertical props made of steel: in a bundle of a dozen they are $1200 a bundle. Nanevski Developments had 41 bundles worth $49,200.
(d) A Frames in sizes from 1.4 meter to 1.8 meters. ND had 500 pieces to match the props. These cost and were worth $80 per A Frame, a total value of $40,000.
€ Cross Braces: Nanevski Development had 750 pieces worth $12 each, a total value of $9,000.
375. In addition, Nanevski Development had 3,000 lineal metres of scaffolding which was removed from Vista St with the formwork. The scaffolding is used for fall protection and working at heights. It is sold by the board length at $17 per metre. It was therefore valued at and worth $51,000."
Tom's evidence is, with respect, insufficient to enable the Court to be actually satisfied either of the quantities involved or their value. It is well understood that all evidence is to be weighed according to the proof which it is in the power of the party to have provided. Evidence expressed in terms of approximations from the mouth of even a qualified witness are, in a claim such as this, insufficient to prove a claim said to be worth approximately $500,000. Nanevski Developments, it can be expected, should have been in a position to prove by documents including financial records and asset registers, the quantity of the items and for how much they had been purchased. Similarly in relation to the scaffolding, the Court cannot accept as of sufficient weight a statement that something was "therefore valued at and worth $51,000". The Slaveski parties were correct in their forensic decision not to challenge this evidence beyond objecting to it. It is of insufficient weight even if it was admitted. Assuming everything else in Nanevski Developments' favour, it has failed to prove loss or put the Court in a position to value any such loss.
Ken and Biljana's claim in trespass was equally thin. In his closing written submissions, Mr Robinson submitted that as a result of the trespass constituted by the formwork and scaffolding (assuming it to be a trespass), there was a period during which Vista Street was unable to be rented out. The foregone rent for that period was the measure of damages. I understood that to be claim for mesne profits. However, the Court's attention was not directed to any evidence, and there was certainly no expert evidence, as to what that rental might have been. Again, assuming without deciding everything else in Ken and Biljana's favour, any damages have not been proven.
Both the conversion and the trespass claims will be dismissed. If Mega-Top still has any of the formwork and scaffolding it should be returned to Nanevski Developments. No basis for a claim for storage costs has been made out.
[18]
Allowance for in kind satisfaction of debt due to CF Piling Group Pty Ltd
The Nanevski parties read an affidavit of Mr C A Derham, the founder and managing director of CF Piling. He was not required for cross-examination. CF Piling undertook the installation of secant piling walls at Riverside.
Mr Derham was not required for cross-examination His affidavit included:
"6. On or about 29 July 2016 CF Piling issued a tax invoice in the sum of $862,400 to Nanevski Developments which represented the costs of the material and labour to install the Secant piling.
7. CF Piling has accepted the four containers housing sheet piling delivered to its business address in Banksmeadow as full and final settlement of this tax invoice for the Secant piling. No further amount is owing for piling at Riverside Drive."
It was Tom's evidence that he entered into a barter arrangement with Mr Derham that the invoice for $862,400 would be satisfied by sheet piles which Tom had ordered from China for Riverside. Dr Peden SC submitted that there was no reason why contribution by an "in kind" payment should be treated any differently from a cash payment. She contended that because the cost of the piling work was $862,400, Nanevski Developments should receive the benefit of $862,400 in any partnership accounting because the sheet piling was provided in exchange for piling work of that value.
The Court accepts the first part of that submission, namely that on any final accounting of the parties' contributions to the Partnership, Nanevski Developments should be credited for the arrangement which it entered into with CF Piling. However, the Court does not accept the second part of the submission. The amount for which Nanevski Developments should be credited is not the value of the invoice. What Nanevski Developments contributed was the sum of money it paid for the sheet piling, which it then happened that CF Piling accepted in full and final satisfaction of the invoice.
While the Court was not expressly taken to it, the evidence included a list of expenses prepared on behalf of Nanevski Developments in relation to Riverside. This included a reference to "Shunli Enterprise International Limited" for "sheet pile supplier in China" with an amount of $125,475.60 recorded as the expense. If the Court has misunderstood that evidence, Nanevski Developments will be entitled to draw that to the Court's attention as part of the working out of this judgment. On the assumption that the Court has understood the evidence correctly, on any winding up of the Partnership Nanevski Developments should be given a credit of $125,475.60 to reflect its contribution to the Partnership by making the barter arrangement with CF Piling.
[19]
An allowance for work performed by Ken?
It was submitted for Tom that no allowance should be permitted for any time expended in management by Ken because Ken had no skill or experience as a builder and worked in a full time job approximately 40-50 hours a week.
Unlike the position in relation to Nanevski Developments where rates for Tom's services, the Court has found, were agreed between the partners, there is no suggestion that there was any agreement that Ken was to be remunerated. Ken's role was primarily as an investor.
The answer to this issue is provided by s 24 of the PA, which sets out the rules for the conduct of the partnership subject to any express or implied agreement otherwise. Section 24(1)(6) provides that "No partner shall be entitled to remuneration for acting in the partnership business". There being no agreement otherwise, Ken is not entitled to an allowance in respect of his time in relation to the affairs of the Partnership.
[20]
An allowance for alleged defects?
The closing submissions on behalf of Ken raised an issue concerning claims of defective work by Nanevski Developments at Riverside. While there were references to such claims in the evidence, they were not the subject of the proceedings. In those circumstances, it is not appropriate for this Court to express any view about what whether or not such matters can be raised by either party in the winding up of the Partnership by the receiver. That will be a matter for the receiver.
[21]
Rent at Vista Street
I did not understand it to be seriously in contention, but for the avoidance of doubt make clear that insofar as Vista Street has been rented, that rental is income to the Partnership and should be accounted for as such on the winding up.
[22]
Allowance for expenses after April 2019
It was submitted for Tom that the Slaveski parties should not be entitled to claim costs incurred after April 2019 when Nanevski Developments were excluded from the Partnership. I do not agree. As I have found elsewhere (see paragraph [175] above) the partnership has not been terminated. In the absence of agreement, it will be a matter for the receiver to determine what are proper partnership costs which each party is entitled to claim after April 2019.
[23]
The Slaveski parties' cross claim - account
There ultimately did not appear to be any dispute between the parties that, if the Court was satisfied that there was a Partnership, there should be an accounting. Any such accounting should be performed by the receiver as part of the winding up of the Partnership.
[24]
Slaveski parties' cross claim - debt claim
The Slaveski parties' cross claim included a prayer for judgment in favour of Megatop against Nanevski Developments for $590,000 plus interest at the rate of 4.5% per annum. This was a reference to three advances (the making of which was not in contest) to Nanevski Developments on 25 May 2015 of $500,000 (see paragraph [73] above), 22 December 2017 for $50,000 (see paragraph [123] above) and 9 February 2018 for $40,000 (see paragraph [127] above). This was a claim in debt.
It was contended for the Nanevski parties that these three advances were not a loan on special terms from Megatop to Nanevski Developments but were rather contributions by Ken to the Partnership. By the end of the hearing, when it came to final submissions, Mr Robinson made no submissions in support of this claim beyond noting in his written submissions:
"29. A relatively straightforward claim is made by MegaTop Cargo Pty Ltd to recover a principal sum of $590,000 lent to Tom Nanevski with interest, and which remains outstanding. There is no dispute that this amount was paid but it is said by the plaintiff to be a "partnership contribution" by one or other of the defendants. This remains a matter of contest between the parties."
With respect, Mr Robinson was right to emphasise other aspects of his client's case rather than this one. The Court accepts Dr Peden SC's submission that the totality of the evidence makes it clear that these amounts were advanced by Ken (albeit sourced from Mega-Top) to Nanevski Developments in the course of the Partnership. Before turning to specific aspects of the evidence, the Court also notes that Ken never had any conversation with Tom that a loan was being made for $500,000 (or the later amounts) to be charged at a particular interest rate. Even under cross-examination, Ken did not positively suggest that he had reached such an agreement with Tom (Tcpt, 6 October 2021, pp 334(47) - 335(7)):
"Q. You also say, "Interest will be charged at 4.5%, paid at the end of the term." Do you see that?
A. Yes.
Q. That's inconsistent with your SMS to Tom saying there'd be no interest?
A. Yes. Because because there wasn't because it the the directors and Grace they suggested there should be interest charged in that period.
Q. So you changed the deal with Tom without telling him?
A. Within that for that period, yes. I may have told him afterwards. I'm not sure, Doctor."
Turning to the specific evidence:
1. There was no written loan agreement.
2. Ken's text message to Tom of 20 May 2015 that no interest would be payable (see paragraph [68] above).
3. While the purported minutes of a meeting of Mega-Top dated 22 May 2015 (see paragraph [70] above) refer to a loan to Nanevski Developments of $500,000 for the purposes of Lawson Street, the Court accepts Dr Peden SC's submission that this appears to be an example of Ken telling Tom one thing and Biljana and Ms El-Turk another. So much appears from Ken's email to Ms El-Turk on 25 May 2015 (see paragraph [71] above) which is clearly directed to Vista Street and says "I will throw in $500k now and another $500k when I get the NAB money".
4. Mega-Top's records record the three payments comprising the $500,000 advance by reference to "Ken Slaveski" suggesting that these were personal rather than business expenses and were described in Grace's emails to Tom as "payment" rather than "loan". Similarly, the entry for the $40,000 advance on 9 February 2018 has the reference "Ken Slaveski").
5. Ken's email to Tom and Biljana of 28 July 2015 (see paragraph [95] above) describes the $500,000 as "(payment by Ken to Tom to secure Vista Street)".
6. The reconciliation which Ms El-Turk sent to Tom copied to Ken on 18 August 2015 (see paragraph [98] above) is described by Ms El-Turk as the "reconciliation for the purchase of Vista Street" and includes a reference to the $500,000 as "advance by Ken to Tom for Lawson". This appears to make clear that it was an advance by Ken and that even if had originally been intended for Lawson Street it had come within the Partnership as falling within a reconciliation for the purchase of Vista Street.
7. The next day, 19 August 2015, Mr El-Turk sent an email to Tom, copied to Ken with the subject line "NAB Loan documents" (see paragraph [99] above) attaching "Loan documents for both Vista and Riverside". This explains that the "500k advance and the balance of the deposit of $302,500 which was paid from Megatop Cargo overdraft which is the reason for the interest charge. It was billed at 4.5% which is at cost". This clearly treats the $500,000 as an advance to the Partnership but appears to be a unilateral attempt to charge the interest to reflect the fact that such interest was being paid by Mega-Top on its overdraft as the source of the funds. There is no suggestion in the email, or anywhere else in the evidence, that Tom had actually agreed to any such interest charge.
For these reasons, the Court concludes that there was never any loan of the kind alleged from Mega-Top to Nanevski Developments. The relevant advances were advances by Ken to the Partnership and in respect of which he should receive credit on the winding up. It follows that this aspect of the Slaveski parties' cross claim fails.
[25]
The Slaveski parties cross claim - misleading and deceptive conduct
This was another aspect of the proceedings to which little attention was given, especially in closing submissions. It turned on three alleged representations:
1. That Tom had represented to Ken in about January 2015 that if the two of them bought Riverside together, Tom would use Nanevski Developments to do the construction works to build the proposed duplex at Riverside and this his estimate of the construction cost of developing the site into a duplex was approximately $800,000 (the first representation);
2. On or about 8 May 2018 Tom, on behalf of Nanevski Developments, represented to Ken that the construction costs of the duplex on Riverside were $749,000 to $850,000 and/or approximately $800,000 (the second representation); and
3. On and from February 2015 and again in April 2016 and July 2018, Tom for and on behalf of Nanevski Developments represented to Ken that Nanevski Developments was licensed and/or insured within the requirements of the Home Building Act 1989 (NSW) to carry out the works under the contract that had been entered into between Ken and Nanevski Developments (the third representation).
Before turning to consider briefly these representations, the Court concludes that, whatever else may be said about them, these claims must fail for want of proof of loss. As Dr Peden SC submitted, the particulars of damage pleaded in relation to the first and second representations (the pleading refers to the third representation but this must be an error) was that "The cross claimants will provide evidence from a Quantity Surveyor of what an accurate estimate of the cost of the Works would have been". No such evidence was tendered.
Furthermore, particulars were given in relation to the whole of the misleading and deceptive conduct claim including "cost of rectification works, the actual cost to construct the duplex above $800,000 and additional holding and borrowing costs". However, no attention to these matters was given in the evidence.
The final paragraph of the cross claim, while not pleading a material fact, asserted that "particulars of the actual loss and damage will be incorporated into the forensic accountant's report used for the account to be taken with respect to paragraphs 1 to 18 of this cross-claim". No such forensic accounting report was in evidence.
Finally, conscious presumably of this complete lack of evidence of damage, Mr Robinson's closing written submissions included:
"34. The effect for the defendants of relying upon the representations was proceeding with the development of a duplex at all, to be constructed by the plaintiff, by reason of which the defendants have suffered the following damage:
a. the cost of rectification of defective and incomplete work at Riverside;
b. the additional cost to the defendants of constructing the duplex with an alternative builder;
c. additional holding costs due to the extraordinary delays;
d. Council penalties and fines imposed upon the legal owners; and
e. lost rent due to the demolition of the dwelling on the Riverside site earlier than was required for construction works to begin.
35. Should the Court find for the defendants on this claim an application that the matter be stood over for an assessment if that proves necessary is foreshadowed."
The course "foreshadowed" in those submissions is one which the Court neither could nor should entertain. UCPR Part 29, r 29.4 provides that "Unless the Court orders otherwise, proceedings are to be listed for trial generally, that is, for hearing of all questions and issues arising on every claim for relief in the proceedings". The proceedings were listed before me for trial generally. No application had been made for damages to be quantified separately from and after the determination of all other issues in the proceedings. At least so far as the Court is aware, the first suggestion that any such application might be made was in Mr Robinson's closing written submissions provided for the last day of the hearing.
Dr Peden SC was entitled to conduct the hearing on the basis that there was no evidence of the particularised losses in relation to this part of the claim, such that the claim must therefore fail. That is the Court's conclusion.
Were it necessary to do so, the Court would in any event have concluded:
1. As to the first representation, this is not made out because it required the Court, contrary to its findings as to his credit, to accept the uncorroborated evidence of Ken.
2. As to the second representation, this is alleged to have been made in May 2018, well after Riverside had been purchased on 8 May 2015. Furthermore, by reason of a construction certificate dated 25 May 2016 (see paragraph [107] above), Ken must have known that the estimated cost for the piling, excavation, plumbing, electrical work and formwork for two slabs in the basement at Riverside was $830,000, such that there could be no reliance on the alleged representation as to the total cost of construction of the duplex in 2018.
3. As to the third representation, no attempt was made by the Slaveski parties to demonstrate why that representation, even if it was made, was false or to demonstrate that Nanevski Developments was required to be licensed under the home building legislation for the specific tasks it was undertaking.
[26]
The Local Court proceedings - formwork claim
Megatop sued Nanevski Developments for $14,048.61 in relation to formwork.
Nanevski Developments did not dispute that the formwork was supplied, or delivered, or paid for by one or other of the Slaveski parties. However, Nanevski Developments' defence was that the formwork was purchased for work on Riverside, in particular the construction of swimming pools.
Tom was not cross-examined on this evidence in his affidavit and, consistently with its view of Tom's credit, the Court accepts it to be true:
"228. The construction formwork was to be used on Riverside only. It was used for forming up the two swimming pools and to form up the capping beam. As the conditions at Riverside are sand, most of the form work for the swimming pools cannot be reused. This is because the shotcreting of the pools in sandy conditions makes the formwork lose its form.
229. At the time the formwork was ordered, Ken and I had telephone conversations:
Tom: "Ken, I have ordered the form work we need for the pools and capping at Riverside. Can you pay for these and see that they are collected."
Ken: "No problems. They are for the partnership. I will keep the receipts."
230. This construction formwork was not used at Lawson St. At no point did I say to Ken that it was to be. Nanevski Developments did not receive any Mega-Top invoices for this formwork. The letterbox at Lawson St was demolished in 2014 and it still does not have one."
It follows that Mega-Top does not have a cause of action against Nanevski Developments in relation to the formwork. Mega-Top has a claim against the Partnership which will have to be taken into account as part of the winding up. In reaching this conclusion, I have not overlooked the evidence called by the Slaveski parties from a truck driver for Mega-Top, Mr G Ivanovski. He was not required for cross-examination and his evidence was that he delivered the formwork to Lawson Street. However, the Court accepts Dr Peden SC's submission that the fact that the formwork (and in this case not all of it, only so much as constitutes $3,765 of the claim relating to what was delivered on 5 February 2016) was delivered to Lawson Street does not mean that it was used at Lawson Street instead of Riverside.
[27]
The Local Court proceedings - windows claim
This is a claim by Mega-Top against Nanevski Developments in respect of a large number of windows imported from Macedonia by Nanevski Developments. The claim is for $20,636.18 for freight and delivery services and $79,828.67 for storage.
Beyond noting the existence of this claim in his closing written submissions, Mr Robinson did not advance any written or oral submissions specifically directed to this claim beyond answering a question from me as to whether whatever windows were left could be collected by the Nanevski parties (the answer was yes). As with the formwork claim, the Court accepts Dr Peden SC's submission that insofar as the windows related to Riverside, Mega-Top's claim is against the Partnership and will need to be accounted for in the winding up.
The basis of this conclusion is that the evidence demonstrates that, contrary to Mega-Top's pleading, not all of the windows were for Lawson St, and that Ken was aware of this:
1. There was this text exchange between Ken and Tom on 3 May 2015 (see paragraph [62] above):
"TOM: I've also asked Paul to prepare the window schedule for riverside so I can order them and bring back at the same time for lawson is clear anodised aluminium good with you in colour
I have a sample I can show you that I brought back from maco [Macedonia]
KEN: Sounds good. Ok with me. There will be a lot of windows so it should be a good saving.
TOM: Of course
Just need your warehouse if possible to store them
KEN: Ok"
1. Tom texted Ken on 20 May 2015 (see paragraph [68] above): "I'm getting the window schedule for Riverside emailing to maco [Macedonia] so they can send with the nursing home ones".
2. The email referred to in paragraph [102] above of 3 December 2015 which refers to the "Macedonia window shipments" that "will only get Megatop into further debt". The Court accepts Dr Peden SC's submission that this suggests that Ken knew that at least some of the windows were for the Partnership because there would be no reason for Mega-Top to go into debt for windows related to Lawson Street.
3. A text message from Tom to Ken of 2 July 2017 (see paragraph [117] above) which records a request by Tom for Ken's truck to be sent to Lawson Street so that "the windows for the duplex can be taken back to warehouse". The Court accepts this as evidence that the windows for Lawson Street and for Riverside were shipped together and could be stored at Ken's warehouse.
Insofar as some of the windows covered by these shipments and charges were imported for Riverside, then the Court finds those shipping, storage and handling costs were incurred by Mega-Top for the Partnership. Contrary to the submission put for the Nanevski parties, the Court accepts that those storage costs, insofar as they relate to windows for use by the Partnership, would be attributable to the Partnership even after the breakdown in the relationship between them to the extent those costs were not the product of unreasonable delay thereafter on the part of Ken. If delay was an issue, it would be one for the receiver on the winding up of the Partnership. However, it is not an issue because of the Court's conclusion in paragraph [249] below.
Insofar as some of the windows were imported for use at Lawson Street, there was no dispute that these would not fall into any accounting for the Partnership to the extent there was any liability for them in Nanevski Developments to Mega -Top.
However, the Court finds that Nanevski Developments satisfied whatever obligations it had to Mega-Top in relation to the windows that were purchased for Lawson Street. That finding is based on acceptance of Tom's evidence that a container of windows was delivered to Lawson Street on or about 10 May 2017, corroborated by a Mega-Top invoice of 8 May 2017 and a Nanevski Developments cheque butt evidencing payment of that invoice on 9 May 2017.
Finally, insofar as the claim includes storage costs, the Court was not taken to any evidence that Ken reversed his earlier position (evidenced by his text message of 3 May 2015 referred to in paragraph [245(1)] above) that the windows could be stored in his warehouse. In the absence of such evidence, the Court concludes that Mega-Top is not entitled to charge for storage of the windows for Riverside or Lawson Street at its warehouse because the Court draws the obvious inference from the text exchange that Ken was permitting storage of all of the windows at his warehouse gratis as a simple and obvious gesture of goodwill and to the benefit of the Partnership. It is clear that at that time there was still a relationship of trust between the parties such that there would have been no reason for Ken to differentiate between storing windows only for Riverside as opposed to Lawson St. In other words, he was happy to do a favour to Tom insofar as he also agreed to store windows intended for Lawson Street.
For these reasons, Mega-Top's windows claim in the Local Court proceedings fails.
[28]
Conclusion
The parties will be given an extended opportunity to agree short minutes of order to give effect to these reasons, including it is to be hoped as to the identity of a receiver and as to costs. They are also at liberty to draw to the Court's attention if there is any specific finding as to amounts in dispute which they contend was sought and has not been made, or which they now seek on the evidence before the Court (and only that evidence), that may be of assistance in the accounting that must take place as part of the winding up of the Partnership.
Finally, the winding up of the Partnership, including the sale of Riverside and Vista Street, and the detailed accounting as between the parties that will be essential to any winding up, will almost certainly be complex, extended and expensive. That is an outcome which, to my observation and with no disrespect intended, is something which the parties to this case will only find to be a further burden they are ill equipped to bear. I therefore urge the parties, with the assistance of their legal advisers, to give serious consideration to whether the winding up of the Partnership including the allocation of credits and debits to each partner's account, can be agreed through mediation or some other informal process with the benefit of the Court's findings in these reasons. Such a process will necessarily involve broad strokes and concessions on both sides, but experience suggests is likely to be to the parties' overall economic and emotional advantage.
[29]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 09 August 2022