Gill (1873) 8 LR CP 107
Cresvale Far East v Cresvale Securities (2001) 37 ACSR 394; [2001] NSWSC 89
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353
Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184
Deputy Commissioner of Taxation v Wellnora Pty Limited [2007] FCA 1234
Dewhirst v Edwards [1983] 1 NSWLR 34
Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234
Dow Securities Pty Ltd v Manufacturing Investments Ltd (1981) 5 ACLR 501
Equuscorp Pty Ltd v Haxton [2012] HCA 7
Ex parte Harper; Re Rosenfield [1964-5] NSWR 58
Faraday v Rappaport [2007] NSWSC 34
Farah Constructions v Say-Dee (2007) 230 CLR 89
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
Friend v Brooker [2008] HCA Trans 344
Gascoigne v Gascoigne [1918] 1 KB 223
Giumelli v Giumelli (1999) 196 CLR 101
Guardian Ocean Cargoes Ltd v Banco Do Brasil (The Golden Med) [No 3] [1992] 2 Lloyd's Rep 193 (QB)
Haller v Arye [2005] QCA 224; (2005) 2 Qd R 410
Haxton v Equuscorp (formerly Equus Financial Services Ltd) (ACN 006 012 344) (2010) 265 ALR 336; [2010] VSCA 1
In re Emery's Investment Trusts [1959] Ch 410
Kation Pty Ltd v Lamru Pty Ltd [2009] NSWCA 145
Kettles & Gas Appliances Ltd v Anthony Hordern & Sons Ltd (1934) 35 SR(NSW) 108
Jones v Dunkel (1959) 101 CLR 298
Knowles v Fuller (1949) 48 SR (NSW) 243
Lactos Fresh Pty Ltd v Finishing Services Pty Ltd (No 2) [2006] FCA 748
Learmonth v Morris (1868-9) 6 W W & A'B (E) 74
Lumbers v W Cook Builders Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635; (2008) 247 ALR 412
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457
Meyers v Casey (1913) 17 CLR 90
Moody v Cox [1917] 2 Ch 71
Moses v Macferlan (1760) 2 Burr 1005
Murdocca v Murdocca (No 2) [2002] NSWSC 505
Muschinski v Dodds (1985) 160 CLR 583
National Australia Bank Ltd v Budget Stationery Supplies Pty Ltd (23 April 1997, unreported)
North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461
Ogilvie v Adams [1981] VR 1041
Pavey & Matthews Pty Limited v Paul (1987) 162 CLR 221
R v Rothery 25 SR(NSW) 461
Re Robinson's Settlement; Gant v Hobbs [1912] 1 Ch 717
Read v Brown (1888) 22 QBD 128
Richards v Morgan 122 ER 608
Roxborough & Ors v Rothmans of Pall Mall Australia Pty Limited (2001) 208 CLR 516
Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Her Majesty's Commissioners of Inland Revenue and another [2007] UKHL 34; [2007] 4 All ER 657
Spiteri v Georges [2002] VSC 473
State Bank of New South Wales Ltd v FCT (1995) 62 FCR 371; 132 ALR 653
Sykes v Stratton [1972] 1 NSWLR 145
Tolcher v Loiterton [2002] NSWSC 373
Torrens Aloha v Citibank NA (1997) 144 ALR 89
Vines v Australian Securities and Investments Commission (2007) 73 NSWLR 451; (2007) 62 ACSR 1; [2007] NSWCA 75
VL Finance Pty Ltd v Legudi [2003] VSC 57; (2003) 54 ATR 221
Ward v Roy W. Sandford Ltd 19 SR(NSW) 185
Watson v Foxman (1995) 49 NSWLR 315
West v Mead, [2003] NSWSC 161
White v Overland [2001] FCA 1333
Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560; [1956] ALR 939
Texts Cited: P Birks, Introduction to the Law of Restitution (1985)
P Handford, Limitation of Actions: The Laws of Australia (2nd ed, 2007)
J D Heydon and M Leeming, Jacob's Law of Trusts in Australia (7th ed, 2006)
K Mason, J W Carter and G J Tolhurst, Mason and Carter's Restitution Law in Australia (2nd ed, 2008)
R Meagher, D Heydon and M J Leeming, Meagher Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, 2002)
T Prime and G Scanlan, The Law of Limitation (2nd ed, 2011)
Category: Principal judgment
Parties: Nu Line Construction Group Pty Ltd (Plaintiff)
Peter Fowler (aka Grippaudo) (First Defendant)
Gabriella Grippaudo (Second Defendant)
Representation: Counsel
T S Hale SC with J O'Connor (Plaintiff)
H W M Stitt (First & Second Defendants)
Solicitors
Diamond Conway (Plaintiff)
Hunter Lawyers (First & Second Defendants)
File Number(s): 08/280834
[2]
Judgment
1HER HONOUR: In these proceedings, the claim by the plaintiff company (Nu Line Construction) is principally for restitutionary relief in respect of moneys said to have been paid by it or on its behalf to the first defendant (to whom I will refer as Mr Fowler but who is also known as Mr Grippaudo) in the period between June 2000 and February 2001 in relation to or in anticipation of the proposed purchase by Nu Line Construction of industrial land then owned by Mr Fowler's wife, the second defendant (Mrs Grippaudo), at Wetherill Park. That purchase did not proceed and the land was sold in 2009 (after the commencement of the present proceedings) to an unrelated entity.
2An alternative claim for a constructive trust, based on the Muschinski v Dodds ((1985) 160 CLR 583) and Baumgartner v Baumgartner ((1987) 164 CLR 13) line of authority, was pleaded but it was acknowledged by Senior Counsel for Nu Line Construction, Mr Hale SC, that this claim turned on the same issues as those on which the restitutionary claim itself was based. Mr Hale also confirmed that no claim was made on the basis that there was any enforceable contract for the sale of the land.
3As summarised by Counsel for the defendants (Mr H Stitt), the defence of this claim rests essentially on the following contentions: that Nu Line Construction has no standing to sue and therefore no cause of action against the defendants (it being contended both that the relevant agreement to purchase the land was one entered into with the principals of the company in their personal capacity and that Nu Line Construction had not established that the payments in question were made by it rather than by one or other of the principals on their own behalf) and, further, that any action to recover moneys paid to the defendants is statute barred by force of the Limitation Act 1969 (NSW).
4It is submitted by Mr Stitt that even if Nu Line Construction's claim were to succeed the appropriate remedy would have been a remedy at common law for moneys had and received but that such a claim became statute barred six years from the date(s) of the payments in question. In response on this issue, Mr Hale submits that a cause of action for moneys had and received (based on a failure of consideration) accrues only on the failure of consideration (in the sense of the failure of the contemplated state of affairs, in anticipation of which the money was paid, to materialise) and that this was when the property was sold in 2009 or, at the earliest, in 2006 when the negotiations for the sale "finally" broke down. Hence it is submitted that the claim was not statute barred as at September 2008 when the proceedings were commenced.
5As to the claim for a constructive trust, which ultimately was not pressed, Mr Stitt submitted that the Court should not exercise a discretion to impose a constructive trust so as to extend the limitation period within which he submits a claim for moneys had and received should have been brought. It was in this context that it was submitted that Nu Line Construction had been guilty of laches (the relevant delay being from the last correspondence in relation to the proposed purchase that took place between the parties in 2002, when Nu Line Construction failed to respond to requests for confirmation as to whether it wished to proceed with the purchase, and the bringing of the claim in 2008). Mr Stitt also submitted that an issue of unclean hands arose in this (and other) regard(s).
6Issue is taken by Mr Hale to the ability of the defendants to raise the issue of unclean hands, whether by way of defence or as going to any exercise of discretion, having regard to the fact that it was not raised on the pleadings.
Issues
7There are a number of factual issues in dispute (including those that go to whether Nu Line Construction is the proper plaintiff in these proceedings and as to whether it has established that all of the amounts claimed were in fact paid to Mr Fowler by or on its behalf) but ultimately the issues for determination fall into a narrow compass: whether Nu Line Construction has standing to bring this claim; whether there was a total failure of consideration for some or all of the payments made to Mr Fowler, so as to make the retention of those payments an unjust enrichment on the part of Mr Fowler, (the payments effectively falling into two classes: first, the $60,000 payment in June 2000, acknowledged by Mr Fowler at the time as being a "part payment on" the land in question, and, second, any moneys established to have been paid in relation to invoices submitted for payment by Mr Fowler in relation to building works on his own property) and hence to give rise to a prima facie liability on the part of Mr Fowler to make the restitution which has not been dispelled; whether it is open to Nu Line Construction to maintain a restitutionary claim to interest and, if so, over what period; and whether the claim made by Nu Line Construction is statute-barred.
Summary
8In summary, for the reasons set out below, I have concluded as follows.
9As to the payment of $60,000 made to Mr Fowler in June 2000, that:
(a)it should properly be characterised (consistently with the contemporaneous record of the payment) as a payment of part of the then agreed purchase price for the land (and in anticipation that a contract for the sale of the land would be finalised and completed), rather than as a deposit of the kind ordinarily paid on exchange of contracts or some form of holding deposit and not, as the defendants have contended as an option (for which consideration might well be said to have been given by the property having been kept "off the market" for some time);
(b)it was made on behalf of Nu Line Construction as the then contemplated purchaser of the property (and hence the company has, or had at the relevant time, standing to sue for its recovery);
(c)there was a total failure of consideration for that payment at the time when, viewed objectively, the contemplated state of affairs in anticipation of which the money was paid had failed to materialise; and
(d)that this time had arisen at or around mid 2002 (having regard to the lack of any response by Nu Line Construction to successive requests made over the period from February to May 2002 as to whether it wished to proceed with the proposed sale), such that any cause of action for recovery of the said sum based on a failure of consideration had accrued before September 2002 and was, by September 2008, statute barred.
10Thus, while I accept that, as at mid 2002, there was a cause of action in restitution for recovery of the $60,000 (on the basis that Mr Fowler would at that stage be said to be unjustly enriched by the retention of that sum in circumstances where the sale of the Wetherill Park land, in anticipation of which it was paid, had by then failed to materialise and was no longer actively being pursued), I am of the view that such cause of action was no longer maintainable as at September 2008.
11As to the claim for recovery of the moneys allegedly paid to third parties on behalf of Mr Fowler in respect of invoices provided by Mr Fowler, I am not satisfied that (with the possible exception of one payment of $9,075) Nu Line Construction has established that the moneys claimed were in each case actually paid out by it for the benefit or at the request of Mr Fowler. Further, I do not accept that the evidence establishes that any moneys paid in payment of the invoices were moneys paid as part of the purchase price for the land. It seems to me that the more likely explanation for any such payments is that these moneys were paid in order to assist Mr Fowler with his financial situation, in circumstances where the sale contracts had not yet been exchanged, and where they were not intended as a gift but no terms of any loan were discussed. Such a payment would be able to be characterised as moneys repayable on demand. However, even on Mr Fowler's own version of events, some such moneys were paid and they were paid with a view to a purchase of the land occurring (thus is it not unreasonable to infer that the parties would have contemplated that such payments would ultimately have been offset against the purchase price payable on the final completion of the purchase). Whether or not such an inference should be drawn, I accept that in principle any amounts established to have been paid in respect of invoices provided to Mr Fowler should be treated in similar fashion to the $60,000 deposit (not as part payment of the purchase price but as payments in anticipation of a future purchase. Nevertheless, for the same reason as above, the claim to recover any such payments as at September 2008 was in my view statute barred.
12Even if any invoice moneys paid were only in the nature of advances repayable on demand (such that a restitutionary claim for their recovery would not lie), a claim for recovery of those moneys would have been statute barred in each case six years after the payment(s) in question (and hence, at the latest, by February 2007).
13Had the moneys in question ($60,000 and any amount established to have been paid in respect of the invoices) been paid as an option fee (as Mr Fowler contends) or as a holding deposit to keep the property off the market pending a proposed sale to Nu Line Construction (as Mr Fowler formerly contended), no claim based on a total failure of consideration would lie (as there would then have been no total failure of consideration for the payments). However, I am not satisfied that the moneys can be characterised in such a fashion.
14On the basis of the above findings, no claim for restitutionary interest arises. Had the claim for recovery of the $60,000 (and/or any such claim for the invoice payments) not been statute barred, then I would have found that there was a restitutionary claim for interest but only from the date on which it objectively became apparent that the contemplated sale had failed to materialise (not from the date on which the moneys were paid) as it was only from that later date that I consider the retention of the moneys could be said to have become unjust.
15While the result of the above findings is that moneys were paid to Mr Fowler in anticipation of a contract that did not materialise and in circumstances where it had not been the intention of Nu Line Construction (or one of its then principals, Mr Mijatovic) that Mr Fowler should have a "gift" of the moneys, Mr Stitt emphasised that, from a practical point of view, Nu Line Construction had the benefit of the property not having been sold (and effectively kept off the market), hence available for it to purchase, for a considerable time and thus that the retention of the moneys was not unjust. As at mid 2002, it seems to me that this could not be said to be the case. However, I accept that the position may be viewed differently as at September 2008. The broad rationales underlying the enactment of statutory limitation periods (explained by McHugh J In Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 and noted by Spigelman CJ with approval in BP Australia Ltd v Brown & ors [2003] NSWCA 216), reflect a balancing of the interests of claimants and those against whom claims are made and involve a statutory recognition that there are cases where (a claim not having been made within the requisite time) the loss must lie where it falls. This seems to me (unfortunately for Nu Line Construction) to be such a case.
Pleadings
16As emphasis was placed during the hearing on the ambit of the matters raised on the pleadings, I summarise at the outset the claims made in the pleadings before turning to the facts giving rise to the present dispute.
17Nu Line Construction contends that, in about March 2000, Mr Fowler (acting as agent for and with the authority of his wife, Mrs Grippaudo) entered into an agreement for the sale to it of the Wetherill Park property. The agreement (particularised in [7A] of the Further Amended Statement of Claim filed in February 2011) is said to be oral and "entered into on behalf of Mr [Leo] Mijatovic [then one of three directors of Nu Line Construction but now the sole director of that company] for [Nu Line Construction]" and Mr Fowler for and on behalf of Mrs Grippaudo.
18The terms of the alleged agreement pleaded at [8A] of the Further Amended Statement of Claim are that the purchase price was $450,000 ([8A.1]); that Nu Line Construction would pay "a deposit of $60,000 as part payment of the purchase price" ([8A.2]); that, prior to the sale of the property, Nu Line Construction would pay expenses "up to about $90,000" in relation to a separate property owned by the defendants "as and when directed to do so" by Mr Fowler ([8A.3]); that the said expenses paid prior to settlement of the sale would be part payments of the purchase price and deducted from the overall purchase price at settlement ([8A.4]); and that the parties would execute a formal written contract for the sale of the property with a stated purchase price of $300,000 ([8A.5]).
19Nu Line Construction seeks to recover the amount of $152,427.55, that being the aggregate of the sums it alleges says were paid to (or for the benefit of) Mr Fowler pursuant to the alleged agreement. It does not contend that the agreement pleaded in [7A] of the Further Amended Statement of Claim is (or was) enforceable (and, hence, did not press at the hearing the claims for damages for the alleged breach of that agreement contained in its pleading). Rather, it is alleged that there has been a total failure of consideration for the payments in question and that Mr Fowler would be unjustly enriched if allowed to retain those payments in the circumstances that have transpired.
20Nu Line Construction also claims interest on the moneys from the date of payment of the respective amounts as a separate restitutionary claim (or in the exercise of the original or auxiliary equitable jurisdiction) up to the date from which a statutory claim for interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) would otherwise lie.
21The relief sought in the Further Amended Statement of Claim includes a declaration that, in the events that have occurred, there is a constructive trust in favour of Nu Line Construction "as to one-third of the value" of the Wetherill Park property. As adverted to above, Mr Hale indicated during opening submissions that although a claim in equity was included in the pleadings (referring, as I understand it, to the claim for a declaration as to the existence of a constructive trust), it was the restitutionary claim that was at the forefront of the claims made in these proceedings.
22Paragraph [24] of the Further Amended Statement of Claim pleads, "further or in the alternative", a claim for moneys had and received "as a result of the alleged payments". (It is by no means clear, however, that a claim for moneys had and received is in truth an alternative to a claim for restitution based on a failure of consideration and, in my view, this case stands or falls on the claim as principally put, which is for restitution.)
23The Defence, as filed, consists of a series of bare admissions, denials and non-admissions. A limitation defence is expressly pleaded and it is further alleged that the claim is inequitable (though without particularisation of the basis on which it is so alleged).
24There was no express pleading of an "unclean hands" defence. In light of this, issue was taken by Mr Hale not only as to the maintenance of such a defence but as to reliance on such an allegation as going to any issue of discretion that might arise in relation to the relief sought by Nu Line Construction. He objected to any reliance by the defendants on matters such as the alleged failure of the directors to disclose to the external administrator of the company, during the period the company was in voluntary administration or while it was subject to a deed of company arrangement, any claim or interest in respect of the property. In particular, Mr Hale argued that had it been pleaded in the defence that no claim in restitution would lie because of a failure to disclose certain matters to the administrator then the plaintiff would have had the opportunity to find out what in fact was disclosed to the administrator and, if necessary, to call the administrator to give evidence in the proceedings. (Though, as will be noted below, Mr Mijatovic himself gave evidence from which a conclusion as to non-disclosure could be drawn.)
25Rule 14.7 of the Uniform Civil Procedure Rules requires that all the material facts on which that party relies for his or her claim must be pleaded (and the same applies to a defence). Hence, if a defence were to be based on non-disclosure of matters to the company's external administrator, this fact should have been pleaded. Further, rule 14.14 requires that matters be specifically pleaded that would otherwise take the opposing party by surprise, including matters pleaded in defence that the party alleges would make the claim of the opposing party not maintainable. This rule is grounded in a wider principle that each party is given a proper opportunity to prepare and present its case (Bright v Sampson & Duncan Enterprises Pty Ltd (1985) 1 NSWLR 346; Re Robinson's Settlement; Gant v Hobbs [1912] 1 Ch 717; White v Overland [2001] FCA 1333 at [4] per Allsop J (as his Honour then was). Subrule (3) of r 14.14 provides a non-exclusive list of matters that must be pleaded (such as fraud or the statute of limitations).
26In this regard, I am not satisfied that the bare allegation in the defence in this case that the claim was inequitable would suffice to bring to the plaintiff's attention that a plea of unclean hands was being raised made, let alone on what facts, matters and circumstances such a claim might be based. (Although in the initial Defence, laches was not pleaded, in the Defence to the Further Amended Statement of Claim filed on 8 June 2011, there was an express plea of laches, acquiescence and delay as a defence to any claim for equitable relief. In my reasons published earlier today I had overlooked this pleading and I have now published amended reasons to correct the error to which Mr Stitt has quite properly drawn my attention. It does not change the outcome of the proceedings.)
27In some circumstances it seems that a court may take into account effect to matters that are not specifically pleaded (see, for example, Sykes v Stratton [1972] 1 NSWLR 145 at 162, a case where restoration was sought of trust property in the context of a transaction that was considered by Helsham J, as his Honour then was, to be an illegal transaction). However, the general rule is that a court would not be required to consider a defence not raised by the parties (North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461; Knowles v Fuller (1949) 48 SR (NSW) 243) and that cases are to be determined on the issues raised by the pleadings. It is recognised that the parties may by their conduct of the case acquiesce in a departure from, or may disregard or enlarge, a pleaded case or, in the words of Spigelman CJ in Vines v Australian Securities and Investments Commission (2007) 73 NSWLR 451; (2007) 62 ACSR 1; [2007] NSWCA 75, at 17 [57], may choose to fight the case on a different basis. Nevertheless, in the present case, it could hardly be said, in light of Mr Hale's insistence on adherence to the pleaded case, that Nu Line Construction had acquiesced in any expansion of the issues raised expressly by way of defence in the pleadings to include an allegation of unclean hands.
28Pausing here, I have not been able to find in the authorities specific discussion as to the question whether unclean hands can be raised as going to the exercise of the Court's discretion, if not expressly pleaded as a defence. In Dewhirst v Edwards [1983] 1 NSWLR 34 at 45 there was reference in the judgment to facts in the summary of the defendant's submissions which Powell J, in obiter, indicated would suffice successfully to raise such a defence. In Tolcher v Loiterton [2002] NSWSC 373, again in obiter, Gzell J suggested that a ground for rejection of the cross-claim before him (had certain alleged representations otherwise been made out) would have been unclean hands (without there being an indication in his Honour's reasons that an unclean hands defence had in fact been pleaded), stating (at [24]):
Secondly, if the representations were made, the defendants were prepared to allow a document which did not reflect and, indeed, suggested the opposite situation, to be placed before the meeting of creditors. In those circumstances not only is it not unconscionable conduct on the part of the plaintiff to ignore any assumption made by the defendants, but also equitable relief should be refused because the defendants come to this Court with unclean hands (Official Trustee in Bankruptcy v Tooheys Ltd (1993) 29 NSWLR 641).
29However, while I do not accept that inferences adverse to the plaintiff could not have been drawn from some of the material which it is submitted raises the issue of unclean hands (and hence considered in the exercise of any discretion as to the relief to be granted), ultimately I have reached my decision without drawing any such inferences.
Background Facts
30As at early 2000, Nu Line Construction was a property development company with three directors and shareholders (Mr Michael Lebic, Mr Mick Mijatovic and Mr Leo Mijatovic). Mick and Leo Mijatovic are brothers. (Where necessary to distinguish between the two Mijatovic brothers I will do so by their first names. Where I refer simply to Mr Mijatovic, I am referring in each case to Mr Leo Mijatovic.)
31Up to June 2005, the shareholding of the company was held as to 40% by Mr Lebic; as to 40% by Mr Mick Mijatovic and as to 20% by Mr Leo Mijatovic. In 2003 the company went into external administration (as will be discussed further below). After the external administration came to an end in 2005, the shareholding of the company changed and since then the sole shareholder (and director) has been Mr Leo Mijatovic.
32There was a falling out between Mr Leo Mijatovic and Mr Lebic some time around late 2005 or early 2006. (Mr Lebic accepted that it was over serious allegations made against him by Mr Mijatovic, which allegations were denied; that it occurred at the end of 2005 or early 2006; and that they had not spoken since - T 232.46.) There does not appear to have been any such falling out as between the Mijatovic brothers (since Mr Mick Mijatovic attended in Court during the hearing, in Mr Leo Mijatovic's own words to 'support' his brother). Mr Mick Mijatovic was not, however, called to give evidence in Nu Line Construction's case, a matter on which Mr Stitt invites me to draw a Jones v Dunkel (1959) 101 CLR 298 inference.
33As at 2000 (and until its sale in 2009), Mrs Gabriella Grippaudo (Mr Fowler's wife) was the registered proprietor of industrial land at Wetherill Park. Although the Wetherill Park property was in fact owned by Mrs Grippaudo, no issue was raised as to Mr Fowler's authority to negotiate in relation to the land on her behalf. Mrs Grippaudo, who was not required for cross-examination, swore an affidavit in the proceedings in which she deposed that she had had no dealings with Nu Line Construction and that all dealings in relation to the Wetherill Park land were done by her husband with her permission.
34The Wetherill Park land is a battleaxe block on which, at the relevant time, there was a telephone tower that was the subject of leases to both Optus and Vodafone. There was no building on the land but Mr Fowler says that some of his machinery was kept on the land and he carried on some part of his construction business from the land.
Discussions in February 2000 re proposed purchase of land
35In early 2000 there were discussions between one or more of the principals of Nu Line Construction, on the one hand, and Mr Fowler, on the other hand, as to the proposed purchase of the Wetherill Park land. There is an inconsistency between the evidence of Mr Fowler and that of Mr Mijatovic as to what participation the latter had, if any, in discussions before 15 March 2000 in relation to the proposed purchase.
36Both Mr Fowler and Mr Lebic gave evidence that Mr Lebic had initially contacted Mr Fowler in relation to the property. Mr Lebic says that he had heard through a third party that the land was for sale and that he contacted Mr Fowler to express interest in purchasing the land. Mr Lebic places this event as occurring in around late January or early February 2000. Both he and Mr Fowler say that there was a meeting between them on site shortly after that conversation. Mr Fowler's recollection is that Mr Mick Mijatovic was also at that meeting on site but he does not have any recollection of Mr Leo Mijatovic being at that meeting. (Mr Fowler gave evidence that he did not meet Mr Leo Mijatovic until June 2000.) For his part, Mr Lebic does not refer to anyone else being at the February site meeting.
37While Mr Mijatovic does not say that he was at any February site meeting, he does depose that on about 18 February 2000 he had a conversation with Mr Fowler (and says that his "former business partner", by whom I understand him to be referring to Mr Lebic, "was also in attendance" during that conversation) in which Mr Fowler told him about the land and said he would like him to consider buying it. Mr Mijatovic deposes that, in the conversation he had with Mr Fowler in February, Mr Fowler had indicated that there was space on the land to build a warehouse and that he (Mr Mijatovic) had indicated interest in building a warehouse because "our current warehouse is getting small and we need larger premises" (at [6]). He also says that in that conversation Mr Fowler had said that the empty land alone could earn about $50,000 a year because it had a telephone tower that was leased to Optus and Vodafone.
38Thus there seems to be an inconsistency as to whether it was Mr Lebic who first initiated discussion with Mr Fowler as to the possible purchase or whether it was Mr Fowler who suggested to Mr Mijatovic that he buy it. (The possibility that there were two pre-site conversations in February seems unlikely given the overlap of the discussion recounted by the respective directors of the company as taking place in February.)
39Whether or not there was a February telephone conversation between Mr Fowler and Mr Mijatovic (as Mr Mijatovic deposes there was in his affidavit at [6]), there is no reason to doubt that there was a discussion between Mr Fowler and Mr Lebic on site in February 2000 as to the price for which Mr Fowler would be prepared to sell the land or that he wanted to receive for the land. Mr Fowler says (at [7] of his affidavit of 23 February 2010) that he told Mr Lebic that he wanted $300,000 for the land, referring to the need for "a considerable number" of retaining walls to be built that would reduce the effective area of the land (seemingly offering this as justification for the price). Mr Lebic's recollection (albeit in summary terms) differed in that he deposed that:
[6] ... We met on site and after looking at the property and discussing the details with Peter, I agreed to buy it. We agreed on a price of $450,000 or $460,000, I cannot now recall precisely. I believe we agreed on a deposit of up to $160,000 with $300,000 being the balance. [my emphasis]
40Apart from the discrepancy as to the amount said to have been discussed or agreed at that meeting as to the total sale price (which I consider in due course), this again highlights the inconsistency between the evidence of Mr Mijatovic, on the one hand, and that of Mr Fowler (and Mr Lebic), on the other, as to when and with whom the initial agreement as to the proposed purchase price occurred.
41If the discussion that Mr Mijatovic recalls taking place on 18 February is one that took place after the site meeting attended by Mr Lebic, then this would make little sense (as Mr Fowler and Mr Lebic by then had already discussed the potential sale of the property on that earlier occasion). There is no evidence from Mr Mick Mijatovic to shed any light on this, or any other, issue. However, not much turns on this (other than to highlight the difficulty of placing weight on the witnesses' recollections of events from so long ago).
42Nu Line Construction, in its pleadings, contends that the "agreement" was reached in or about March 2000 (Mr Mijatovic referring at [9] and [11] to a discussion he had on 15 March 2000 with Mr Fowler), whereas the tenor of the evidence from each of Mr Lebic and Mr Fowler is that the agreed price was struck in February 2000 and that the discussions before 17 June 2000 in relation to the sale were between the two of them.
43The explanation for this discrepancy may well be that the respective witnesses were using the word "agreement" in a loose sense to indicate consensus (which would not be inconsistent with the informal manner in which the parties seem to have progressed discussions in relation to the proposed sale) and hence that each of Mr Lebic and Mr Mijatovic may separately have come to a consensus with Mr Fowler as to the price (although the prospect of two separate price negotiations following the same path at different times seems unlikely - once a price had been struck one would hardly expect the process to begin all over again at the initial starting point, at least without some reason to do so). Again, little turns on whether an agreed price was struck in February or March 2000. However, it does serve to highlight the potential unreliability of the parties' present recollection of events occurring some 12 years ago. (There was also an unresolved discrepancy between Mr Mijatovic's recollection that he had dealt with Mr Fowler before this particular transaction and Mr Fowler's denial that he had had any prior business or professional relationship with Mr Mijatovic.)
44Ultimately, I have little confidence in the reliability of any of the witnesses' recollections as to the timing of event or content of discussions and I place weight instead on the (few, if any) contemporaneous documents.
[3]
Amendments
31 May 2012 - [6], [24], [26], [319] Amendments to reflect fact that laches was raised on the pleadings; [27] Minor amendment to include reference to unclean hands; [321] & [322] Further commentary on defence of laches
Amended paragraphs: [6], [24], [26], [27], [319], [321] & [322]
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Decision last updated: 31 May 2012
March 2000
45On 15 March 2000, a sketch plan showing the layout of the Wetherill Park land was forwarded by facsimile transmission from Mr Fowler to Nu Line Construction's offices. There were three versions of that sketch plan in evidence:
(i) Annexure A to Mr Mijatovic's 9 October 2009 affidavit, which was identified by him as a true copy of the facsimile that he received from Mr Fowler on 15 March 2000 and which, in the witness box, he made clear he regarded as being the original offer by Mr Fowler in relation to the land (on which copy he had handwritten the words "Original Offer by Peter & Gabrielle" at the time he provided the plan to his legal representatives);
(ii) Exhibit 2, which was a document found on the conveyancing file of Ms Mohini Gunesekera (the solicitor who had acted for Nu Line Construction in relation to the proposed sale), which copy does not contain the handwritten header referred to above and differs from (i) in some of the annotations thereon; and
(iii) Exhibit G (the provenance of which was not clear), which was tendered (without the highlighting and fresh markings thereon) and which copy not only does not contain the header in (i) but also differs in some of the markings from that in (ii).
46(I note that yet a fourth version of the sketch plan appeared behind Tab 4 of the Court Book but that copy was not tendered and is not in evidence.)
47The sketched lay-out of the land was the same on each of the plans. Apart from the handwritten header (which can be ignored as Mr Mijatovic's evidence is that he added that himself at a later date), the relevant differences in the various versions of the sketch plan that are in evidence are to be found in the annotations contained on the left hand side of the plan. (There is writing also on the bottom right hand corner under the heading "development data" but the content of this is common to each of the versions. The author of this handwriting was not identified. Having regard to its content, it seems likely that it was someone involved in preparation of the sketch itself.)
48Logically (and this was accepted in the course of argument), anything not appearing on the version of the document which was found on Ms Gunesekera's conveyancing file (or on which only appeared as a fresh marking on that document) cannot have been on the version that was faxed by Mr Fowler to Nu Line Construction's offices on 15 March 2000. So, for example, the copy as forwarded by Mr Fowler cannot have had the boxes around the words on the left hand side that appear on Annexure A because the copy to Ms Gunesekera's file does not have boxes around the writing. Therefore, I have concluded that anything on Exhibit G, or that is not on Exhibit 2, must be something added to the document after it was sent by Mr Fowler. The difficulty is in knowing precisely what annotations (if any) were on the left hand side when it was received in that office.
49What was on Ms Gunesekera's file (Exhibit 2) is a document that does not have any circles drawn along a part of the site plan; does not have any boxes around the handwriting; and appears to have some changes to the figures that appear uncorrected on Exhibit G.
50The evidence of Mr Mijatovic that the document which is Annexure A was the document he received (and that the only additions were the header he put on the document) cannot be the case. Even apart from the header, there are significant differences between the documents, including that on Exhibit 2, the $500,000 figure is crossed out (and there is a handwritten reference to a 2 month notice linked to the lease back to Mr Fowler).
51Other than Mr Mijatovic's assertion that the handwriting on the left hand side of the sketch plan is that of Mr Fowler, there is nothing to suggest that this was the case (and Mr Fowler denies that the handwriting on the left is his). Therefore, there is at least a possibility that the notes on the left hand side were made after receipt of the plan in Nu Line Construction's office by someone considering the value to the company of a proposed investment in the acquisition/development of the property.
52It seems to me likely that Exhibit 2 (without the correction to the rental amount in the first of the notes on the left that appears to be in pen on the document removed from Ms Gunesekera's conveyancing file) is the earliest of the three versions (since the circled area on the plan is in colour in Exhibit G and appears as a copy on Annexure A, but does not appear on Exhibit 2 at all). However, I cannot be satisfied that any of the annotations on the left hand side were on the plan when it was received in the Nu Line Construction offices (as opposed to being added to the copy of the plan once it was received in those offices). While it was suggested by Mr Hale that it could be concluded from an inspection of the fax machine imprint at the foot of Exhibit G that this was the version originally printed from the machine in that office, and that may well be the case, I do not consider that I can reach such a conclusion without comparing the document to other original printouts from that fax machine and without expert forensic evidence. I cannot discount the possibility that the fax imprint on the page is itself a copy of the original document received in the office.
53Further, while Mr Lebic's evidence suggested that at least some of the writing on the left hand side of the document was on the copy of the plan when it was received in the office of Nu Line Construction, Mr Lebic was hardly definite in his evidence on that point (and, as I will discuss in due course, the generality of his evidence on other points leads me to conclude that he does not have a clear recollection of events in general).
54The handwritten annotations on the left hand side of the sketch plan refer to the rent payable (or that might be received) from Optus/Vodafone for the phone tower - noted variously on the different versions as $25,000 (assuming I have read that figure correctly as the 5 is overwritten on Exhibit G), $20,000 and $26,500 per year plus CPI and to a Peter Fowler lease back ($25,000 per year for 2 (or perhaps 3, depending on the way the figure is interpreted) years). They also include the note:
A Total of $50,000 per year
Total investment only $500,000
55Mr Mijatovic relies on the last line of the note (ie the reference to a total investment of "only $500,000"), as I understand it, as providing support for his evidence that the agreed purchase price was $450,000 not $300,000. However, as Mr Stitt has noted, none of the witnesses deposed in the respective affidavits as to any conversation in which a price of $500,000 was mentioned. Moreover, on its face, it is not clear whether the reference in the note to a "Total Investment" of $500,000 is a reference simply to the proposed purchase price or to a total investment by the proposed purchaser in the acquisition and development of the property (particularly having regard to the discussion said by Mr Fowler to have occurred as to the need for retaining walls to be built and to Mr Mijatovic's evidence as to the proposal that a warehouse would be built on the land).
56If this document did record or confirm an offer by Mr Fowler to sell the land for $500,000, then the discussion at the earlier site meeting to which Mr Lebic refers of a purchase price of either $450,000 or $460,000 (a figure which Mr Lebic says was agreed at that time) does not make sense. While that, of itself, simply reflects the conflicting recollections of Mr Mijatovic and Mr Lebic (and does not point to one or other being the correct version of events), it puts Mr Mijatovic in the position that he contradicts Mr Lebic's version of events at the same time as he seemingly seeks to rely on Mr Lebic's recollection of the agreed purchase price as supporting his contention that the price agreed was higher than that recorded in the contract for sale of land prepared by Mr Fowler's solicitors.
57If the annotations on the sketch plan represented a further 'offer' from that which was discussed (and Mr Lebic says agreed) at the earlier site meeting then (on the normal principles of contractual offer and acceptance) it must logically have superseded any earlier offer or agreement in principle made in the discussions in February.
58Mr Mijatovic's evidence is that, following receipt of the sketch plan (whichever version that might actually have been), he had two telephone conversations with Mr Fowler: the first in which he asked for confirmation as to the leases (which would be equally consistent with the annotation on the plan in relation to the leases having been made when the plan was sent or later during the conversation) (at [9]) and the second (after he had inspected the site) in which he says he said "I think the best we can do is $450,000" and that Mr Fowler said:
OK I can do that; but what I need is $60,000 part payment now, and I have a few invoices that are coming up. If you can pay those invoices up to $150,000 including the part payment of $60,000, we can do this. I also need the contract to show $300,000.00 with 10% deposit; and I can get my solicitor to draft this. Is this OK?
to which Mr Mijatovic says that he agreed.
59Hence, on the case put forward by Mr Mijatovic (and through him Nu Line Construction), the agreement to buy the land was for a total price of $450,000 and was reached on or about 15 March 2000; whereas Mr Fowler and Mr Lebic both place the agreement as having been reached earlier, though Mr Lebic supports the contention that the price was in or about the amount for which Mr Mijatovic contends.
60One of the many factual disputes between the parties (leaving aside for the moment the question as to who was to be the purchaser of the property and hence on whose behalf any payment in relation to the proposed purchase was made) is thus as to the purchase price that was to be paid in order to acquire the property (and how that sum was to be comprised).
61As noted above, both Mr Mijatovic and Mr Lebic gave evidence that the purchase price was to be in the order of $450,000 (in Mr Lebic's case he was not sure if it was $450,000 or $460,000). Mr Lebic said that there was to be a "deposit" of up to $160,000; Mr Mijatovic said that the purchase price was to include a part payment of $60,000 and payment of invoices up to a further amount of $90,000, (ie a total of $150,000). Mr Fowler is adamant that the agreed sale price was $300,000 (as was recorded in the contract for sale later prepared by his solicitors).
62It was not suggested by Mr Mijatovic that any explanation was proffered to him by Mr Fowler at the time as to why the contract would be required to record a lower purchase price on the face of the contract than the purchase price that had been agreed. Mr Mijatovic simply asserts that Mr Fowler made that a condition of the sale. Nor was it suggested to Mr Fowler in cross-examination that there was a reason why it would be in the vendor's interest for this to occur. Mr Mijatovic accepted in cross-examination that the effect of this would be to result in lower stamp duty being paid by the purchaser if the contract proceeded to be exchanged at the lower price (something that I note would financially be in the purchaser's favour), though denying any intention to deprive the State of revenue payable in relation to the sale.
63Mr Lebic, in his affidavit, deposed that there had been a decision on about 15 March 2000 (presumably by the respective shareholders and directors of the company) to buy the property "personally in equal proportions" (by which I assume he meant in proportions referable to the in proportionate shareholdings - see [7] of his affidavit of 22 February 2010) rather than for the property to become an asset of the company. (If so, then this is inconsistent with what later occurred in relation to the preparation and signing of the then proposed contract for sale by the directors of Nu Line Construction, including Mr Lebic himself.)
64Mr Lebic's evidence as to the decision to buy the property personally and not as a company asset (like much of his affidavit evidence) was expressed in general and conclusory terms and was the subject of numerous form objections by Mr Hale. I consider later the import of Mr Lebic's evidence but for present purposes note that insofar as his evidence amounted to a generalised conclusion as to matters that he asserted had been the subject of decision or agreement between the three principals of Nu Line Construction, without deposing to the substance of what was said that caused him to form that belief or reach that conclusion, I read that evidence (subject to weight) as going simply to Mr Lebic's belief or understanding that this was the consensus reached between the three individuals and not as to the correctness of that belief.
65As to how the purchase price was to be comprised, there is not only a dispute as to whether the purchase price was in part to be paid by way of payment of invoices rendered by third parties to Mr Fowler (in respect of building works on his own property) but also as to whether, as at 15 March 2000, there was any agreement (in principle or otherwise) by one or more of the principals of Nu Line Construction to pay invoices on behalf of Mr Fowler (ie whether or not such payment was to be part of the purchase price). There is, however, no dispute that at some stage there was an agreement or understanding reached between at least Mr Fowler and Mr Mijatovic that the latter would arrange for payment of moneys the subject of invoices rendered to the former. Mr Mijatovic contends that this was agreed in March 2000 and was to be by way of part payment of the purchase price; Mr Fowler contends that it was, in effect, an option fee pursuant to an agreement reached in December 2001 whereby he would continue to hold the land for sale exclusively for Nu Line Construction or its principals at the earlier agreed sale price of $300,000.
66Neither version of those conflicting accounts in this regard is in my view particularly compelling. The version of the conversation to which Mr Mijatovic deposes at [9] of his affidavit (extracted earlier) seems to proceed on the basis that Mr Fowler's agreement to accept a price lower than $500,000 was subject to there being part payment of the purchase price (in an amount that, on whatever version of the agreed purchase price, would exceed a 10% deposit in advance of exchange of contracts) together with payment of invoices (in an even greater amount).
67Such an arrangement might make commercial sense if it was anticipated that completion of the sale would not take place in the near future (and hence might explain Mr Fowler's need to have a relatively large sum by way of part payment/payment of invoices separate from the contract price) yet there is nothing to suggest that as at March 2000 it was anticipated that there would be any delay in the matter proceeding to exchange of contracts and completion of the sale within a reasonable time frame (and there is nothing to explain how such a regime would operate in the context of a settlement in the ordinary course).
68Moreover, such an arrangement would seem to me to be fraught with uncertainty as to what would happen if settlement of the sale were to occur at a time prior to payment of the total sum of $150,000 (that Mr Mijatovic says was part of the purchase price but was not to be dealt with in the contract itself). Of course, the fact that the proposed arrangement might have been uncertain in its operation or uncommercial in its terms (or might expose one or other party to the risk that it could not be enforced in accordance with its terms) does not preclude a finding that this was the arrangement that was reached between the parties. Nevertheless, the more uncommercial an arrangement the less likely that one might think it was in fact the arrangement reached between the parties (making Mr Mijatovic's version of events more difficult to accept).
69That said, Mr Fowler's version of events has its own difficulties (particularly in relation to the suggestion that the $60,000 payment was an option fee to hold the property off the market, when that payment was made at a time when there was no suggestion that there would be any material delay in completion of the sale), which I discuss in due course. Foremost among those is that there is nothing in writing as to any "option" fee and it is inconsistent with the only record of payment of the $60,000 (namely, the 17 June note).
70Both Mr Fowler and Mr Mijatovic seem to have considered the arrangements reached in relation to the purchase to amount to no more than (or to include) a "gentlemen's agreement" (also described by Mr Mijatovic in the witness box as an 'underhand arrangement" - see eg T 37, T109.45). At the very least, the suggestion that there would be a deposit or part payment of "up to" any particular amount (referred to by both Mr Mijatovic and Mr Lebic) is indicative of the non-binding nature of any agreement reached between them and Mr Fowler in relation to the proposed sale at the time.
71Where this leaves me is that I am not convinced that either side's account is particularly compelling and therefore, again, I must place the most weight on whatever contemporaneous documents there may be that shed light on this issue.
Preparation of draft contract
72Mr Fowler contacted his solicitors in around late April to prepare a contract for the sale of the Wetherill Park land. His instructions were that the purchase price was $300,000. He deposed to the fact that Mr Lebic had provided him with "his details". Since the draft contract prepared in or about May 2000 disclosed the purchaser as Nu Line Construction, I can only assume that Mr Fowler provided those details to his solicitors and was at that stage under the understanding from Mr Lebic that the purchaser was to be Nu Line Construction.
73The draft contract (noting the purchase price as $300,000) was forwarded to Ms Gunesekera on 10 May 2000, naming Nu Line Construction as the purchaser and Mrs Grippaudo as the vendor. Ms Gunesekera, who gave evidence in Nu Line Construction's case, deposed to having first received instructions in relation to the purchase of the property in a telephone conversation with Mr Mijatovic (for whom she had acted on various matters from 1994) on or around 4 May 2000.
74The copy contract annexed to Ms Gunesekera's affidavit of 9 October 2009 (which has been executed under company seal by Nu Line Construction) bears certain alterations as to the purchaser's details, including its ARBN, from which (and also by reference to the correspondence attached to her affidavit) it is clear that this is not a copy of what Ms Gunesekera actually received on 10 May 2000. Nothing turns on this. What is of relevance is that the contract, as prepared, named Nu Line Construction as the purchaser (and that, when signed by the directors, the contract named that or a related company not the directors in their personal capacity as the purchaser of the property).
17 June 2000 payment
75On 17 June 2000, a payment of $60,000 was made to Mr Fowler. The circumstances in which that payment was made and the precise characterisation of that payment are both matters in issue.
76Mr Mijatovic's contention is that it (and the moneys later paid in relation to invoices at Mr Fowler's request) represented moneys paid as part payment of the purchase price for the Wetherill Park property (consistent with the agreement he says was reached on or about 15 March 2000). The existence of an agreement in advance of 17 June as to payment of that sum would readily explain the fact that there was such a sum sitting in the safe of Nu Line Construction in advance of the meeting (and would also explain the preparation in advance of the so-called "receipt" document to which I refer below, assuming that this was in fact prepared in advance of the meeting as Mr Mijatovic contends). Otherwise, it might seem fortuitous that a not insubstantial sum of money just happened to be in the safe at the Nu Line Construction offices at the time of the 17 June meeting and available for payment to Mr Fowler.
77Mr Fowler's account of what happened on 17 June 2000 is markedly different to that of Mr Mijatovic. He says that the subject of a payment of $60,000 arose for the first time at the meeting on 17 June 2000. Mr Fowler deposes that, at the meeting, Mr Lebic said that "We really like this industrial property and would like to go ahead as soon as possible and we would like you to take it off the market"; that he, Mr Fowler, responded that the property had been listed with a real estate agent and that he would need some money to take it off the market; and that Mr Mijatovic left the room and returned with the cash, asking whether that was enough money for him. (On this version of events, the fact that there was $60,000 already in the safe could equally be explicable by reference to a decision amongst the principals of Nu Line Construction in advance of the meeting to offer such an amount by way of deposit.)
78Mr Fowler said that he had offered to sign something (and that Mr Mijatovic then asked his secretary to type up the letter which is annexed to Mr Mijatovic's affidavit). In contrast, Mr Mijatovic says that he had prepared the "receipt" in advance and that it was he who asked Mr Fowler to sign the receipt.
79Tellingly, in light of the manner in which the invoice payments are said to have occurred, Mr Mijatovic says that he needed something in writing because he was giving such a large amount of money (though later, when he says that Nu Line Construction provided an almost equally as large amount of money in payment of an invoice from DeGabriele Kitchens at Mr Fowler's request, Mr Mijatovic seems not to have seen any need for anything in writing).
80Mr Fowler was adamant that this payment was an option fee (though in the first verified defence it was described as a "holding deposit"). (I should note that I do not draw any adverse inference from the fact that in the first verified defence the payment was described as a holding deposit since leave was given by Macready AsJ for the withdrawal of any admission comprised thereby.)
81The defendants' position is that the agreement reached in relation to this payment was to the effect that they would take the property off the market; that the defendants would not sell the property to any other person; that the price for purchase would be fixed at $300,000; and that the individuals would have time to settle the purchase. Insofar as Mr Fowler says that this sum was offered to him (not requested by him) as consideration for further time being allowed for the settlement to take place and for the property to be taken off the market, one difficulty I have with this is that there seems nothing to suggest at that stage that completion would not take place in the ordinary course - the draft contract only recently having been provided to Ms Gunesekera and its terms not yet having been the subject of any debate between the respective solicitors. Indeed, Ms Gunesekera had not even acknowledged receipt of that contract by that stage (and when she subsequently did her response was seemingly straightforward).
82There is no evidence that the property had been listed "on the market" as such at that stage (although Mr Fowler said in the witness box that he had spoken with a real estate agent in relation to a proposed listing). Nor is there any evidence of any other potential purchaser at that stage (so as to support an inference that Nu Line Construction might have perceived a need to secure the property by such a large payment). It does not seem to me that there is any basis on which I could conclude that the company was at that stage likely to require more than a standard time to settle the terms of and complete any contract for the sale of the land. (Mr Mijatovic's evidence was that he believed the contract could settle within a standard 6 week period but I place no weight on this. It seems to me to amount to little more than an assertion unsupported by evidence as to the company's financial position at the time.)
83Both Mr Mijatovic and Mr Lebic were of the belief that by 2002 the company was in financial difficulty. Although Mr Hale objected to the evidence from Mr Lebic as to the company's ability in 2002 to pay its bills, Mr Mijatovic himself confirmed that there were financial difficulties. At least by 2003 that must have been the case as the company was placed into voluntary administration and then entered into a deed of company arrangement with its creditors. However, whatever the correctness of the views expressed by Mr Lebic, and Mr Mijatovic, as to the financial position of the company in 2002, it does not lead to the conclusion that as at 2000 it might have been thought necessary to pay some sort of holding deposit or option fee in order to take the property off the market so as to allow for a longer completion period.
84The other (and in my view insuperable) difficulty with the suggestion that this was an option fee is that it is inconsistent with the document signed by each of Mr Lebic and Mr Fowler, when the latter received the money. That document was formally witnessed by Mr Mijatovic. It stated as follows:
TO WHOM IT MAY CONCERN
This is to certify that I, Peter Fowler have received a sum of $60,000 as a part payment on the industrial block at .... Wetherill Park (my emphasis)
Peter Fowler Michael Lebic
(sgd) (sgd)
Witness:
(sgd)
Leo Mijatovic
17/6/2000 [this date being handwritten]
85Mr Lebic, in cross-examination, expressed the view that the document annexed to Mr Mijatovic's affidavit was not exactly as he had remembered it (his recollection being that the document had been on Nu Line Construction letterhead). However, the document in evidence is not on company letterhead and, as there is no suggestion that more than one document was signed at the time, it seems that Mr Lebic's recollection on this aspect of the matter must be incorrect.
86In any event there is no dispute that the payment in question was made by cash (taken from the safe in the offices of Nu Line Construction) and that Mr Fowler signed a document (witnessed by Mr Mijatovic) recording the receipt of those funds in the above terms.
87There is a dispute between Mr Lebic and Mr Mijatovic as to who had provided the cash for this payment. Mr Lebic says that the amount was comprised of a 40% contribution from himself made out of funds that he had withdrawn from his account from time to time and kept at home (there being no evidence beyond his assertion that this was the case) and he asserts that Mr Mick Mijatovic also provided 40% (leaving Mr Leo Mijatovic as having provided only 20%, in accordance with the proportions each held of the company shares). Objection was taken to Mr Lebic's evidence in this respect. I read it as no more than an assertion by Mr Lebic as to the source of the funds (and, given the vagueness of Mr Lebic's evidence as to the source of the funds he says he personally had contributed, I have no confidence that weight can be placed on this assertion.)
88Mr Mijatovic (who gave conflicting evidence as to the source of those funds) eventually said that he (together with a company associated with him) provided the whole of the $60,000. In his first affidavit, however, he deposed that on 17 March 2000 (which he corrected in the witness box to 17 June 2000) he had attended the bank prior to the meeting to obtain that sum in cash. (He did not in that affidavit also depose to the creation in advance of the receipt document.) In his affidavit of 1 March 2012 (sworn in reply to the affidavit of Mr Fowler), para [5] of which was not read by Mr Hale but was tendered in the defendants' case not as to its truth but as to the fact that Mr Mijatovic had deposed to the statement contained therein, he deposed that:
[5] ...I drew $60,000 cash from one of my personal bank accounts for the purpose of the money being used by the plaintiff for the part payment of the purchase price for the property, which I then gave to the first defendant in the circumstances I describe in my affidavit dated 9 October 2009. (my emphasis)
89In the witness box on 6 March 2012, Mr Mijatovic corrected this to say that half of the money had come from his personal bank account and half from the account of a company with which he was associated (an error he says he realised when he gave the bank statements to his legal representatives only in the week before the hearing commenced). At T 110, Mr Mijatovic said:
A. ... I said before that 30,000 came from my account, 30,000 came from Endeavour Medical account. That money was given to Nu Line Construction which is reflected in our financial statements. That money was put in a safe belonging to Nu Line Construction Group. When Mr Fowler came to get the money I went to the safe
90As to the plausibility of Mr Mijatovic personally or through his company paying the whole of the amount, it seems to me that I can draw no inference one way or the other from the fact that the shareholding was held in the proportions 40/40/20. True it is that it might seem surprising that a 20% shareholder would pay the whole of such a sum. However, there might be all manner of explanations for such a payment (for example by reference to previous capital contributions by the other shareholders). There was no evidence of any shareholders' agreement as to the funding of capital for the company's business or investment purposes, nor did Mr Mijatovic accept in the witness box that the usual practice was for capital to be provided in accordance with the respective shareholdings. However, nor was it clear from the financial statements of Nu Line Construction to which I was taken that the company had recorded two such contributions as payments made on its behalf by Mr Mijatovic and Endeavour respectively.
91Unsigned "Preliminary Financial Statements" for Nu Line Construction for the period ending 31 December 2001 were tendered as Exhibit Z and show unsecured loans from Mr Mijatovic and Endeavour to the company but not in amounts that precisely correlate with the $60,000. The references in that document to loans of $50,900 for Endeavour Medical and Surgical Supply and unsecured loans of $109,255 do not correspond to the payments that Mr Mijatovic says were made. (Mr Stitt further notes that there is no evidence that this preliminary report was ever accepted as a final report for that period.)
92Unlike some of the disputed facts, this is a critical issue, since the standing issue raised by the defendants turns on whether the sum of $60,000 (together with the further sums claimed to have been paid in respect of invoices on Mr Fowler's request) was paid by or on behalf of the company. Reliance is placed by Mr Stitt in this regard on the fact that the receipt was not on company letterhead and that the signatories did not sign expressly on behalf of the company. I consider this issue later but at this stage note that the draft contract for sale specified the purchaser as being the company and that Ms Gunesekera's correspondence at around this time makes clear that she understood her instructions to be that the purchaser of the property was Nu Line Construction (not the principals of that company), both matters that (together with the wording of the 17 June document) I consider support Mr Mijatovic's version of events on this issue.
Communications in relation to the proposed contract for sale
93Ms Gunesekera forwarded to the company a letter dated 28 June 2000 in which she confirmed her instructions in relation to the sale and gave general advice in relation to the contract (including confirmation as to the purchase price and that a 10% deposit was to be payable on exchange, although by this time, unbeknownst to Ms Gunesekera, the $60,000 payment had already been made). Mr Mijatovic did not at that time correct Ms Gunesekera's understanding of the transaction details (that on his evidence were incorrect) in relation to the contract price or deposit.
94On 29 June 2000, Ms Gunesekera wrote to the vendor's solicitors, emphasising (in the context of a requirement that Special Condition 37 of the contract be deleted) that the agreement was that the purchase price was $300,000 inclusive of all charges and taxes. In that letter, Ms Gunesekera advised that her "clients finances have now been approved" and that agreement as to the terms of the contract was awaited with a view to an early exchange. (This seems inconsistent with any request having been made on 17 June by Nu Line Construction for a longer completion period, in consideration for which Mr Fowler says the $60,000 had been paid. However, given that Mr Mijatovic concedes that in other respects he did not disclose to Ms Gunesekera the "actual deal" in relation to the proposed sale - T 106 - it may be that little can be drawn from this apparent inconsistency.)
95At T 106, Mr Mijatovic said:
A. No. I did not disclose fully to my solicitor what the actual deal was. I believe that at that time when Mohini Gunesekera had this contract in front of her she had no idea that we were doing any under hand deal. That happened much later, I believe a year a year later that she found out about this.
Q. You say this is an under hand deal. By that you mean, in effect, a deal that is not reflected on the contract for the sale of land is that
A. It was the only deal offered to us and we could acquire that land only under those terms. The terms were from Mr Peter Fowler. He demanded 60,000 cash, 90,000 in invoices and a contract for $300,000.
Q. You went along with that?
A. Yes, because it was a good deal.
Q. So notwithstanding that the documents were not accurate reflections of the deal, you went along with the deal?
A. Yes.
96After a further exchange of correspondence, Ms Gunesekera advised the vendor's solicitors on 26 July 2000 that her "client" was now ready to exchange subject to the agreement as to the terms of the contract (there, seemingly referring to a 'Cellsites' lease which was not yet to hand but to which reference had been made in earlier correspondence, it being then contemplated that this lease would be annexed to the contract). Then, after yet further correspondence in relation to the Cellsites lease and a request by an adjoining owner for consent to a variation of an easement for batter benefiting the Wetherill Park land, Ms Gunesekera noted by letter dated 26 October 2000 to the vendor's solicitors that she was "still awaiting the amended Contract to enable my client to exchange on the property".
97As at this stage, Ms Gunesekera seems to have been pressing (on behalf of her client) for exchange of contracts and settlement to take place. By letter dated 6 December 2000, Ms Gunesekera wrote to the vendor's solicitors stating that there was a need for settlement to take place no later than the fourth week of January 2001 (though no exchange of contract had yet taken place and it is not clear to me that this date was an imperative of Nu Line Construction as opposed to being a matter of convenience relating to when Ms Gunesekera's office was to be closed over the Christmas/New Year period).
98By letter dated 20 December 2000, the vendor's solicitors forwarded the contract to Ms Gunesekera, with the qualification that the lease from Vodafone was not yet to hand. Ms Gunesekera sought certain information and amendments by letter dated 12 February 2001 (requesting an amendment to the entity that was to purchase the land - a different Nu Line group company then being nominated from the plaintiff in these proceedings - the details of which were confirmed in letters dated 5 and 21 March 2001. Subsequently, the contract was amended to reinstate the corporate details of the purchaser initially named therein, Nu Line Construction).
99By letter dated 21 March 2001, Ms Gunesekera advised that she had been told that the $30,000 deposit had already been paid directly to the vendor. (This letter is the first reference by Ms Gunesekera to any deposit having been paid.) The letter did not indicate that any further amounts had been paid, as a deposit or otherwise. Ms Gunesekera sought confirmation of that from the vendor's solicitor (though none seems to have been directly forthcoming). She also noted that she should be in a position to exchange shortly, subject to confirmation that had been sought in relation to the lease back to Fowler Pty Ltd and another issue. Also on that date, Ms Gunesekera sent a letter to Nu Line Construction noting that the directors had signed the contract and that she was awaiting provision of the seal of the company.
100Subsequently, certain special conditions were proposed by letter dated 19 April 2001 by the vendor's solicitors and Ms Gunesekera sought some amendments thereto by letter dated 23 April 2001. By letter dated 24 April 2001, the vendor's solicitors enclosed the lease for annexure to the contract and sought advice as to when the purchaser would be in a position to exchange.
101It was at about this point that a difficulty as to the location for the Cellsites tower seems to have arisen as a potential obstacle to the sale. By letter dated 28 May 2001, the vendor's solicitors advised Ms Gunesekera that all discussions to attempt to renegotiate a new location for the tower had been unsuccessful and said:
Consequently we are in a position where we have to make a decision as to whether we sign the current lease or sell the property to your client without the lease having been signed. Please note there may however be an obligation on your client to proceed to complete the lease as our client has signed an early access agreement.
Would you let us know within the next 7 days whether your client would prefer our client to sign the lease so your client has absolute [sic] no doubt as to where he stands in relation to the obligation to Cellsites or whether he would like us to hand over the property with the current situation unresolved.
102The vendor's solicitors, therefore, were still apparently proceeding on the basis that a sale would take place (the remaining issue being as to the status of any lease to Cellsites). Ms Gunesekera, however, responded on 5 June 2001, raising a number of issues for clarification, pending which she said her client would not be ready for exchange. By October 2001, the position of the Cellsites tower (referred to as the "offending construction" in correspondence between Ms Gunesekera and Mr Mijatovic) was apparently still causing a difficulty with the purchase since, by letter dated 16 October 2001, Ms Gunesekera wrote to the vendor's solicitors noting that the Cellsites tower hindered the intended use and that the installation had to be removed and that this had to be resolved prior to exchange. That letter again noted that a deposit had been paid directly to the vendor, though to this point there is no suggestion that an amount in the order of $60,000 or more had been paid (as a deposit or otherwise).
103By November 2001, the position seems to have been reached (on the part of Ms Gunesekera at least) that, until the matter of the assignment to new assignees of the lease to Lucent Technologies was "explored" by the vendor's solicitor, "nothing further could be negotiated in relation to the contract".
104It was at this point that Mr Mijatovic apparently saw fit to raise with Ms Gunesekera the fact that something more than the $30,000 noted as a deposit under the contract had been paid to the vendor. By letter dated 6 February 2002, Ms Gunesekera wrote to the vendor's solicitors in relation to the matter (copying her correspondence to Mr Mijatovic) referring for the first time to a payment of $100,000 having been made to the vendor. In that letter she wrote:
I understand from my clients that he has already paid to your client $100,000.00 and that your client has had the use of that money for almost a year and as such my client wants a resolution fairly expeditiously.
105While there is room for ambiguity arising from the use in the same sentence of the plural "my clients", juxtaposed with references to "he" and "my client" (which might permit an interpretation that the payment to which Ms Gunesekera referred was a payment by Mr Mijatovic and not the company), I doubt that too much can be read into the grammatical juxtaposition of plural/singular and the use of the pronoun "he" in this letter (at least without any understanding of Ms Gunesekera's practice in this regard). More relevantly, this letter asserts that a sum of $100,000 had been paid. It seems to me that this amount must be read as including the $60,000 payment on 17 June 2000. If so, then what Ms Gunesekera was asserting was, in effect, that additional moneys of $40,000 had been paid (whereas Nu Line Construction's claim is that by then a sum in excess of $90,000 in total had been paid in addition to the $60,000).
106However, at T 109, Mr Mijatovic denied the suggestion put to him in cross-examination that, as at February 2002, far less than the sum of $150,000 had been paid to the defendants (consistent with the reference to a sum of $100,000 in Ms Gunesekera's letter), and said:
A. No. As I said we never fully disclosed to Mohini what the actual deal was. She had no idea what it was. I said it is over $100,000 and you will see in one of her letters she says "over $100,000", I believe.
...
A. She did not have all the information.
...
A. This is 2002, two years after. She had no information. We did not give her the information.
...
A. She just knew there was an under hand deal, or whatever you want to call it, but she had no idea how much.
107The response from the vendor's solicitor to Ms Gunesekera's February 2002 letter, interestingly, made no demur to the proposition that a sum of $100,000 had been paid to the vendor, simply denying any contractual obligation to secure a relocation of the equipment (being the second matter raised in her letter). An inference might therefore be drawn that at least some $40,000 on top of the $60,000 June "part payment" had been paid to Mr Fowler. The vendor's solicitors suggested that the purchaser proceed to purchase the property "as is" and take up the matter with the relevant telecommunications company direct.
108Matters then seem to have to come to a head. By letter dated 27 February 2002, the vendor's solicitors wrote:
Numerous attempts have been made to have the equipment belonging to Lucent Technologies Australia Pty Ltd to be removed from its current location. Our client has been unsuccessful with those attempts.
Please advise whether your client is still interested in proceeding with all the matters, if not, arrangements will be made for the deposit to be refunded. (my emphasis)
109That letter implicitly acknowledged that a deposit had been paid (although there was no acknowledgment of the amount of the deposit). There was no response to that letter. Nor was there any arrangement made for the refund of the "deposit".
110Further letters to similar effect, asking for instructions as to the purchaser's intentions in relation to the sale, were forwarded to Ms Gunesekera on 13 March 2002 and on 14 May 2002. In the last of those letters the vendor's solicitor asked that she telephone "to advise whether your client still wishes to proceed with the purchase of the above-mentioned property". (In the absence of any response at all to that request or to the earlier correspondence, in my view it would not be surprising for the conclusion to be reached that the purchaser no longer wished to proceed with the purchase.)
111On each occasion on which such a request was made (as Ms Gunesekera acknowledged in cross-examination and as her conveyancing file discloses), Ms Gunesekera sought instructions from her client, to no apparent avail since there was no response to the vendor's solicitors by Ms Gunesekera to the February, March or May letters. As far as the conveyancing file discloses, from at least February 2002 Nu Line Construction had not responded to the vendor's solicitors' request for confirmation as to whether it was still interested in proceeding with the purchase and nothing further happened on the conveyancing file. (In 2006 Ms Gunesekera retired from practice, apparently without ever having closed her file on the matter.)
112Mr Stitt relies on the fact that Ms Gunesekera's file shows that her client (or clients) had not provided her with instructions to proceed with the proposed sale as an indication that, by 2002, Nu Line Construction (or its principals) was not intending to proceed with the sale. Mr Hale emphasises that the conveyancing file was not closed (ie that Ms Gunesekera never received instructions from her client to close the file).
113The fact that the file remained "open" is of no significance in my view. I accept that it is consistent with Ms Gunesekera having received no instructions to close the file before she retired (and Ms Gunesekera was adamant in the witness box that she had not received instructions that her client was not intending to proceed with the sale, since she says that if she had received those instructions she would have conveyed them to the vendor's solicitors - T 29.27). However, neither had she received instructions to communicate to the vendor's solicitors an intention to proceed with the sale. There is no suggestion that any other solicitor was instructed to continue or to re-activate the conveyancing matter following Ms Gunesekera's retirement from practice.
114In the witness box, Ms Gunesekera stated (at T 25.26) that when she retired (in 2006) "the parties were still negotiating. They were having discussions ...". Pressed on that issue, she could not recall the specifics of those conversations (T 26.21) but maintained that she recalled that conversations were continuing (T 26.33/38). Cross-examined further (from T 144), Ms Gunesekera maintained that she was "fairly confident" that the parties were having discussions (notwithstanding that there was nothing in the file to suggest that she was told that this was occurring and notwithstanding that in her earlier evidence she had said that she could not recall any particular conversation that happened so many years ago without reference to documents - see for example T 22.20).
115Ms Gunesekera did not accept that her letter of 18 March 2002 to her client noting "your instructions that you are considering the matter and will advise me as to whether you are proceeding or not" indicated that she must have received at least some instructions (namely, that she had received instructions that her client was "considering" the matter) and then went on to suggest an alternative construction that might be open when reading this letter:
A. ... could mean that the parties were having discussions on their own and once they decide on how they were proceeding they were going to let the solicitors know.
Q. When you say that is what could have happened, you are speculating, aren't you?
A. It is more than speculation, because memory. It is more than speculation. In this instance I believe that that is actually what happened, that I was waiting on further instructions and I knew that the parties were talking to each other.
Q. It doesn't say that in any of these letters and there is no letter or file notes in your file which states what you have just said, do you accept that?
A. Yes, I do.
Q. So what I am suggesting to you is that you did have conversations but that you are now just speculating or guessing as to what might have happened. You don't actually know what really happened, isn't that the case?
A. No, I can be fairly confident that the parties were having discussions.
Q. But there is no contemporaneous evidence to support that theory that you are putting forward, do you understand?
A. Yes, I do. I do.
116I consider later Ms Gunesekera's evidence in general. Suffice it at this stage to note that the degree of confidence expressed by her (namely, that she was "fairly confident") as to her memory on this aspect of the matter is at odds with her seeming lack of independent recollection as to other aspects of the matter in which she seems to have had more direct involvement.
Invoices
117Meanwhile, it is Nu Line Construction's contention that (pursuant to the agreement that Mr Mijatovic claims was reached on or about 15 March 2000) from time to time invoices (for materials or work unrelated to Nu Line Construction or to any work on the Wetherill Park land) were provided to Mr Mijatovic by Mr Fowler and paid by Nu Line Construction at Mr Fowler's request. (Although Mr Mijatovic maintains that this was an agreement reached in March 2000, in his cross-examination he seemed to tie the provision of the invoices temporally to the 17 June 2000 meeting, asserting that within 8 or 9 days (of that meeting) invoices totalling around $120,000 had been paid by him. (At T 108, Mr Mijatovic accepted that the last payment he claims that was made in payment of any invoices was on 19 February 2001 to Baker Furniture in the amount of $1,115.40.)
118I have referred above to the conflicting versions of the conversations in which reference to the payment of invoices was made. Mr Fowler does not dispute that from time to time he provided some invoices to Mr Mijatovic and that those were paid, but his defence puts the plaintiff to proof of the amounts so paid. (Mr Hale submits that the failure of Mr Fowler to deny that particular invoices were paid on his behalf permits an inference more readily to be drawn in Nu Line Construction's favour in that regard.)
119Mr Fowler, in his first affidavit, deposes to a conversation in around December 2000 (subsequently corrected by him as being 2001 though, for reasons to which I later advert, it is difficult to accept that such a conversation took place as late as December 2001) in which he says that Mr Mijatovic and Mr Lebic said that they were still interested in buying the property but asked for time to exchange (and asked that the purchase price remain as originally negotiated at $300,000). Mr Fowler says that he agreed to do so if they paid some further money and said that he needed money to pay tradesmen and to purchase supplies for the building work on his own home. He says at [18] that:
[18] ...They agreed to further compensate me and, as a result, the Plaintiff agreed to pay some invoices. I agree I provided invoices to Michael Lebic and Leo Mijatovic. Regarding the invoices as set out in paragraph 15 of the Affidavit of Leo Mijatovic, not all of the invoices annexed appear to relate to me. I deny some of the payments attributed to me. As far as I was concerned, this was a separate agreement between me and the Plaintiff. I did extend time for the Plaintiff to exchange and I did leave the price of the property at $300,000 as agreed.
120As to the invoices themselves, para [12] of the Further Amended Statement of Claim pleads that from about 20 June 2000 to about 19 February 2001, Nu Line Construction "paid the additional sum of $92,427.55 for and on behalf of, and at the direction of, [Mr Fowler], in further part payment of the subject property". Nine payments are there particularised (by reference to date, payee and amount). Somewhat confusingly, in Mr Mijatovic's affidavit (at [15]) (where he deposes that the total amount paid by Nu Line Construction by way of further deposit was $99,447.55 - an admitted typographical error), Mr Mijatovic says that "some" of the invoices and payments made by Nu Line Construction are annexed and he then lists the "receipts annexed". That list comprises seven amounts totalling around $19,000 (nowhere near the total amount claimed) and the list does not correspond (other than in relation to two amounts) to the 9 payments particularised in the pleading. (The two invoice payments appearing on both lists are an amount of $9,075 for an "Eric's Art" invoice and an amount of $874.50 for a "Bisanna Tiles" invoice.) Nor do the documents attached appear to be receipts as such.
121Even more confusing than the disparity between the pleaded invoices and the so-called "receipts" annexed to Mr Mijatovic's affidavit is that in cross-examination he conceded (T 55.1/56.50) that, of the seven invoices listed in his affidavit and described as "receipts annexed", five invoices were not paid (whether by him or by Nu Line Construction): Eric's Art - $1,140; Cobblestones - $2,960; Insulation Solutions - $2,089.97; Cobblestones - $940; Verona Pty Ltd - $1,980. That leaves only the two invoices that are common to both the affidavit list of "receipts" and the list of payments particularised in the pleading (ie the Eric's Art invoice dated 13 February 2001 of $9,075, addressed to Newline Constructions Pty Ltd, an entity unrelated to Nu Line Construction, and the Bisanna Tiles invoice dated 26 October 2000 of $874.50, which Mr Fowler accepts was addressed or copied to him and which, on its face, seems to have been rendered at an earlier time insofar as it is stamped Past Due).
122At T 101, Mr Mijatovic accepted that he had annexed the "receipts" to his affidavit because he was claiming that amount of money and accepted that five of those "receipts" had not been paid by him but explained this by saying that, at the time he swore his affidavit, he had believed that he did pay them. I am prepared to accept that Mr Mijatovic did believe at the time that he swore his affidavit that these amounts had been paid by him (or by Nu Line Construction), although that does not explain why there was no later correction to his affidavit in that regard. (That said, as I understand the thrust of Mr Mijatovic's evidence in relation to the manner in which he compiled the schedule which was Annexure D to his affidavit (to which schedule I refer later and which I rejected), Mr Mijatovic may have thought that the schedule itself made clear that some of the amounts claimed in his affidavit to have been paid were not in fact paid.) In any event, it highlights the likelihood that Mr Mijatovic's evidence as to the invoices was based on his reconstruction of events, not his recollection.
123What was made clear in the course of cross-examination was that for five of the seven listed amounts in Mr Mijatovic's affidavit no sums were paid for or on behalf of Nu Line Construction and, as conceded by Mr Hale, no claim for reimbursement can now be made. Further, of the nine payments particularised in the pleading, copies of the invoices said to have been paid by Nu Line Construction have been annexed to Mr Mijatovic's affidavit only in relation to the two referred to above. For the balance there is no invoice (nor is there any receipt) in respect of the payments claimed.
124Produced at the hearing were copies of cheque butts for ten amounts (the last being a copy of the first, so in fact there were only nine separate cheque butts). The original cheque butts for the nine payments were tendered and I admitted them in evidence (as Exhibit C) subject to weight, over Mr Stitt's objection that the writing of information on a cheque butt does not prove that the amount of money there recorded was in fact paid or was paid to the person or entity recorded on the cheque butt. (Mr Stitt further submitted that even if the cheque butts' numbers and amounts correlated to entries on the company's bank statements (as all but one did), this was not proof that such an amount was paid to any particular person.)
125The cheque butts in question contain handwritten annotations in which the amounts correspond to the list of amounts claimed in [12] of the Further Amended Statement of Claim. In cross-examination (T 52.36/53.5; T 59.7), Mr Mijatovic admitted that not all of the writing on the cheque butts in question was his (some, being references to "new Land" or "Work in Progress", were said to be in an accountant's handwriting and two, he said, were in Mr Lebic's handwriting). It is apparent, by reference to the original cheque butts that on some of them there is writing in different colours. To the extent that Mr Mijatovic admitted that he did not himself did not place all the writing on all the cheque butts, Mr Stitt submits that the weight which can be placed on that evidence is negligible.
126According to Mr Mijatovic, the cheque butt bearing a job reference number "295" is a reference to the proposed purchase of the Wetherill Park property (that being the code he says was allocated to it for the purpose of accounting for work in progress in the company's accounts). One cheque butt (bearing a 30 June date and a reference to DeGabriele Kitchens) notes an amount of $55,680 and also contains the words "Bank Cheque".
127Also tendered during the hearing (and admitted as Exhibit F) were bank statements for the Nu Line Construction bank account from which entries can be found for cheques bearing the numbers of those in the tendered cheque butts and showing the amounts debited to the account on presentation of the cheques (those amounts matching the sums noted in handwriting on those cheque butts).
128There is nothing in the bank statements to indicate to whom the payments were in fact made. What the bank statements (admissible as business records) do, however, indicate is that (other than for one of the claimed payments - the $874.50 payment) on particular dates cheques were processed in Nu Line Construction's account in amounts corresponding to those noted on the cheque butts. Moreover, the amounts there noted correspond to the amounts appearing on the invoices (for the one claimed payment in respect of which there is an invoice, a cheque butt and a corresponding entry in the bank statement - the $9,075 amount).
129So, for example, an amount of $9,075 was debited to the company's bank account on cheque number 12225 on 21 February 2011. That corresponds to the amount recorded on the relevant cheque butt (on which the date of the cheque is noted as being 19 February 2011) and the amount so debited from the account is for the same amount as the Eric's Art invoice annexed to Mr Mijatovic's affidavit. This is consistent with the annotation on the cheque butt as to the payee (though the bank statement cannot itself prove that the cheque drawn for that amount was in fact presented to Eric's Art). However, no correlation can be made in respect of the Bisanna Tiles invoice of $874.50 (that being the reference on the cheque butt numbered 011747 on which the date 24 November 2000 is written) with any such amount debited from the company's bank account according to the Exhibit F bank statements.
130Mr Hale relies on the fact that, at T 52-60, (in his examination in chief) Mr Mijatovic identified the relevant cheque butts and the invoices annexed to his affidavit and related the invoices to the cheque butts. At best, this assists only in relation the Eric's Art/Bisanna Tiles invoices that together total just under $10,000. Whereas, at T 75.10, Mr Mijatovic confirmed his belief that the total amount paid on behalf of Nu Line Construction was in the order of $152,000.
131As adverted to earlier, emphasis is placed by Mr Hale on the fact that Mr Fowler did not deny that the payments were made (referring to [18] of his affidavit of 23 February 2010 in which Mr Fowler deposed that "Regarding the invoices as set in paragraph 15 in the affidavit of Leo Mijatovic, not all of the invoices annexed appear to relate to me. I deny some of the payments attributed to me" (my emphasis) and the evidence at T 193-198, T 205 in which Mr Fowler admitted that certain of the invoices related to work being carried out on his house, did not deny the invoices were paid by Nu Line Construction and admitted that he had sent invoices to Mr Mijatovic to pay. I consider below the import of this.
132For the purposes of the proceedings, Mr Mijatovic had prepared a summary (Annexure D to his affidavit) of the moneys he claims were paid to third parties on behalf of Mr Fowler. I rejected paragraph [16] of his affidavit (in which he referred to and sought to annexe the summary) and Annexure D itself. I did so because it was a summary prepared by Mr Mijatovic at a time when the litigation was already on foot (not a business record as such) and it was not clear to me from Mr Mijatovic's affidavit the basis on which it had been compiled. (No application to adduce it as a summary under s 50 Evidence Act 1995 (NSW) was, or could in my view have been, made as the underlying documents were not voluminous or of any particular complexity.) During the course of evidence on the voir dire on the issue of admission of the cheque butts, at T 53.18, Mr Mijatovic explained Annexure D as follows:
A. The list shows all the cheques, the cheque butts I could find and also the invoices. You can see some of these "cobblestones" the last four there is no cheque butt referring to that because I could not find out where it was paid from. I believe it might have been paid from Nu Line or one of the associated companies and later on I realised they were cheques never paid.
133Thus, it would seem that where Mr Mijatovic found a cheque butt that referred to a payment coded as "295" or not otherwise referable to Nu Line Construction's business, he has assumed it was paid at Mr Fowler's request and for the latter's personal benefit. I did admit into evidence (again over Mr Stitt's objection), subject to weight, a computer MYOB spreadsheet produced by Nu Line Construction during the course of the hearing in which entries corresponding to the amounts claimed to have been paid in respect of the Fowler invoices were listed. At T 61, Mr Mijatovic was cross-examined as to the way in which information was processed on the MYOB system:
Q. Sir, you gave evidence that the way that these documents are prepared is that your accountant takes the information that you give him and he enters it into the system, is that right?
A. Correct.
Q. And that information that he enters often has a reference to you giving an input as in "see Leo" for example?
A. If it says "see Leo" it just means there is an incomplete information like, the invoice is missing, see Leo. So it is only asking me to provide with an invoice which I didn't have at the time or I still don't have.
...
Q. You give the information to your accountant?
A. Yes.
Q. And he enters it into MYOB?
A. Correct.
Q. If there is no invoice you are the point of information for the information that he puts into the system?
A. Yes, for some of those entries, yes. ...
134Insofar as the basis of Mr Stitt's objection was that the material contained in the MYOB entries in part derived from instructions from Mr Mijatovic himself, and there was no evidence from the internal accountant as to the preparation of those records or from the external accountant in relation to the records and accounts of the company, I accept that the weight that can be attributed to the MYOB records seems low. (Mr Stitt also invited me to draw a Jones v Dunkel inference from the failure of the plaintiff to call evidence from the internal accountant as to the preparation of those documents.)
135Although Mr Mijatovic said in the witness box that there were (or would be) other records in existence of some or all of the relevant payments, his evidence on this was vague and to some extent contradictory. It might be assumed that in preparation for the hearing (if not indeed at the time of preparation of his affidavit) Mr Mijatovic would have sought to locate all relevant records of the payments claimed to have been made at least to the extent that those were within the company's possession or control. (Mr Mijatovic's refrain, when pressed on this issue, seemed to be that he did not realise that he would be asked about such matters, that he did not realise his case would be so hard to prove and that he regarded the cheque butts as the primary evidence of payment.)
136Where the evidence was left, therefore, was that Mr Mijatovic says he was given various invoices by Mr Fowler and asked to pay those invoices but he has copies of only two of the invoices in question (though he has annexed other invoices which he now concedes were not paid by him or the company); that he either wrote cheques (evidenced by the cheque butts, the presentation of all but one of which is recorded in the bank statements) on the company bank account in payment of the invoices and that he provided those cheques either to Mr Fowler or to the supplier in question or (in the case of the DeGabriele Kitchen invoice, which was by far the largest in amount) that he wrote a cheque on the company account in order to purchase a bank cheque to give to the supplier (for which he had neither a record from the bank for the provision of the bank cheque nor a receipt from the supplier); that from time to time he provided copies of invoices and/or information to the company's internal accountant on the basis of which the payments were recorded in the company's MYOB records as expenses referable to a particular item of "work in progress" (295), that being the proposed acquisition of the Wetherill Park land; and that the company's bank statements disclose a payment out of the account of amounts corresponding in all but one case to the amount appearing on the nine cheque butts (though the only evidence as to the recipient of those funds comes from Mr Mijatovic).
137Mr Fowler did not deny having provided "some" invoices to Mr Mijatovic for payment but was unable (or unwilling) to explain which invoices had so been paid or in what amounts.
138I was left unpersuaded as to what particular amounts had been paid to third parties at Mr Fowler's request, save to the extent that the inference that could be drawn (from the failure of Mr Fowler's solicitors to demur in February 2002 from the proposition that a sum of $100,000 had been paid) that around $40,000 at least in (largely unidentified) invoices had been paid for his benefit. (As the onus of proof lies on Nu Line Construction to prove its case, this gives rise to a difficulty for it on the invoice payments claim.)
External administration of company
139Nu Line Construction went into voluntary administration on 7 April 2003. Messrs Dean-Willcocks and Shepard of Star Dean-Willcocks were appointed as voluntary administrators of the company.
140According to a review of the ASIC search in evidence, the appointment of voluntary administrators followed the filing of a notification to wind up the company lodged with ASIC on 14 March 2003; a previous such application having been filed on 28 February 2002 but dismissed on 29 May 2002. I have no information as to those winding up applications. Although the fact that some such applications had been made might suggest that the belief expressed by Mr Lebic in his affidavit (to which objection was taken by Mr Hale) as to the financial difficulty experienced by the company in 2002, a belief apparently shared by Mr Mijatovic, was not without some foundation, nothing ultimately turns on whether the company was in a position in 2002 to complete a contract for the sale of the property (assuming one had then been exchanged).
141A Deed of Company Arrangement was executed on 30 May 2003. It appears that the voluntary administrators were then appointed as deed administrators under the Deed of Company Arrangement. A copy of that Deed was admitted into evidence (over Mr Hale's objection).
142Insofar as the objection was as to relevance, I considered that there was potential relevance to the Deed in order to consider the ability of the directors of the company to pursue claims of the kind now made while the deed was operative. There had been cross-examination by Mr Stitt of Mr Mijatovic as to what the administrator had done during the administration in relation to the moneys said to have been expended on behalf of the company in relation to the Wetherill Park land, during the course of which objection was taken by Mr Hale to questions suggesting that it was a matter for the administrators to pursue any claims in relation to the purchase while the company was in administration. (Mr Hale noted the distinction drawn between companies in administration and companies subject to a deed of company arrangement in this regard.)
143In Cresvale Far East v Cresvale Securities (2001) 37 ACSR 394; [2001] NSWSC 89, Austin J noted that where a company is in administration under a deed of company arrangement there were no equivalent provisions to those applicable while it was in voluntary administration (prohibiting the directors from performing or exercising their powers without the administrator's written approval), and said at [214]:
Generally speaking, the directors' powers are revived once a deed of company arrangement has been executed, because the administration terminates at that point. .... The deed may contain provisions about the management of the company's business and the exercise of the powers of its officers, binding the officers and members under s 444G, and subject to any such provisions, the administrator will have the power to carry on the company's business ... [and noted that the creditors have a measure of practical control due to their power to bring the deed to an end or vary it but went on to say] However, subject to such matters, the officers remain in place with the functions and powers given to them by the Corporations Law and the constitution of the company.
144Hence, in considering what inferences might be drawn from the action (or inaction) by the directors (while the company was under external administration) in relation to the purchase or the recovery of the funds said to have been paid as part payment for the purchase, I considered the Deed to have potential relevance.
145The Deed contains provision for the day to day management of the company's business and affairs during the arrangement period (in clause 5) and provides that the directors are responsible therefore, subject to the deed administrator's right and entitlement to exercise all or any of the powers conferred by the deed to the exclusion of the powers of the company or its directors. Clauses 5.3 and 5.4 set out the directors' and the company's respective obligations during the arrangement period. Clause 5.4(g) precludes the company (without the prior written consent of the deed administrator) from charging or encumbering or disposing of the assets or property of the company other than in the ordinary course of the company's business. It therefore might have been a moot point as to whether the directors would have had the power, while the company was subject to the deed of company arrangement, to pursue the purchase of the land without the deed administrator's consent (at least if the funding for the acquisition would have required a charge or encumbrance over the company's assets or involved a disposal of its assets).
146The Deed does not make clear what disclosure if any had been made to the deed administrators (or, before their appointment as such, to them as voluntary administrators) as to the payments now claimed to have been made by or on behalf of the company as part payment of the purchase price for the land and in anticipation of its acquisition.
147The Deed makes provision for the claims of "excluded creditors" to be deferred until distribution of the deed fund to participating creditors. Mr Mick Mijatovic is identified as an excluded creditor (with a deferred debt of $16,503.13); Mr Leo Mijatovic is not an excluded creditor (though Endeavour Medical and Surgical Supplies Pty Ltd is, with a deferred debt of $10,901.89). (I note in passing that any claim by Mr Leo Mijatovic against the company, say for recovery of moneys as a loan to the company that were provided by him personally to enable the company to make part payment for the purchase of the Wetherill Park land would seem under the Deed to have been extinguished once payment in full of the participating creditors claims was made out of the deed fund.)
148Mr Lebic, in deposing in his affidavit to his belief that the money paid to Mr Fowler had not been company money, said that the deposit (to which I understand him to be referring only to the $60,000) had not been disclosed to the company administrator "because we said it was our money, not company money which we had paid to Peter" (at [22]) I can place little weight on this belief given the generalised form in which the evidence was given. I accept that this may have been Mr Lebic's opinion as to the characterisation of the money but I do not accept that this establishes any acceptance by Mr Mijatovic or his brother that this was the position.
149Mr Mijatovic, in his cross-examination, did make clear that the only disclosure that he had made to the administrator in relation to the Wetherill Park acquisition was of whatever was contained in the records that he gave to the administrator (by the production of those records). From T 72.36, he was cross-examined on this issue:
Q. As a director, you never disclosed to the administrator the facts of these payments made by the company.
A. The full set of MYOB accounts and all documents were given to the administrator.
...
Q. You never disclosed to the administrator that you were owed $60,000 as a personal loan that you made to the company?
A. We submitted all the MYOB accounts and all the accounting records and all books relating to Nu Line Construction Group to administrator and I provided them everything that he requested. I believe there were 3 boxes of things that we provided to him.
...
Q. You were not aware and you did not disclose to the administrator the fact that Peter Fowler owed the company money?
A. It should have been in all the records.
Q. You never disclosed to the administrator that the company had any equitable interest in the property?
A. It was not a 295. It was a work in progress. It's there. It's there as an asset.
...
A. ... The job was carried as a job 295.
Q. 295?
A. Work in progress.
Q. It was a number that you put in your MYOB accounts?
A. No. My accountant put that.
...
Q. The administrator, you never disclosed to the administrator the fact that you or the Nu Line Construction Group rather had an equitable interest in the property?
A. All the records were given to the administrator. It was up to the administrator to find that information unless he specifically ask me for a question. (my emphasis)
...
Q. You would have been particularly keen to ensure that you were noted as a creditor of the company that the company owed you $60,000. That is a detail about which you would have been particularly keen to make sure the administrator had a note of?
A. The administrator was appointed in 2003. Between 2000 when I gave money to Mr Fowler or Nu Line Construction Group gave to Mr Fowler. Three years past. From 2000 to 2003, there were changes. I'm telling you the truth.
...
Q. Is it your evidence it was ever disclosed to the administrator that you were a creditor of the company for the sum of $60,000 or thereabouts?
A. I believe when I gave all the records to the administrator in 2003 that there would have been information in there about me being a creditor.
Q. You made no specific disclosure as such to the administrator. You just gave him the records?
A. If he had asked the question, I would have provided him the answer. He never asked me that question. (my emphasis)
Q. Was it disclosed to the creditor that Nu Line had a claim
Q. over the property?
A. I believe it was disclosed. It's still in the records. It was a job 295. (my emphasis)
Q. You are saying that the disclosure is that it has 295 on some of the MYOB records?
A. Yes.
Q. That's the sum total of the disclosure that you gave to the administrator about the interest that you say Nu Line had in this property?
A. The job 295 was carried as just another job in progress. It was part of the purchases and buying materials, constructing the property and then selling it. We did not carry it in our assets and liabilities as an asset of the company.
...
Q. The money that was paid was not ever disclosed as an asset of the company. Your answer to that is that you have given it to the administrator and it was up to the administrator to work it out?
A. Yes.
150Any suggestion that the administrator should have realised, from a reference to expenses incurred in relation to a particular job code, that this expenditure amounted to a part payment for purchase of land (so as to give rise to a claim by the company to proceed either with the purchase or for a refund of the moneys) would seem to me to be highly unlikely. What significance should be placed on any such non-disclosure is, however, another matter (which I consider later).
2003/2004 retaining wall payments
151There was some evidence (received over objection by Mr Stitt as to its relevance) as to payments made by one or other of the principals of Nu Line Construction towards a retaining wall on one of the boundaries of the Wetherill Park property in 2004. As I understand it, reliance is placed on this by Mr Hale to show that the company, or its principals, at that stage still considered the proposed purchase to be on foot, so to speak, and hence that there had not been by then a failure of consideration for the payments. (He also asserts that Mr Fowler did not attempt to sell the property to a third party during the period from 2002 to 2006 and that this indicates that Mr Fowler share that belief, though as I understand it this submission is based simply on the fact that the property was not sold during that time.)
152As to the retaining wall issue, Mr Lebic admitted receiving a letter dated 20 October 2003 from a third party (Exhibit H) requesting payment for a retaining wall built on the property (T 237.40) and agreed that he had told that person to send him the bill for the retaining wall because it was only a matter of time "before we own the land" - T 238.25. Certainly that response is consistent with Mr Lebic as at 2003 believing that the proposed purchase would still eventuate (although neither he nor the Mijatovic brothers seemed to have been prepared in 2002 to give instructions to Ms Gunesekera to that effect).
153Mr Hale also draws attention to Mr Fowler's evidence in cross-examination at T 200.40/50:
Q: Can you recall having a conversation with Mr Mijatovic about certain payments that had been made in respect of a retaining wall around the property?
A: Vaguely.
Q: Can you remember him telling you or Mr Lebic telling you that certain payments had been made for the retaining wall and you said "you don't have to pay them, it was all part of conditions of consent for the next door neighbour"?
A: I remember that.
154That evidence, vague as Mr Fowler's recollection was, goes to Mr Fowler having been made aware (after the fact of the payments) that payments had been made in relation to the retaining wall by one or other of the principals of Nu Line Construction.
155Mr Stitt submits that this evidence is irrelevant since Mr Fowler did not receive any such payment and there is no claim against him for any such payment. It is submitted that any such payment was without the knowledge of Mr Fowler and is not relevant to any continuing negotiation about the sale of the property.
156As I understand it, the relevance sought to be drawn by Mr Hale from Mr Fowler's response was that he did not say that there was no point making the payments (because the sale of the land was not proceeding) but simply said that there was no liability to pay them (as they were part of the neighbour's conditions of consent). I have difficulty seeing that this warrants a conclusion that, as at mid 2002, the contemplated state of affairs (ie the purchase of the property in anticipation of which payment of at least $60,000 had been made) was something which the purchaser was then still interested in pursuing (given the deafening silence to the successive requests for confirmation of that fact over a four month period). The lack of any steps taken from February 2002 to pursue the purchase (until at least 2005/2006) supports such a conclusion.
157I do not see the exchange between Mr Lebic and Mr Fowler as to the retaining wall as meaning that the contemplated state of affairs had not (objectively) already failed to materialise by then (so as to give rise to a restitutionary claim for recovery of any moneys so paid by that time). (Indeed, it seems to me that the later discussions, in 2005 and/or 2006, in which a sale of the property was again raised, are not consistent with there being an understanding that there was at that stage any entitlement on the part of Nu Line Construction to proceed with the purchase. Mr Fowler at that time sought a vastly increased purchase price and, while there was objection to the price, objection to that price was not seemingly put on the basis that this involved a departure from the "deal" that had earlier been struck or that the purchase price previously contemplated should be maintained; rather, Mr Mijatovic's position seems to have been that he already had an interest in a third of the land and should benefit from the increase in value of the land.
158For completeness, I note that Mr Fowler's evidence (that he was not aware, prior to the retaining wall payments being made, that Mr Mijatovic or Mr Lebic intended to do so), means that it could not be said that he had somehow acquiesced in the payments or stood back and allowed them mistakenly to be made, in order to benefit his wife's property.
Termination of external administration
159The Deed of Company Arrangement was completed by 27 June 2005 from which date the appointment of the deed administrators ceased. After the Deed of Company Arrangement came to an end, a Notice of Winding Up was filed by the company in 2005. That Notice was subsequently withdrawn. Following this, Mr Lebic and Mr Mick Mijatovic ceased to be company directors and Mr Lebic ceased to be company secretary. Mr Leo Mijatovic from that time became the sole director, secretary and shareholder of Nu Line Construction. The Deed Administrator presented the accounts of the administration on 6 December 2005.
Post administration discussion(s) re purchase
160There was at least one meeting held with Mr Fowler, after the deed of company arrangement terminated and the external administration of the company came to an end, in which the sale of the property was discussed. There is conflicting evidence as to when this meeting was held and who was in attendance (and as to whether there was more than one such meeting).
161Mr Fowler, in his affidavit, refers to a meeting at in or around early 2006 attended by Mr Lebic, and both of the Mijatovic brothers, as well as a consultant of Mr Fowler's company (Fowler Homes) - a Mr Sebastiano (Sam) Romeo. Mr Fowler deposes that Mr Leo Mijatovic said at that meeting that they wanted to talk about the purchase of the property and said "We want to either buy it or see about getting some of our money back". Mr Fowler says that he said the value of the land had gone up and wrote down a figure in excess of $1m but indicated that he was prepared to drop the price by $100,000 below market value (which might suggest that he was taking into account sums already received by that stage - although Mr Fowler says that this was a gesture of goodwill). Mr Fowler says that Mr Leo Mijatovic asserted that they had an interest in the property and that, if the value of the land had gone up, that interest was worth more.
162Mr Mijatovic, in his 1 March 2012 reply affidavit, accepts in general terms the account given by Mr Fowler of this meeting but says that it took place in the middle of 2006 not early 2006 (and that Mr Lebic was not there). In the witness box he said the figure put by Mr Fowler on the price for the land had been $1.56m (as Mr Stitt notes, a reasonably precise figure to which no reference had earlier been made in Mr Mijatovic's affidavit earlier). He also deposed to an earlier meeting in about October 2005 that he said was attended by himself, Mr Lebic, Mr Fowler and Mr Romeo. (However, Mr Romeo says that he only attended one such meeting and it was in 2006.)
163Mr Lebic's version of events is consistent with that of Mr Fowler in that he says that he met with Mr Fowler and with the Mijatovic brothers in or around early 2006. His recollection of the conversation is that he asked if there was any way "we could still buy the land for a good price like before" (at [27]). Mr Lebic nevertheless accepts that there was a falling out with Mr Mijatovic around late 2005/early 2006 (which makes it less likely that he attended a meeting on good terms with Mr Mijatovic in July 2006, as Mr Romeo's evidence suggested, as opposed to attending such a meeting before the falling out).
164Annexed to Mr Mijatovic's affidavit is a copy of a letter dated 25 July 2006 from the solicitors acting for Nu Line Construction to Mr Fowler in which reference is made to a meeting "about 2 weeks ago" between their clients (presumably referring at least to the Mijatovic brothers) that took place "in the company of your accountant" (presumably Mr Romeo) in relation to the matter. The letter included the statement "For the record would you also note that Mr Michael Lebic no longer has any association with Nuline Construction Group Pty Ltd". (The need to mention this might suggest that Mr Lebic had been at that July meeting but that was thereafter not to be included in the discussions or it might be responsive to a comment in relation to his absence. However, any inference to be drawn from the letter in that regard would be mere speculation on my part.)
165The July 2006 letter nevertheless supports the conclusion that there was a meeting, with Mr Romeo in attendance, in July 2006. It seems most likely that this was the meeting that Mr Fowler and Mr Romeo recall having taken place (and that Mr Fowler was in error in his recollection that it took place in early 2006). However, if Mr Romeo's evidence is accepted (and there seems no reason not to do so - particularly given my observation that he seemed genuinely surprised in the witness box at the suggestion that there was more than one such meeting) then the meeting did not take place in October 2005, as Mr Mijatovic suggested. Further, Mr Romeo's recollection is that Mr Lebic was present at that meeting.
166As to Mr Lebic's presence, there is clearly an inconsistency given the evidence that, after the falling out with Mr Mijatovic, he had not spoken with the latter and the evidence of Mr Romeo that Mr Lebic had appeared on good terms with Mr Mijatovic at the meeting. However, the explanation for this may be that there was no outright confrontation between them at the meeting or that Mr Romeo was mistaken when he said he thought the two were on good terms at the meeting (or else that the falling out was later than Mr Mijatovic recalls).
167Ultimately, it does not seem to me that much turns on when the post-DOCA discussion as to the proposed purchase took place. It seems to me that it is of more relevance that the position adopted by the principals of Nu Line Construction was not to insist upon a sale at the original price but (ON Mr Lebic's evidence) to engage in discussion as if the prospect of a sale was one that had still to be agreed (consistent with this being a fresh deal and not simply a continuation of the old deal) or (on Mr Mijatovic's evidence) to regard the earlier payments as having resulted in there being already a part interest in the land.
Advice from Ms Gunesekera
168Another point where the evidence was disputed was Mr Lebic's evidence as to advice he says was obtained from Ms Gunesekera (at some time around 2005/2006) as to whether insistence could be placed on the purchase or on recovery of the "deposit". Ms Gunesekera denied having given the advice that Mr Lebic says she gave and says that such advice would have made no sense. There was no file note of any such advice on the conveyancing file (other than to the extent that it can be discerned from the February 2006 advice to which I refer below). (Nor, however, was there any file note of instructions as to the content of any conversations or negotiations Ms Gunesekera says were then continuing, although there was reference to some discussions in that February letter.)
169On Ms Gunesekera's file, there was a copy of a letter dated 15 February 2006 (admitted as Exhibit A for the fact of the communication not the truth of its contents) from Ms Gunesekera to Nu Line Construction, marked to the attention of Mr Lebic, referring to "a call from you in relation to this contract". Ms Gunesekera there noted that the last correspondence had been in May 2002 and went on to say:
... [I] note that you were having further discussions in relation to the exchange in view of the long delay in not having exchanged contracts and that you had handed to the vendor $40,000 you believed you had a right to exchange contracts at the old price. I confirm my advices that unless there was an agreement in writing that it will be difficult to proceed on that basis.
170This supports Mr Lebic's recollection that Ms Gunesekera had given advice as to the rights of Nu Line Construction in relation to the land. It also supports Mr Mijatovic's recollection that there had been some discussion between the parties prior to July 2006 (but after 2002) in relation to the proposed purchase of the land.
171Ultimately, I do not place any weight on the alleged giving of advice by Ms Gunesekera (or the decision Mr Lebic says was reached by him not to pursue claims against Mr Fowler). (That said, the advice that Mr Lebic recalls having been given, which is said by Ms Gunesekera to make no sense, might well reflect a non-lawyer's interpretation of advice in relation to the matter that would, if recounted differently, have made sense - such as, for example, the consequence of there being no binding contract for the sale of the property - a matter to which Ms Gunesekera's letter of February 2006 itself adverted. Hence, I draw no adverse conclusion as to Mr Lebic's credit from the fact that he deposed to the giving of the advice denied by Ms Gunesekera.)
Commencement of proceedings
172These proceedings were commenced, as noted above, by way of Summons filed on 29 September 2008 in which specific performance of the agreement for sale was sought together with a declaration that Nu Line Construction was entitled to a one third equitable interest in the Wetherill Park property. A Statement of Claim was filed on 27 March 2009 in which Nu Line Construction sought specific performance of the agreement for sale; damages; and the sum of $60,000.
173The Wetherill Park land was sold (to an entity unrelated to Nu Line Construction or Mr Mijatovic) by contract dated 2 June 2009 for the sum of $496,930.00.
174An Amended Statement of Claim was filed in May 2010, seeking declarations that $152,427.55 had been paid towards the purchase of the property; damages; and unjust enrichment.
175On 18 February 2011, a Further Amended Statement of Claim was filed in which an additional claim for a constructive trust as to one third of the value of the property was made.
Credibility of Witnesses
176Before turning to a determination of the various issues in the proceedings, I make the following observations of the witnesses.
Plaintiff's witnesses
Mr Leo Mijatovic
177Mr Stitt points to the successive amendments to the case as pleaded as indicative of the unreliability of Mr Mijatovic as a witness. (In that regard, there have of course been amendments to the defendants' pleadings as well.) Mr Stitt further submits that there has been no credible explanation for the omissions in Mr Mijatovic's evidence or changes to that evidence (referring to T 63.49/64.15; T 136.15-41) and points to the evidence that emerged only in cross examination (such as to the manner of keeping of the MYOB records and to the procedure for payment of invoices by cheque provided personally to Mr Fowler, the latter being inconsistent, with Mr Mijatovic's affidavit at [16] which refers to payments directly to third parties) as supporting a conclusion that Mr Mijatovic was not a reliable witness.
178Mr Stitt also refers to Mr Mijatovic's refusal to accept that the payment of $60,000 operated to secure the property (when logically it must have had such an effect) as an example of Mr Mijatovic being "combative, evasive and argumentative" and unwilling to make obvious concessions (T 108-110). As to that particular issue, my observation of Mr Mijatovic in the witness box was that he did not understand the thrust of the question and was wary that he was being asked to concede a point adverse to his case.
179Mr Mijatovic's evidence (as to both the invoices and the cash payment of $60,000) was contradictory and changed from time to time. He proffered various explanations and answers in the witness box for the first time. My assessment was that Mr Mijatovic was so convinced of the merits of his case (and that it would be established simply by production of the cheque butts) that he could not understand the need for anything else and hence explanations as to the steps that had been taken came at the last minute because there had not been an earlier focus on them. Nevertheless, It seems clear that Mr Mijatovic's evidence as to the invoices was the result of a process of reconstruction from the company's bank statements and that there was an element of approximation or guesswork as to the total amount claimed.
180I accept that Mr Mijatovic genuinely believes that he has been "hard done by", particularly given the feeling with which he insisted that the invoice payments were not a gift. However, overall I did not find his recollection of events particularly reliable. This may well be due to the subconscious gloss that it is recognised a witness may put on his or her memory of events that happened many years before, as explained in Watson v Foxman (1995) 49 NSWLR 315, but it leads me to be cautious as to his recollection in general. (By the same token, I did not find Mr Fowler's memory particularly reliable either.)
Ms Mohini Gunesekera
181As to Ms Gunesekera, Mr Stitt submits that Ms Gunesekera sought to argue the plaintiff's case (referring to T 21-22.50) and that she did not answer questions put to her directly (T 25.17/26). I do not share that view. However, where Ms Gunesekera's evidence was strikingly different was that, despite her inability to recall the specifics of most of the events other than by reference to documents, she was "fairly confident" of there being discussions in 2006 (those being discussions to which she was not directly privy and hence any knowledge of them presumably came from Mr Mijatovic or another of the principals of Nu Line Construction. (It may be, of course, that this confidence came from reviewing her conveyancing file in which there is a letter referring to such discussions, although it was not clear that she had made reference to that before her cross-examination.)
182Ms Gunesekera confirmed that she only acted on instructions and that the details which she included in correspondence and on the face of the contract were done on instructions. Hence, Mr Stitt submits that those documents should be taken as reflecting the plaintiff's instructions and that more weight should be placed on the facts contained in Ms Gunesekera's contemporaneous documents than on her oral evidence.
183In general, I found Ms Gunesekera a careful witness. I have difficulty, however, accepting that she had any clear recollection of the process of negotiation of the proposed sale other than by reference to her notes (and those notes did not include any reference to discussions or negotiations continuing as at 2006). Therefore, I have some doubt as to the weight that can be put on Ms Gunesekera's assertion of a fair degree of confidence in her recollection that the parties were continuing discussions in 2006 (unless by this Ms Gunesekera is referring in general terms to information conveyed to her as to the discussions referred to in her February 2006 correspondence).
Defendants' witnesses
Mr Peter Fowler
184Mr Hale pointed to the vagueness of Mr Fowler's evidence and, in cross-examination, highlighted the inconsistency in relation to the dates at which, on Mr Fowler's version of events, particular matters were agreed or done.
185Mr Stitt submits that Mr Fowler's evidence was given without equivocation and in a straightforward manner and that "minor discrepancies" about dates on his part (in which category, Mr Stitt refers to the December 2000/2001 inconsistency) are explicable by the effluxion of time.
186I accept that the fact that Mr Fowler's evidence was not reliable on an issue such as the precise date of the alleged argument regarding the invoices is likely to be a product of poor recollection over time (although neither of the dates he proffered seemed to me to fit comfortably with the chronology of events). Overall, Mr Fowler was relatively unresponsive to questions (particularly in relation to the invoices) and either has very poor recall or was not making much of an effort to answer questions. (See, for example, his answers as to the invoices at T 192-197.) As already indicated, I consider that caution should be exercised by accepting either his or Mr Mijatovic's version of events where that is not corroborated by contemporaneous documents, as both of their evidence was marked by inconsistency.
Mr Michael Lebic
187Mr Stitt invites me to accept Mr Lebic as a credible witness who made concessions where appropriate. Mr Hale objected to a not inconsiderable portion of Mr Lebic's evidence as being conclusory (and seemed to invite an inference that it was motivated by a desire to assist Mr Fowler's case or to hurt that of Mr Mijatovic or his company).
188As to the evidence contained in Mr Lebic's 27 February 2010 affidavit, to which Mr Hale took objection (and which I read at the time as going to Mr Lebic's belief or understanding of those matters), in respect of which (after hearing) a schedule of transcript references to the relevant rulings was provided by Mr Hale, ultimately this played no part in the conclusions I have reached on the issues in dispute.
189The evidentiary rulings on which Mr Hale placed emphasis in this regard were those falling broadly within the following categories:
(a)the assertions by Mr Lebic that there had been a joint decision to buy the property "personally in equal proportions ... rather than make it a company asset..." [7] (see T 13.30; T 14.15) and that the three had contributed "equal proportions" of money to the $60,000 payment [12] (see T 14.20; T 224.30) (as to both of which, even when further evidence in chief was adduced, Mr Lebic was clearly conveying his conclusion or perception as to what the position was and I read this evidence in general as going simply to Mr Lebic's belief and not as to what had in fact occurred between the three principals);
(b)his assertions as to the financial position of the company and a decision not to pursue the purchase of the property (or to request more time) because of the then cash flow of the company (see T 15.20; 15.21; 15.22; 15.23; T16.20; T 227.45) or, later, as to a decision by Mr Mijatovic to press the matter and Mr Lebic's decision not to do so (T 16.42) (evidence that, again, I read as going solely to Mr Lebic's belief as to those matters and noting the objection as to relevance thereof);
(c)as to whether the $60,000 (or some other sum) was a debt owed to the company (T 16.39) (evidence that I rejected);
(d)as to the lack of disclosure to the administrator of the deposit (T 16.38) (read as an assertion of Mr Lebic's belief - and that he had not, himself, made any express disclosure); and
(e)as to Ms Gunesekera's advice and Mr Lebic's belief in that regard (T 16.40; T 16.42) (again, which I read as an assertion as to Mr Lebic's belief).
190Mr Hale placed on record (as he had indeed been at pains to emphasise during the course of the hearing), that insofar as the evidence given by Mr Lebic pursuant to the leave I had granted in relation to those aspects of the evidence in respect of which form objections had been made went only to Mr Lebic's belief as to the relevant matters, and was not admitted as to the truth of those matters, he had not cross-examined Mr Lebic about that evidence (see T 229.5; T 231.27-35). As I made clear at the time, I considered the evidence that Mr Lebic had given as to advice he received from Ms Gunesekera was in a different category. Mr Hale accepted that was the case and cross-examined Mr Lebic on that issue accordingly.
191As noted above, the evidence that was given orally by Mr Lebic pursuant to the leave I had granted was as to his conversations with the Mijatovic brothers as to the making of decisions and the like (see T 230.44). The general terms in which that evidence was given would in my view permit no more than a finding that it was Mr Lebic's belief that certain matters had been agreed in relation to the transactions at hand. As to his belief about matters such as the financial position of the company, I understand the thrust of Mr Lebic's evidence to be that he said to Mr Fowler words to the effect "we weren't in a hurry to settle", not as evidence that this was the fact.
192Insofar as Mr Stitt seeks to rely on Mr Lebic's evidence as to the arrangement between the directors for the purchase of the property and their respective contributions to payment of the $60,000, I accept the force of Mr Hale's criticism and have placed no weight on Mr Lebic's general assertions as to what was argued between the three principals. As to the advice which Mr Lebic says he received from Ms Gunesekera concerning future rights to the property, while not implausible, there is nothing to support his version over that of Ms Gunesekera's account.
193I am not persuaded that I can draw anything from Mr Lebic's decision not to pursue recovery from Nu Line Construction since this might as equally be referable to the $60,000 contribution having come solely from Mr Mijatovic (as the latter contends) as from a belief that there was no legal basis to do so (whether or not that belief was based on an accurate recollection of Ms Gunesekera's advice).
194As to the discrepancies in Mr Lebic's evidence, Mr Stitt referred to what was said by Cockburn CJ in Richards v Morgan 122 ER 608 (followed in R v Rothery 25 SR(NSW) 461; Ward v Roy W. Sandford Ltd 19 SR(NSW) 185; and Barker v Charley 62 SR NSW) 296) to the effect that where a party is under the necessity of calling a doubtful or even a hostile witness in order to prove some part of that party's case which cannot otherwise be made out then it is open to the party calling that witness in the event of adverse statements being made by that witness, to ask the Court to reject them as unworthy of belief or contradicted by the rest of the evidence (and, in the case of written evidence such as an affidavit, it may be used with a view to adopting part of it and rejecting the rest). Mr Stitt submitted that the evidence of Mr Lebic should be viewed in this way (namely, that if some part of his evidence were to be rejected this would not mean that reliance could not be placed on other parts of his evidence that were favourable to the defendants). As a general principle, I accept that submission. So, for example, the fact that I am not persuaded that Mr Lebic's stated belief as to matters such as the decision to purchase the land in the directors' individual capacity does not mean that I reject his evidence as to his attendance at the 2006 meeting to discuss the purchase.
195In essence, while I found Mr Lebic to be a straightforward witness (and not someone obviously seeking to advance a particular interest in the case), and he made various concessions against the interest of the party who had called him (such as the amount agreed as to the purchase price) which supported the conclusion that he approached the matter in a non-partisan way, I found his generalised recollection of matters to be of little assistance other than where it was consistent with other evidence or supported by contemporaneous documents. Again, I see this as a function of the gloss on memory that can occur as the events in question become more distant in time.
Mr Sam Romeo
196Mr Romeo's evidence was challenged on the issue as to when the meeting attended by the Mijatovic brothers with Mr Fowler after the termination of the company administration took place. Although Mr Romeo's recollection of that meeting is broadly consistent with that of Mr Fowler and Mr Lebic, the most likely date for that meeting seems to be that indicated by the letter of Ms Gunesekera which places the meeting later in mid 2006. While a meeting in mid 2006 at which Mr Lebic was acting in a friendly manner with Mr Mijatovic is inconsistent with the nature of the falling out that had taken place by then between those two men. Therefore, I accept that there is an inconsistency as to his observations of Mr Lebic at that meeting. However, there may be explanations for that inconsistency (such as an inattention to such matters on Mr Romeo's part) and, broadly, I had no reason to think that Mr Romeo was not a credible witness.
Inferences to be drawn from witnesses who might have been called
197Both sides submitted that Jones v Dunkel inferences should be drawn against the other, arising from a failure to adduce evidence from various persons.
198In respect of the defendants' case, Mr Hale submitted that such an inference arose from the failure of Mr Fowler to give evidence in relation to those invoices which he admitted had been received and paid by him and the fact that Mr Fowler did not deny the making of the specific claimed payments (referring to the principles discussed in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389).
199In Ferrcom, Handley JA (noting that there appeared then to be no Australian authority extending the principles of Jones v Dunkel to a case where a party fails to ask questions of a witness in chief) could see no reason why those principles should not apply "when a party by failing to examine a witness in chief on some topic, indicates 'as the most natural inference that the party fears to do so'". His Honour went on to note that "This fear is then 'some evidence' that such examination in chief 'would have exposed facts unfavourable to the party'" (referring to Jones v Dunkel at 62).
200Handley JA considered that the Court "should not draw inferences favourable to the insured on ... matters when no attempt was made to prove them by direct evidence and in particular when no relevant questions were asked of [the principal of the insured]" and that the trial judge should not have drawn the inference that a policy endorsement would not have been acceptable to the insured when Counsel for the insured did not ask its principal about the matter in chief or in reply; did not cross-examine the insurance agent on this issue; and did not call any representative of the broker to establish what view the broker would have taken and what advice it would have given the insured. (The issue in question was relevant in determining the extent to which the insured's interests had been prejudiced so as to determine the monetary prejudice suffered by the particular underwriter.)
201His Honour referred to Ex parte Harper; Re Rosenfield [1964-5] NSWR 58 at 62, where Asprey J had held that inferences could not be drawn in favour of a party that called a witness who could have given direct evidence when that party refrained from asking the crucial questions, and to case law in the United Sates on the question as summarised in 5 ALR 2d, par 25 at 949-951.
202As to this issue, while it did not strike me that Mr Fowler was particularly quick to search his memory as to what had taken place with the invoices, I am not satisfied that a Jones v Dunkel inference should be drawn against him for his failure specifically to deny the payment of particular invoices. In this regard, Mr Fowler's evidence was to the effect that, while he accepted the possibility that particular invoices could have been provided to Mr Mijatovic for payment, he could not recall if the invoices presented to him were ones that he asked Mr Mijatovic to pay (cf T 192.21). While his evidence on this was vague, to say the least (see, for example, the contradictory evidence at T 192.49 and T 193.10 in relation to the same invoice), it is quite conceivable that this was simply a function of the lapse of time since the events in question.
203In respect of the plaintiff's case, Mr Stitt invited me to draw adverse inferences from the fact that there was no evidence adduced on behalf of Nu Line Construction from either of the company's internal or external accountants (as to the process of compilation of the company's accounts or the expenditure of funds claimed to have been made or, perhaps, as to the financial position of the company) or from Mr Mick Mijatovic, who was in attendance in Court throughout the proceedings -T 114.34/115.4) (as to the various meetings or conversations in relation to the proposed purchase).
204As to the accountants, it seems to me that the basis for an adverse inference could be drawn. The proof of matters in relation to the payments claimed was left in the main to scant documentary evidence and to Mr Mijatovic's stated recollection of events. Where there were matters, such as the preparation of MYOB accounts or the evidence of payments that could have been explained by the company's accountants, the failure to call such evidence seems noteworthy. However, the question then is what particular inference would properly be drawn in that regard. At most, that nothing that the accountants could say would have assisted Mr Mijatovic to prove the plaintiff's case in relation to payments; not that the missing evidence would have been damaging to that case.
205As to Mr Mick Mijatovic, any such inference would in my view arise where there were conflicting evidence (as to matters, say, such as the timing of the 2005/2006 meeting(s) or as to decisions made between the three principals in relation to the purchase or to the purchase price). The absence of evidence from Mr Mick Mijatovic would enable a conclusion more readily to be drawn that the recollection of those witnesses supporting Mr Fowler's recollection was more likely to be the correct version of events. However, ultimately, my findings do not turn on any such inference.
Factual Issues
206I turn then to the relevant factual issues for determination.
Who was the proposed purchaser?
207The first issue is as to who was proposed to be the purchaser of the land. Mr Hale submits that the proposed purchaser was Nu Line Construction. He points to the evidence of Mr Fowler that he had instructed his solicitor to prepare a contract, that Mr Lebic had already provided him with his details (at [9] and T 163.35); and that the contract for sale prepared by Mr Fowler's solicitors clearly named Nu Line Construction as the purchaser. He notes that Mr Lebic (in his affidavit of 22 February 2010) had deposed in [8] that the solicitor for Nu Line Construction was Ms Gunesekera; that Mr Lebic at [12] deposed to his belief that the receipt dated 17 June 2000 was on Nu Line Construction letterhead; and to the evidence of Mr Mijatovic (in his affidavit of 9 October 2009) (at [12]) that he had paid $60,000 on behalf of Nu Line Construction, (at [13]) that he had put $60,000 into the safe at the offices of Nu Line Construction and (at [17]) that he had instructed Ms Gunesekera to act for Nu Line Construction.
208It is noted that Ms Gunesekera deposed to receipt of the contract from the vendor's solicitors and corresponded with them by reference to Nu Line Construction as the purchaser (although it appears that the actual identity of the corporate entity was sought to be changed at one stage).
209Mr Hale also points to the evidence given in cross-examination at the hearing as to the dealings in relation to the preparation of the contract: that Mr Fowler in April 2000 instructed his solicitors to prepare a contract (T 174.35); that Mr Fowler attended his solicitor's office to discuss the contract for sale (T 178.50); that Mr Lebic met with Ms Gunesekera and discussed the contract for sale (T 234.25/45); and that Mr Lebic confirmed his belief that the receipt dated 17 June 2000 was on Nu Line Construction letterhead (T 239.50) and signed the receipt on that assumption (T 240.5).
210The defendants contend that the agreement to purchase the land was one reached with the three individual directors of Nu Line Construction (in their personal capacity) after a conversation to that effect at the office of Nu Line Construction. Reliance for this proposition seems largely to be based on Mr Lebic's evidence that the decision was made to purchase the property not as a company asset and as to the proportionate manner in which the $60,000 payment is said to have been made (on which I can place little weight); as well as on the absence in the accounts of the company or in the reports of the company's deed administrator of express reference to an interest in or claim in relation to the property (at least the first of those matters lends more support to the defendants' contention). Reliance was also placed on the evidence as to the lack of disclosure of a claim in relation to the property to the voluntary and deed administrator (to which I have earlier referred).
211The defendants' contention that the proposed purchase was to be in the individual principals' names is, however, inconsistent with the manner in which the draft contract, was prepared. While I accept that there no contract was ever exchanged and that the preparation of a draft contract (or submission of a final contract for signing and exchange) showing the company as the purchaser is not conclusive, it is in my view significant that there does not seem to have been any suggestion at the time that the contract had wrongly disclosed the proposed purchaser and that the principals had apparently been prepared formally to sign a contractual document specifying the company as the purchaser.
212I accept the plaintiff's contention that the agreement reached in principle between the parties in early 2000 was for the purchase of the property to be effected through a corporate entity (for the most part that being Nu Line Construction) and that this remained the basis (although the particular corporate entity proposed as purchaser did change for a short period of time in the course of the negotiations having regard to the changed ARBN details on the signed coversheet to the contract) on which the negotiations took place in relation to the proposed purchase up until at least February 2002 (after which Ms Gunesekera was seemingly unable to obtain instructions in relation to the sale). I am not satisfied that the purchase was to be by the three principals of the company in their individual capacity. (The relevance of this finding goes to the question as to on whose behalf any part payment of the purchase price was made.)
What was the agreed purchase price?
213The second issue is as to the 'agreed' purchase price as at February/March 2002. The evidence in this regard is unsatisfactory. On the one hand, I consider that weight would ordinarily be given to the figure specified in the draft contractual documents ($300,000), that being the only figure as to which Ms Gunesekera was given instructions at the relevant time and there being no evidence of any particular reason for Mr Fowler to have insisted upon a contract that specified an incorrect (and lower) sale price.
214However, Mr Lebic deposed (at [6], [27] of his affidavit) to having agreed on a price of $450,000 or $460,000 at the site meeting in February and this is consistent with Mr Mijatovic's evidence (at [3] of his affidavit) that Mr Fowler had offered to sell the land to the company for the sum of $460,000 and that he, Mr Mijatovic, had said that the best "we can do" was $450,000. In cross-examination, Mr Fowler could not recall if he had had a conversation with Mr Lebic in which time he had agreed that the purchase price would be $460,000 (T 182.45; T 189.40).
215In light of Mr Lebic's evidence as to the figure agreed in early 2000 (and there being no evidence from any of the parties as to there being a negotiation downwards from around $450,000 or $460,000 to the much lesser figure of $300,000), I would accept that, at least as at February/March 2000, there was an agreement in principle that the purchase price would be in the order of $450,000.
216The troubling aspect of this finding is that the specification of a lower price on the contract signed by Mr Mijatovic and his co-directors suggests that the principals of Nu Line Construction were prepared to participate in execution of a document that wrongly stated the purchase price (and which, had the deal proceeded on that basis, would have deprived the government of stamp duty revenue in circumstances where that would have been to the direct benefit of Nu Line Construction). I consider the implications of this for any discretionary relief later in these reasons.
217(As to the suggestion that the statement of a lesser sum on the contract was a requirement of Mr Fowler, there is no evidence to suggest why he would have sought to make this a condition of the sale. It was submitted in passing that there might have been capital gains tax implications or the like but nothing was put to Mr Fowler in cross-examination to that effect.)
Was the $60,000 agreed to be a part payment of the purchase price?
218The next factual issue is whether (and at what time) the agreement included a requirement that $60,000 (or, alternatively, up to $150,000 or $160,000) be paid as part payment of the purchase price (or whether the arrangement in relation to the $60,000 (and/or the invoices) was one that was in consideration for the property being held off the market - in effect as a deposit or holding deposit that might later be applied to offset the purchase price - or, as the defendants contend as an option fee that was not recoverable if the sale did not proceed).
219For the submission that the sum of $60,000 was a part payment or deposit agreed to be made in February or March 2000 in respect of the purchase price for the land, reliance is placed by Mr Hale on Mr Lebic's evidence ([6] of his affidavit) that "we agreed to pay a deposit of up to $160,000"; Mr Mijatovic's evidence (in his affidavit of 9 October 2009 at [11]) that he had a conversation with Mr Fowler in which the latter said words to the effect "what I need is $60,000 part payment now"; and (at [12]) Mr Mijatovic's assertion that the $60,000 was paid by way of cash part-payment. Mr Hale notes that Mr Fowler admitted reading and signing the document dated 17 June 2000 recording receipt by him of the sum of $60,000 "as a part payment on the industrial land ..." (T 177.5); that Mr Lebic accepted in cross examination that the agreement to pay $60,000 was made prior to 17 June 2000 (T 240.20) and accepted that the payment of $60,000 was part payment of the deposit of $160,000 (T 240.40).
220For the defendants, the submission that the $60,000 payment was in the nature of an option fee, offered for the first time on 17 June 2000, rests solely on Mr Fowler's evidence and is inconsistent with the terms of the document signed by him. I consider the more credible explanation for the payment of $60,000 (consistent with the 17 June 2000 document) was that it was agreed, some time before 17 June 2000, that a payment of $60,000 would be paid as part of the purchase price in advance of the contract being exchanged. I accept that the effect of this must have been to secure the land for the purchaser but I see no basis to treat it as an option fee.
221I consider the characterisation of the invoices later.
Was the $60,000 payment made on behalf of Nu Line Construction?
222There is no doubt that the sum of $60,000 was not paid out of Nu Line Construction's company accounts. Mr Stitt submits that there is no evidence that the sum was paid for the company (as opposed to having been paid personally by Mr Mijatovic and/or the remaining shareholders). He points to the fact that the only 'receipt' for this sum was the 17 June document signed by only two of the directors of the company (one of whom as a witness) and to the conflicting oral evidence of Mr Mijatovic as the source of the moneys. Mr Stitt submits that if such a large amount of money were being paid by the company for the specific purpose of buying land then experienced businessmen such as Mr Mijatovic and Mr Lebic would have included a clearer statement to that effect in the document recording the payment. (The difficulty I have with that submission is that the parties seem to have been prepared to proceed on an informal basis, without close attention to the documentation of their arrangement, throughout the period.)
223As noted above, the 17 June document (recording that $60,000 was received) is not on company letterhead, does not have a company seal affixed, is not signed by all of the directors of the company (being signed by Mr Fowler and Mr Lebic and only "witnessed" by Mr Mijatovic) and makes no reference to Nu Line Construction on its face.
224Mr Stitt submits that Mr Lebic's evidence (that he provided 40% of the money, as did Mr Mick Mijatovic (who did not give evidence). and that Mr Leo Mijatovic provided only 20%) should be accepted. However, it was by no means clear to me that Mr Lebic accepted that this was the usual arrangement for the three directors nor was it clear from the evidence that there was an arrangement between the shareholders that capital was ordinarily provided in accordance with the proportionate shareholdings of the directors (though Mr Stitt referred to T 82.10-30 for such a proposition).
225Mr Stitt points to the absence of any reference to the deposit in the documents filed by the company's external deed administrator with ASIC (Exhibit 4, listing the company's then creditors and the Deed of Company Arrangement being Exhibit 5) as being contrary to Mr Mijatovic's assertion that the $60,000 was paid by or on behalf of Nu Line Construction. (In this regard, he invites me to draw a Jones v Dunkel inference in relation to the failure to adduce evidence from the company's accountants). I accept that the company's own documentation does not provide support for Mr Mijatovic's contention but that may of course be due to inefficient book-keeping.
226It seems to me that weight must be given to the fact that Mr Fowler acknowledged in writing receipt of the sum as "part payment" on the land - it must, therefore, have been accepted by him as a payment on behalf of the then contemplated purchaser of the land (which was Nu Line Construction). In those circumstances, whatever the arrangements between the shareholders/directors of the company as to their contributions thereto, the payment seems to have been treated by them and accepted by Mr Fowler as on behalf of the company and in part payment of the purchase price.
227Even if the moneys paid to Mr Fowler were contributed in the proportions of the shareholders' entitlements (and I am by no means satisfied on Mr Lebic's evidence that this was the case), the moneys were still paid "as part payment" for a property then proposed to be acquired by Nu Line Construction and I consider that it should be inferred that the moneys were paid on its behalf. I place little weight on the fact that the 17 June document was not on company letterhead (given the informality with which the arrangements in relation to the payment were conducted) nor on the fact that Mr Mijatovic "witnessed" the signing by Mr Lebic and Mr Fowler of the document rather than signing it other than in the express category of witness (there being no suggestion that Mr Lebic had personally paid the whole of the $60,000 to acquire the property for himself).
228Therefore, I place weight on the acknowledgment signed by Mr Fowler and find that the payment of $60,000 was made on behalf of the company. That disposes of the first issue for determination. I find that Nu Line Construction has standing to sue for the return of the moneys.
What was the arrangement re payment of invoices
229As to the arrangement in relation to the invoice payments, the evidence is unsatisfactory, there being no document recording the arrangement said to have been reached and nothing other than the acceptance that some invoices were paid to point to any arrangement in relation to the invoices. I am left, in essence, with conflicting assertions by Mr Mijatovic and Mr Fowler (albeit with an acknowledgment by the latter that there was some form of arrangement whereby some invoices were presented to Mr Mijatovic who then arranged payment thereof and with the evidence of Mr Lebic who recalled that up to $150,000 or $160,000 was to be paid "as a deposit".)
230Mr Hale submits that the payment of Mr Fowler's invoices (up to an amount of $150,000) was part of the initial agreement to purchase the property, referring to the evidence of Mr Mijatovic at [15] and [16] of his affidavit of 9 October 2009. Mr Lebic's recollection of the February 2000 discussions is to some extent consistent with this (since he refers to a deposit of "up to" $150,000) but he does not refer to the payment of invoices as being the manner in which that "deposit" was to be made. The seemingly informal manner in which the price was struck leaves it open that the balance between $60,000 and $150,000 or $160,000 was to be paid by some other deposit payment (and not by the invoice procedure that seems later to have been adopted).
231Insofar as reliance is placed on the fact that invoices were paid (and the evidence of actual payments is limited to whatever inference can be drawn from the written information on cheque butts that correlates with amounts withdrawn from the company bank account - only one of which is matched with an invoice in the possession of Mr Mijatovic), such an arrangement would equally be consistent with Mr Mijatovic agreeing to provide funds in advance of settlement in order to assist Mr Fowler (or to compensate for a delay in the sale proceeding).
232Further, it is strikingly inconsistent with the way in which the payment of $60,000 was evidenced by a written document (and the reason Mr Mijatovic is said to have required this) for there to be no attempt by him to document the payment of moneys for invoices as a part payment on the land.
233Mr Mijatovic's evidence as to the payment of invoices was not in my view persuasive (not helped by the fact that his affidavit referred to at least 7 payments that he conceded had not been paid - his explanation for the mistake indicating that what he had attempted to do was to reconstruct from bank statements and cheque butts what moneys had gone out of the Nu Line Construction bank account). There was no evidence other than that of Mr Mijatovic as to the entities to which the funds were in fact paid and the bookkeeping entries on which reliance was placed seem to have depended on what information Mr Mijatovic himself had provided to the internal accountant (who did not give evidence).
234However, Mr Fowler did not deny that there had been invoices presented to Mr Mijatovic and he accepted that at least some of the invoices in Exhibit C related to the work on his property.
235Mr Fowler's account itself is also not compelling. The suggestion that an agreement was reached in December 2001 to meet payment of invoices in consideration for the property being held off the market would be a not unreasonable commercial arrangement given the delay in the sale until that time but the difficulty with that is that the invoices in Mr Mijatovic's possession (which even, if unpaid, were given to him) pre-date this. Indeed the timing of the dates on the invoices would support Mr Mijatovic's contention that the invoice arrangement occurred even earlier than December 2000 (which was the date initially recalled by Mr Fowler).
236Therefore, while I have difficulty accepting that there was an arrangement for payment of invoices as part of the purchase price for the land or in determining which of the claimed amounts were referable to invoices actually paid for Mr Fowler's benefit (with perhaps the exception of the Eric's Art invoice for $9,075.00), I have even greater difficulty accepting that payment of those moneys was under an option arrangement. The assertion that this was an "option" arrangement relies on nothing other than Mr Fowler's recollection (or assertion) to that effect.
237I accept that moneys (in an unquantifiable amount) were paid out of Nu Line Construction's accounts and I accept that Mr Mijatovic arranged this in circumstances where he anticipated that the company would be purchasing the land (and I would infer that it was his understanding that he would be able to offset those amounts against any ultimate purchase price if the sale proceeded). Mr Mijatovic's response in the witness box (that these moneys were not paid "as a gift") would also be consistent with the invoice payments (whatever they may in fact have been) being moneys advanced from time to time to assist Mr Fowler's cash flow rather than any pre-payment of the purchase price as such.
238Mr Mijatovic's account that this was an arrangement reached prior to December 2000 (and closer to June 2000) is more likely than that of Mr Fowler, having regard to the date of various of the invoices. In circumstances where I am left in doubt as to the real arrangement in relation to the invoices, I have considered whether the appropriate finding would be that there was an arrangement (separate from the proposed sale agreement) that Mr Mijatovic would arrange payment of invoices at Mr Fowler's request (not exceeding the amount previously suggested as the upper limit of the deposit) and that these should be treated as moneys repayable on demand (which could have been set-off against the purchase price for the land had the sale proceeded).
239However, even in that event I would accept that they were paid on the understanding that they would be offset against the ultimate purchase price and, hence, were paid in anticipation of the purchase even if not as part of the purchase price.
240Ultimately, whether these payments are treated in the same fashion as the $60,000, or as moneys repayable on demand, the result would be the same in my view on the limitation question and hence nothing turns on this finding.
What payments were made for the invoices?
241As to the payments themselves, for a number of the itemised amounts there are no invoices and no receipts. The largest amount claimed is the DeGabriele Kitchens invoice (of $55,680). The cheque butt refers to a bank cheque. There is no bank documentation in relation to the issue of a bank cheque and no receipt from DeGabriele Kitchens (T 64.21-40). Mr Stitt submits that there is no evidence that DeGabriele Kitchens ever received such an amount of money, nor that Mr Fowler ever obtained any benefit of such an amount. It is further submitted (and I consider that there is force in this submission) that the evidence of Mr Mijatovic that he required a receipt for the $60,000 as it was a large amount of money (contained at [14] of his affidavit of 9 October 2009) makes it inconceivable that he would not have obtained a receipt for a similar amount of money at a later time.)
242Mr Stitt also places weight on the letter written by Ms Gunesekera (then instructed by the principals of Nu Line Construction) to the defendants' then solicitors in February 2002 in which she states that her instructions are that, as at 6 February 2002, her clients had "already paid to your client $100,000...", noting that this amount included the claimed 60,000 (see T 109.5-46) as gainsaying the suggestion that any amount greater in total than $100,000 had been paid (though that submission seems implicitly to accept that at least $40,000 may well have been paid). Mr Mijatovic's evidence in this regard suggests that he was hardly precise in his calculation of the amounts paid even then and that his memory cannot be regarded as reliable now as to the actual amounts advanced on behalf of Mr Fowler.
243I accept Mr Stitt's submission that Nu Line Construction has not satisfied the burden of proof as to the precise amounts that may have been paid for the benefit of Mr Fowler in this regard. I note that Mr Fowler accepts that "some" unquantified amounts were paid. However, I do not consider that an adverse inference arises from the fact that Mr Fowler put the company to proof in that regard (particularly given that his apparently poor recollection of events generally from 2000/2001 may well have been due to the passage of time).
Legal issues
244Turning then to the particular legal issues arising for determination, first, for the reasons above, I consider that Nu Line Construction did have standing to sue for the return of moneys paid in anticipation of the purchase price on its behalf ($60,000) and for any moneys it can show that it paid in respect of the invoices on behalf of Mr Fowler. As to the balance of the issues for determination, I have reached the conclusions set out below.
(i) Restitutionary claim
245The principal basis on which restitutionary relief is sought is that the contemplated state of affairs pursuant to which both the $60,000 and the payments said to have been made in respect of the invoices were made (identified as the anticipated purchase of the Wetherill Park land by Nu Line Construction) had failed to materialise either by June 2009 (when the land was sold to another entity) or earlier in 2006 (when it is said that negotiations for the purchase of the property 'finally' broke down) and hence there was a total failure of consideration for those payments in the sense explained by the late Professor Birks in his Introduction to the Law of Restitution (1985) at p 223, namely that:
... the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself.
246Reliance was placed on Roxborough & Ors v Rothmans of Pall Mall Australia Pty Limited (2001) 208 CLR 516 (per Gleeson CJ, Gaudron and Hayne JJ at [16] and Gummow J at [104]) and in Muschinski v Dodds (per Deane J at [619]-[620]) in this regard.
247It is contended for Nu Line Construction that, in retaining the money after the failure of consideration for its payment, Mr Fowler was unjustly enriched at the expense of Nu Line Construction and that Mr Fowler is therefore under an obligation to make just compensation for the benefit derived at the expense of the plaintiff (Roxborough [20]; Pavey & Matthews Pty Limited v Paul (1987) 162 CLR 221 per Deane J at p 257).
248The defendants submit that the purpose of the arrangement in relation to the payment of the $60,000 (and any moneys paid in relation to the invoices) was that this was an 'option fee' to "lock in" a price for the land of $300,000 and give the purchaser time to settle. The defendants submit that there was no 'unjust' enrichment in circumstances where they did take the property off the market and held it exclusively for the individual purchasers, and in circumstances where the price for the land remained the same from 17 June 2000 until 27 February 2002 when the solicitor for the defendants wrote to Ms Gunesekera seeking instructions as to whether the sale of the land was going to proceed. It is submitted that the principals of Nu Line Construction (and presumably the company itself) therefore obtained that for which they (or it) had bargained (and hence there was no failure of consideration).
249In determining whether an enrichment is unjust, what is required is not simply proof of a retention of a benefit but rather that there is an additional factor rendering retention of the benefit 'unjust' in the relevant sense (Pavey & Matthews Pty Ltd v Paul; Lactos Fresh Pty Ltd v Finishing Services Pty Ltd (No 2) [2006] FCA 748; Lumbers v W Cook Builders Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635; (2008) 247 ALR 412). This is to be determined by reference not to some subjective evaluation of what is fair or unconscionable but by reference to the existence of a qualifying or vitiating factor such as mistake, duress or illegality (David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, at 378-379; Farah Constructions v Say-Dee (2007) 230 CLR 89; Haxton v Equuscorp (formerly Equus Financial Services Ltd) (ACN 006 012 344) (2010) 265 ALR 336; [2010] VSCA 1).
250Failure of consideration is accepted as a basis on which a restitutionary claim (or a claim for moneys had and received as such claims were formerly characterised) can be made.
251Reference was also made by Mr Hale on the High Court's decision in Equuscorp Pty Ltd v Haxton [2012] HCA 7 (published the day after I had reserved judgment in the present matter) as reinforcing and restating (at [31]) the sense in which failure of consideration is described above and as an application of the approach adopted in David Securities in determining claims of unjust enrichment in the context of a claim where the vitiating factor is a failure of consideration ([30]-[33]).
252While Mr Hale accepts that the prima facie obligation to make restitution if the retention of the benefit of the payments would be unjust (by reference to a failure of the anticipated purchase to materialise) can be displaced "by circumstances which the law recognises would make an order for restitution unjust" (as noted at [30] in Equuscorp), he submits that there are no such recognised circumstances pleaded or established in the present case (noting that in Equuscorp, the recognised circumstance which displaced the prima facie liability was the need to maintain coherence of the law and that restitution should avoid self-stultification in the law ([38]) (which turned upon the proper construction of the legislation which rendered the transaction illegal and unenforceable)).
253Mr Stitt submits that Equuscorp can be distinguished on its facts generally (on the basis that in Equuscorp the parties sued under a deed whereas here Nu Line Construction is seeking the general exercise of discretion), but maintains that in any event it does not change the position in relation to the relevant principles of law applicable on the case before me, referring to what was said at [25] by French CJ, Crennan and Kiefel JJ and noting that at [34], their Honours said:
The outcome of a restitutionary claim for benefits received under a contract which is unenforceable for illegality, will depend upon whether it would be unjust for the recipient of a benefit under the contract to retain that benefit. There is no one-size-fits-all answer to the question of recoverability. As with the question of recoverability under a contract affected by illegality the outcome of the claim will depend upon the scope and purpose of the relevant statute. The central policy consideration at stake, as this Court said in Miller, is the coherence of the law. In that context it will be relevant that the statutory purpose is protective of a class of persons from whom the claimant seeks recovery. Also relevant will be the position of the claimant and whether it is an innocent party or involved in the illegality.
254Mr Stitt further submits that the import of the emphasis placed by the plurality on the qualification as to the lack of attributable blame and on the need to maintain coherence of the law is significant in the present case in that it could be said that the evidence in the present case discloses that Nu Line Construction was involved in an illegality (namely, in a decision to alter a contract document to permit a potential fraud on the revenue) and hence that it is in the position of a claimant involved in the illegality (or potential illegality), rather than being an 'innocent party'. It is submitted that it was Mr Fowler who was the innocent party in this regard as it was not to his benefit to change the price on a contract for the sale of land (Mr Stitt noting that it was not put to Mr Fowler that he would have obtained any benefit from this arrangement). (That said, insofar as this argument is relevant, it would seem that if the agreement was as Mr Mijatovic contends then Mr Fowler was at the very least prepared to accede to the same course of action in relation to the understated purchase price). In any event, I do not consider that recognition of the claim to restitution in this case would involve the principles considered in Equuscorp as to contracts unenforceable for illegality.
255There is pleaded an alternative claim to the unjust enrichment claim, namely a claim that Nu Line Construction was entitled to repayment of moneys. It is doubtful whether that claim truly is a claim in the alternative. Insofar as unjust enrichment has been rejected as a legal principle in Australian law (and, excepting new and developing categories of case, the analysis proceeds according to the established categories for the remedy of restitution), a claim for total failure of consideration is a claim historically based on the count for moneys had and received and not a separate cause of action.
256The plea of money had and received (indebitatus assumpsit) received its modern elucidation in Lord Mansfield in Moses v Macferlan (1760) 2 Burr 1005. Lord Mansfield spoke of the action as being "founded in the equity of the plaintiff's case" and an "equitable action, to recover back money, which ought not in justice to be kept". He described the circumstances which gave rise to the action as being for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition, (express, or implied;) or extortion; or oppression; or an undue advantage taken of the plaintiff's situation, contrary to laws made for the protection of persons under those circumstances.
257In Roxborough v Rothmans of Pall Mall, Gummow J discussed the relationship between the plea of money had and received and the illustrations that Lord Mansfield had given of when the action arose. Gummow J said (at 563) that:
Lord Mansfield emphasised that he had stated what were but examples of "the gist of this kind of action [namely] that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money". The particular examples which Lord Mansfield gave, of which failure of consideration is one (his Lordship did not add the qualification "total"), each have developed their own body of authority in which their meaning and scope will be sufficient. Usually, recourse to that particular body of authority will be sufficient. However, the specific examples Lord Mansfield gave are not exhaustive of the scope of the action.
258I accept that the $60,000 was paid in anticipation of the contract for sale being exchanged and completed; that it represented a part payment of the intended purchase price; and that this contemplated state of affairs did not materialise, giving rise to a prima facie obligation to refund those moneys. I also accept that there is nothing to dispel that prima facie liability of the kind contemplated in Equuscorp.
259The relevant question, however, is at what time the failure of consideration occurred. This is relevant to the limitations defence and I consider it at that stage.
(ii) Restitutionary interest claim
260The claim for interest is made as an incident of restitution, whether as part of the restitutionary cause of action itself or in the exercise of the original or auxiliary equitable jurisdiction and/or pursuant to the Court's statutory power under s100 of the Civil Procedure Act (reference being made by Mr Hale to the discussion in Restitution Law in Australia, Mason and Carter, 2nd edn at [2807]).
261The breadth of equity's jurisdiction to order the payment of interest is noted in Murdocca v Murdocca (No 2) [2002] NSWSC 505 by Campbell J (as his Honour then was) (from [7]) referred to this broad jurisdiction as arising whenever a person who is under an equitable obligation to pay a sum of money fails to do so (citing Hungerfords v Walker (1989) 171 CLR 125, at 148 per Mason CJ and Wilson J).
262Mr Hale invites me to approach the claim for restitutionary interest on the basis of the principles outlined and conclusion reached in Lahoud v Lahoud [2010] NSWSC 1297 by reference to authorities including Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Her Majesty's Commissioners of Inland Revenue and another [2007] UKHL 34; [2007] 4 All ER 657; Westdeutsche Landesbank Girozentrale v Islington London BC [1996] 2 All ER 961, [1996] AC 669, [1996] 2 WLR 802, HL; National Australia Bank Ltd v Budget Stationery Supplies Pty Ltd (23 April 1997, unreported); State Bank of New South Wales Ltd v FCT (1995) 62 FCR 371; 132 ALR 653; and Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285. In Lahoud, I concluded that (in the absence of a definitive ruling by the High Court on this issue), Mason P's decision in Heydon remained binding authority supporting the availability of a claim for interest on the basis of restitutionary principles notwithstanding that the claim brought may be 'free-standing' in the sense referred to in SCI. I remain of that view.
263In the present case, however, I consider (on a similar basis to the reasoning of Wilcox J in State Bank v FCT) that the retention of the moneys did not become unjust until after the contemplated state of affairs in connection with which they were paid had failed to materialise and hence that had any interest been payable it would not be from the date the payments were made. This is because there is nothing to suggest that there was any intention that Mr Fowler should not be free to use the moneys in advance of the proposed purchase and no suggestion that interest be payable on those sums if they later became repayable.
(iii) Alternative constructive trust claim
264It is further submitted by Mr Hale that equity will not permit Mr Fowler to assert or to retain the benefit of the money paid since it would be unconscionable for him so to do and that he therefore holds the money on constructive trust for Nu Line Construction (referring to what was said in Muschinski v Dodds by Deane J at pp 619-620 and 623 and in Baumgartner v Baumgartner by Mason CJ, Wilson and Deane JJ at pp147-148) in circumstances where the property has now been sold and there can be no proprietary claim against it.
265In submissions it was acknowledged, in effect, that the alternative claim to relief based on the principles outlined in Baumgartner and Muschinski v Dodds (where there was an application of the general equitable principle which restores to a party contributions which he or she has made to a joint venture which fails without attributable blame when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them) did not advance the plaintiff's claim beyond that based on a total failure of consideration.
266For completeness, however, I note that the principle here relied upon is that outlined by Deane J in Muschinski (at 620):
... the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf Atwood v Maude [1858] LR 3 Ch App 369 at pp 374-375 and per Jessel MR, Lyon v Tweddell (1881) 17 Ch D 529 at 531).
and that, although, subject to some academic criticism (J D Heydon and M Leeming, Jacob's Law of Trusts in Australia (7th ed, 2006) at [1353]) and although judicial caution has been advocated as to when a proprietary right should be interposed to prevent unconscientious reliance on legal rights (see Gummow J during the special leave application in relation to Friend v Brooker [2008] HCA Trans 344), the principle has been applied in a number of cases.
267As to whether the requirements might be said to have been established, I accept that the proposed purchase of the Wetherill Park land might in one sense be described as a joint endeavour, although ordinarily I doubt that one would think of a sale of property from one party to another (in which each party was considering that party's own separate commercial or other interests) as a joint endeavour in the sense contemplated in cases such as Baumgartner, Muschinski or, say, West v Mead, [2003] NSWSC 161. It is not, for example, a situation falling within the first of the requirements articulated by Campbell J (as his Honour then was) in West v Mead to be established before such a trust could be imposed (namely that there be a joint relationship or endeavour, in which expenditure is shared for the common benefit in the course of and for the purposes of which an asset is acquired).
268The second requirement, namely failure without attributable blame would seemingly be satisfied to the extent that it seems that there was a decision not to proceed otherwise in the context of a breach of some contractual obligation to do so.
269What would also be required, however, would be the requisite element of unconscionability for the benefit of the relevant monetary contributions to be retained by the other party to the joint endeavour. (In this regard, the question whether it is unconscionable for Mr Fowler to retain the benefit of the $60,000 payment or any payments made in relation to his invoices must be viewed in light of the period of time in which the property was from a practical point of view held off the market and the lapse of time between the cessation of negotiations in relation to the purchase by at least mid 2002 and the delay in the commencement of the proceedings.) In applying the Baumgartner principle, idiosyncratic notions of what is just or fair are not sufficient for the imposition of a constructive trust. What is required is that unconscionability be established (West v Mead at [62]; Cetojevic v Cetojevic [2007] NSWCA 33 at [34]. That brings the matter back to the question whether it would be unconscionable for Mr Fowler to retain the sum(s) paid to him in anticipation of the sale in the circumstances that have now transpired. While I consider that such unconscionability could be established as at the time the contemplated sale failed to materialise, I am by no means satisfied that it remains the case some years after that (and where in the interim the property had not been sold, such that it had been potentially available for purchase by Nu Line Construction over a considerable period).
270I note, moreover, that in Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566, the High Court made it clear that where relief of this kind was sought the Court must consider whether there are other means available to quell the controversy between the parties, with a view to the Court granting the minimum relief necessary in those circumstances. Similarly, in Giumelli v Giumelli (1999) 196 CLR 101, their Honours noted that "Before a constructive trust is imposed, the court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust". In the present case it seems to me that a trust remedy would not be the minimum equity to be applied.
(iv) Limitation Act defence
271The first question to be determined when considering the Limitation Act defence is the relevant period in which claim in restitution for moneys had and received based on the total failure of consideration for the payments in question was required to have been brought (the proceedings having been instituted in September 2008).
272Section 14 of the Limitation Act 1969 (NSW) provides that an action in quasi contract must be brought within six years of the accrual of the cause of action. This limitation period applies, having regard to the authorities discussed below, to a claim based on total failure of consideration.
273In Torrens Aloha v Citibank NA (1997) 144 ALR 89, Sackville J (as his Honour then was, then sitting in the Federal Court of Australia) noted that the language of s 14(1)(a) was not entirely apt to cover restitutionary claims, referring to the concept of unjust enrichment, but accepted that a restitutionary claim for money paid under mistake still fell within the words of s 14(1)(a).
274In English law, the classification of a claim for money had and received in the context of determining the appropriate limitation period was considered in Chesworth v Farrar [1967] 1 QB 407 by Edmund Davies J, who held, following Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, that the action fell within the category of quasi contract and therefore neither the provision regarding contract nor the provision regarding tort applied.
275In K Mason, J W Carter and G J Tolhurst, Mason & Carter's Restitution Law in Australia (2nd ed, 2008), it is noted at [2719] that applying the same limitation period for contractual claims to claims in "quasi contract" by analogy has a number of problems: one being that it provides limited assistance in determining when a cause of action accrues and time commences to run for a restitutionary claim; another being that the general limitation provision of six years from the cause of action accruing yields in a number of cases to specific statutory rules that affect some categories which are commonly considered to be restitutionary claims, such as those based on fraud, mistake, frustrated contracts, contribution and certain claims affecting trust property and estates.
276The heterogenous nature of unjust enrichment claims requires a case by case consideration in order to determine the correct limitation period and when that time commences to run. In considering how to classify a claim in "quasi-contract" or restitution, T Prime and G Scanlan, The Law of Limitation (2nd ed, 2011) state (at p 21) that:
The short answer to the question thus raised is that there is no single uniform categorisation into which restitution claims can be swept. ... The issue in each case is the identification, and subsequent categorisation, of the underlying cause of action which is being used to found the restitutionary claim.
277The accepted formulation of a cause of action (adopted by Sackville J in Torrens Aloha) is that it encompasses every material fact that is necessary to be proved to entitle the plaintiff to sue (Cooke v Gill (1873) 8 LR CP 107; Read v Brown (1888) 22 QBD 128; Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234). A cause of action accrues only when all the material facts have occurred. The relevant question for present purposes is thus when a cause of action for total failure of consideration will be taken to have accrued.
278In Torrens Aloha, his Honour considered a submission that a cause of action for a restitutionary claim, where the unjust retention of the benefit was based on a mistake of law and noted that the authorities to which reference was there made did not suggest that a cause of action did not accrue until the courts acknowledged the existence of the right to sue, rather that:
The statements focus on the facts which a plaintiff must establish. Knowledge of the right to sue is not an essential ingredient of a cause of action. It would seem to follow that recognition of the right to sue by the courts is also not an essential ingredient. If it were otherwise, many cases would have been decided differently. ...
279His Honour stated that:
This conclusion is consistent with the principles governing the accrual of a cause of action to recover money paid by mistake. In a common law action for the recovery of money paid under a mistake of fact, the rule was that time ran from the date of payment of the money and not the date of discovery of the mistake: Baker v Courage & Co [1910] 1 KB 56; In re Mason [1929] 1 Ch.1, at 9, per Lord Hanworth MR.
...
... The authorities to which I have referred suggest strongly that a cause of action for recovery of moneys paid under a mistake of law accrues on the date of payment. Indeed, this was the view taken by Brennan J in his concurring judgment in David Securities. His Honour said this (at 389):
"If under a mistake, money is paid to and unjustly enriches a payee, the payer's right to recover the amount paid accrues at the moment when the payee received the money." [Emphasis added.]
At the very least, the authorities provide no support for the contention that the cause of action does not accrue until the courts acknowledge that the facts alleged give rise to a cause of action.
280While the action for money had and received may not be limited to the categories enumerated in Moses v Macferlan, it nevertheless does not appear that it can stand independent of the circumstances which make the retention of money by the defendant against conscience and unjust. If the question when a cause of action accrues requires consideration of the substantive constituents of that cause of action, then unless the categories of case falling under the banner of money had and received can be said to have a uniform pattern or can be distilled to the same material outline of events, there is limited utility in referring to the action of money had and received in the context of limitation periods, rather than the specific category of case being pleaded.
281In P Handford, Limitation of Actions: The Laws of Australia (2nd ed, 2007), the proposition is given that for an action for money had and received, the cause of action accrues at the date of payment to the defendant or the defendant's use (at [5.10.720]), citing Baker v Courage & Co [1910] 1 KB 56 in support (to which Sackville J referred in Torrens Aloha), a case considering moneys paid under a mistake of fact.
282There are few cases that deal specifically with the time at which a restitutionary claim based on failure of consideration accrues as a cause of action. Limitation of Actions cites Guardian Ocean Cargoes Ltd v Banco Do Brasil (The Golden Med) [No 3] [1992] 2 Lloyd's Rep 193 (QB) as supporting the proposition that for an action based on total failure of consideration, time runs from the date the consideration failed, not the date when the money was paid.
283In Guardian Ocean, a payment of $600,000 had been made by the plaintiffs to the defendants in the context of protracted negotiations to refinance the building of a ship. In a prior judgment, Hirst J had found in favour of the plaintiffs that, having the paid the money on the condition that the negotiations were successful, they were entitled to be reimbursed by the defendants once the negotiations broke down. The remaining question was, for the purpose of a statutory claim of interest, when the cause of action arose. Hirst J said (at 199-200) that:
...by analogy, the frustration cases, in particular the leading case in the House of Lord of Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe (1942) 73 Lloyd's L Rep 45; [1943] AC 32, as showing that the claim in such a case by a party, who was paying money under a contract, to get the money back, on the grounds that the consideration for which he paid it has totally failed, arises because, in the circumstances that have happened, the law gives a remedy in quasi-contract to the party who has not got that for which he bargained; thus the claim is to recover money to which the defendant has no further right, because in the circumstances that have happened the money must be regarded as received to the plaintiff's use...
I accept Miss Gloster's argument, and hold that for the reasons she gave the cause of action only arose after the negotiations broke down, and it was no longer proper and appropriate for the defendants to continue to hold the $600,000 since the condition under which it had been deposited no longer applied; so that the defendants in the circumstances that had happened had no further right to the monies, which must thereafter be regarded as received to the plaintiffs' use.
284Although Hirst J refers to a remedy in quasi contract for total failure of consideration in course of his reasons, Guardian Ocean strictly so-called may be seen as a failure of condition case (that being also a recognised basis upon which restitution operates to entitle the plaintiff to repayment although in each case relief is based on a different principle). The distinction between a conditional payment and a claim for total failure of consideration was discussed in Baltic Shipping Co v Dillon (1993) 111 ALR 269 where Mason CJ was of the view (at 293) that in addition to total failure of consideration:
An alternative basis for the recovery of money paid in advance pursuant to a contract in expectation of the receipt of the consideration to be provided by the defendant may arise when the defendant's right to retain the payment is conditional upon performance of his or her obligations under the contract. This basis of recovery has a superficial but not a close resemblance to the concept of an entire contract. In the class of case the plaintiff may be entitled to recover so long as the payment remains conditional.
285This basis of recovery is consistent with Dixon J's observations in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477 that:
When a contract stipulates for payment of part of the purchase money in advance, the purchaser relying only on the vendor's promise to give him a conveyance, the vendor is entitled to enforce payment before the time has arrived for conveying the land; yet his title to retain the money has been considered not to be absolute but conditional upon the subsequent completion of the contract.
286Whether the entitlement to repayment is based on total failure of consideration or a condition impressed upon the advance that failed, the contract must be construed so as to determine for what purpose the money was advanced and what was the consideration for which the parties had bargained (Baltic Shipping).
287For the purposes of determining when a cause of action accrues, the two bases of recovery are similar and the rule proposed in Guardian Ocean may be applied by analogy. There is no right to sue for the return of a conditional payment until the condition fails, as until that time, the defendant retains a right to hold the monies advanced. Similarly, the right to sue on the basis of a total failure of consideration can arise only once the consideration has failed. In Baltic Shipping, Mason CJ noted (at 297) that:
The action to recover money paid on a total failure of consideration is on a common money count for money had and received to the use of the plaintiff. The action evolved from the writ of indebitatus assumpsit. It is available only if the contract has been discharged, either for breach or following frustration, and there has been a total, and not merely partial, failure of consideration. (emphasis mine)
288Here, there is no enforceable contract to be discharged as such but logically the position should be the same.
289I accept Mr Hale's submission that the cause of action for restitutionary claim based on a total failure of consideration arises not by reference to the time at which the payment was made but at the time the contemplated state of affairs failed to materialise (if at that stage there was a total failure of consideration in the sense considered in Roxborough).
290When did the contemplated state of affairs fail to materialise? Mr Hale submits that the contemplated state of affairs did not fail to materialise until, at the earliest, July 2006 when the negotiations for purchase of the property finally broke down.
291Mr Hale refers to Mr Lebic's evidence in his affidavit at [27] to the effect that at a meeting in 2006 he said "We want to finalise the settlement on the land. It has been a long time and you have waited patiently" and to the evidence of Ms Gunesekera that she does not recall telling Mr Lebic that the company could not proceed to purchase the land or be repaid the money paid or that it had no rights as contracts were not exchanged (she also gave evidence that it makes no sense for her to have given that advice as the contracts were not exchanged - T 21.50; T 22.5; T 31.15; T 32.2, T 35.40); that Ms Gunesekera denied receiving instructions in 2002 to the effect that the company did not intend to proceed with the purchase of the land and said that if she had received those instructions, she would have informed the vendor's solicitors (T 29.35).
292That submission, however, does not in my view sufficiently take into account the fact that, from February to May 2002, the vendor's solicitors were pressing for confirmation as to whether Nu Line Construction intended to proceed with the purchase (and were met with deafening silence on the part of Nu Line Construction), particularly where, leading up to this, Ms Gunesekera had been indicating from time to time a readiness to exchange contracts.
293Looking at the state of the sale from mid-2000, it cannot be said that there was any indication that the purchaser still intended to proceed. It follows that the contemplated state of affairs in anticipation of which moneys had been paid must by then be said to have objectively failed to materialise. The fact that discussions might later have been received in relation to a proposed purchase or that one or more of the principals of Nu Line Construction may have harboured a hope (or even had an expectation) that if and when they later chose to reactivate the discussions, the property would still be available to purchase (whether or not at the same price) seems to me to be beside the point.
294As at mid May 2002 (after four months of silence on the part of Nu Line Construction - and in the face of repeated requests as to its position), I consider that the only reasonable conclusion would have been that the purchaser did not intend to proceed with an exchange of contracts and, hence, the contemplated sale had by then failed to materialise. I do not consider that the conversation as to retaining wall payments warrants a different conclusion.
295For completeness I note that if (contrary to the conclusion I have reached) any invoice payments established to have been made were not in the same category as the June 2000 "part payment" (ie if they were not moneys paid in anticipation of the sale proceeding) and were recoverable only as an advance repayable on demand, there is authority for the proposition that, unless the making of the demand was a condition precedent to the obligation to pay arising then (other than in the limited exception in banker/customer cases) the cause of action accrues when the money was advanced (Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560; [1956] ALR 939, (at 566-567); Ogilvie v Adams [1981] VR 1041; Haller v Arye [2005] QCA 224; (2005) 2 Qd R 410, at [26] - [30])
296In Haller, at [31], the Queensland Court of Appeal adopted the analysis of Nettle J in VL Finance Pty Ltd v Legudi [2003] VSC 57; (2003) 54 ATR 221 and confirmed that "the principle in Ogilvie, in its full rigour, remains securely established in our commercial law". Similarly in Faraday v Rappaport [2007] NSWSC 34, White J stated at [102]:
Had I been of the view that the moneys were advanced as a loan, the loan would have been repayable on demand. A cause of action for its repayment would have arisen immediately the advance was made, not when demand was made for it on the service of the amended statement of claim (Young v Queensland Trustees Ltd (1956) 99 CLR 560; Ogilvie v Adams [1981] VR 1041; Haller v Ayre [2005] 2 Qd R 410).
297Therefore, had the fact of the invoice payments been established and had those payments been no more than advances repayable on demand, then the cause of action for those moneys would commence on time of each of the payments and any such claim would have expired at the latest by February 2007, since the last claimed payment was in February 2001.
Discretionary Issues
298In light of the findings I have reached, these do not arise (and, on Mr Hale's submission, they should not in any event be considered, having regard to the matters pleaded in the defence). Nevertheless, for completeness, I address the matters raised as follows.
Unclean hands
299On Mr Mijatovic's own evidence, it seems that he recognised this was an "underhand" deal or at least one that he should not disclose fully to the company's solicitor. Despite the fact that he said on oath that he would not sign a false document, on his evidence the contract signed by him as a director of the company (albeit never exchanged) did falsely state the purchase price and his only explanation for this conduct (contrary to what he had sworn was his practice) was that Mr Fowler had demanded that this be done and that the land was a "good deal".
300However, that does not mean that Nu Line Construction should be precluded from recovering moneys paid in anticipation of a contract that (had the contract proceeded) may have operated to deprive the government of stamp duty revenue. It might well be a different matter if Nu Line Construction had been seeking to enforce the agreement for sale itself (not having paid stamp duty on what it contends is the real sale price) but that is not the situation before me. Rather, it is seeking to recover moneys paid under an arrangement that might have led to a contract in fraud of the revenue but did not do so.
301Mr Stitt raised the issue of unclean hands. It is well recognised that the defence of unclean hands is based on the equitable maxim that someone who comes to equity must have clean hands (as explained in Black Uhlans Inc v New South Wales Crime Commissions [2002] NSWSC 1060 at [158]).
302To establish a defence of unclean hands (and I note that none was here pleaded), there must be some impropriety in a legal (not merely moral) sense (though impropriety need not require illegality) (Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184; Meagher Gummow and Lehane (4th ed, 2002) at [3-110]). Further, the impropriety must have an immediate and necessary relation to the equity sued for in the proceedings (so, for example, in Clapham v Shillito (1844) 7 Beav 146 and Learmonth v Morris (1868-9) 6 W W & A'B (E) 74 unclean hands was not made out and the defendant was granted specific performance of the contract despite having made a misrepresentation to the other party to the contract, in circumstances where the misrepresentation did not in fact mislead the other party).
303The relationship between the alleged impropriety and the equity sued for has been expressed as whether the right upon which the plaintiff seeks relief is tainted by the impropriety or is independent of the impropriety (Meyers v Casey (1913) 17 CLR 90 at 123 per Isaacs J; Dow Securities Pty Ltd v Manufacturing Investments Ltd (1981) 5 ACLR 501; Moody v Cox [1917] 2 Ch 71; see also the cases discussed in Black Uhlans).
304If, as suggested by Campbell J (as his Honour then was) in Black Uhlans (at [179]), referring to Gascoigne v Gascoigne [1918] 1 KB 223 and In re Emery's Investment Trusts [1959] Ch 410 (though cf Kation Pty Ltd v Lamru Pty Ltd [2009] NSWCA 145), the test is whether it is necessary for the party claiming relief to prove its own bad conduct in order to obtain the relief, then that is not the case on the present facts. The claim relied upon in the present case is not dependent on establishing a sale price that was higher than that provided for on the document that seems to have been the document that would have been stamped had the sale proceeded. Nor is it necessary to prove that there was any particular disclosure of the arrangements to the external administrator of the company in order to prove the claim for restitutionary relief.
305Allsop P and Hodgson JA upheld the finding at first instance that unclean hands had tainted the plaintiffs' claim in the Court of Appeal Kation v Lamru. On the requirement of an immediate and necessary relation, Hodgson JA said at [28] that:
...it is not a requirement that the relation be of the nature of contributing to or constituting the equity sued for; and since this requirement is not a rule of law but merely an aspect of principles guiding the exercise of discretion, it should not in my opinion be given a narrow or technical construction.
In the present case, the relation between the bad conduct and the equity sued for was that the bad conduct established practices conducive to the understatement of stock as at 30 June 1996, and to the disposal of abstracted stock in the year ended 30 June 1997; and that it provided an essential part of the evidentiary material supporting the finding that the equity sued for existed. In my opinion, that relation was sufficiently close to justify application of the unclean hands doctrine.
306Basten JA dissented on this point. He held that there was no such immediate and necessary relation on the basis that "[n]o part of Lamru's cause of action depended on its or Mr Lamb's improper or discreditable conduct". His Honour held (at [155]) that to find that there was a "continuum between complained of and the conduct relied on to prove it" (the latter being evidence of Mr Lamb's own past practices) involved "elisions in the process of reasoning". His Honour then went on to comment (at [159]) in relation to the evidentiary proposition, that:
[t]here may be an element of ambiguity in asking whether the plaintiff "needs to" prove his own bad conduct. In a constrained sense, the need may be identified by reference to the legal elements of the cause of action; in the broader sense, the need may be a practical one referring to that which is necessary in an evidential sense. The authorities which led his Honour to adopt that language do not, however, support the latter construction. Further, his Honour's failure to identify the possible ambiguity in a careful analysis of the case-law, suggests that he was indeed focusing upon the more constrained approach requiring a legal necessity of reliance upon bad conduct. So understood, the defence has no application in the present case and, in my view, his Honour was in error in upholding it.
307Whether or not the proposition (that where a plaintiff is required to prove their own bad conduct there is a sufficient nexus for unclean hands to operate) holds good, insofar as (consistent with Hodgson JA and Allsop P's reasons in Lamru), the doctrine is a discretionary one then the fact that a plaintiff leads evidence of its own bad conduct may be taken into account when considering whether or not the relief sought should be granted.
308In this regard, reference was made during the course of the hearing to the potential stamp duty and capital gains tax consequences that would have followed had the proposed agreement for sale been executed and as to the seeming non-disclosure of any claim that the company might have had as to the property at the time that the company was under external administration of one kind or another (neither of which, as Mr Hale emphasises, was pleaded).
309It is submitted by Mr Hale that no such enforceable agreement was entered into and that the present restitutionary claim does not depend upon unenforceability of a contract by reason of its illegality. Thus, it is said (and I agree) that the analysis of illegality under consideration in Equuscorp has no relevance to the present case.
310As to the other matter raised in the context of the 'cleanliness' or otherwise of the plaintiff's hands, I have some concern as to what seems to have been a failure to draw to the attention of the voluntary/deed administrator the potential for recovery by the company of moneys spent in anticipation of a purchase of the property.
311Pursuant to s 438B of the Corporations Act 2001 (Cth), the directors of Nu Line were under an obligation before the execution of a deed of company arrangement to provide all the company's books to the administrator and disclose to the administrator the state of the company's business, property, affairs and financial circumstances. The effect of sub-sections (4), (5) and (6) mean that failure to comply with the obligations imposed under s 438B is an offence of strict liability, unless the person in contravention as a reasonable excuse. If Nu Line had a claim against Mr Fowler and the directors failed to disclose this to the administrator during its administration, then the directors seemingly would have failed to comply with their obligation under s 438B and this failure may constitute improper conduct of a legal kind as required by Dering upon which the defence of unclean hands may be raised against the plaintiff.
312The context in which this duty is owed and how s 438B sits within the framework of Pt 5.3A of the Corporations Act was discussed by Lindgren J in Deputy Commissioner of Taxation v Wellnora Pty Limited [2007] FCA 1234 at [196]:
The Explanatory Memorandum for the Corporate Law Reform Bill 1992 stated (para 449) that the new Pt 5.3A was intended to provide for:
speed and ease of commencement of administration;
minimisation of expensive and time-consuming court involvement and formal meeting procedures;
flexibility of action at key stages in the administration process; and
ease of transition to other insolvency solutions where an administration does not by itself offer all the answers
313The primary relief available in relation to Pt 5.3A is to vary, terminate or avoid the deed of company arrangement by impugning the process by which it was arrived at and executed. This is the context in s 438B is considered (although only in passing) in Wellnora. It was also considered in this context in Spiteri v Georges [2002] VSC 473 by Hansen J, where his Honour described the obligations under s 438B (at [80]) as being:
...the necessary and complementary obligation on a director under s 438B [to the obligation of the administrator under s 439A], which requires that a director must, as soon as practicable after the administration begins, deliver to the administrator all books in their possession that relate to the company...[a] director must attend on the administrator and give the administrator such information about the company's business, property , affairs and financial circumstances as the administrator reasonably required.
314There, his Honour referred to the administrator's duty to report to ASIC where a past or present officer of the company may have been guilty of an offence in relation to the company under s 438D and suggests that this provision covers a director's failure to comply with s 438B. However, his Honour, although considering that the "administrators were starved of information to which they were entitled" by the director's conduct in Spiteri, did not set aside the decisions made by the administrator at the first creditors' meeting.
315While it is clear that the alleged improper conduct need not be carried out against the defendant pleading unclean hands against the plaintiff, as long the immediate and necessary connection is established (Carantinos v Magafas [2008] NSWCA 304; Armstrong v Sheppard & Short Ltd [1959] 2 QB 384; Kettles & Gas Appliances Ltd v Anthony Hordern & Sons Ltd (1934) 35 SR(NSW) 108) and hence it would be no bar to raising unclean hands that the wrongful conduct of the Nu Line directors was perpetrated against the company, rather than against Mr Fowler, in the circumstances of the current case I consider that no such defence can be raised.
316Despite there being few cases concerned with contravention of the provision or in which contravention of the provision was held to lead to legal consequences for the contravening party, s 438B plainly sets out an offence, contravention of which would amount to conduct which is improper in a legal sense. For any finding of that kind to be made would be a serious matter and one that would require the level of satisfaction referred to in Briginshaw v Briginshaw (1938) 60 CLR 336. No such finding could be made in the present case, where the allegation was not pleaded and was raised in effect in submissions as to the discretionary relief based on evidence admitted for a limited purpose in relation to the deed of company arrangement.
317I note that the relevant equitable relief sought is for the Court to recognise the a constructive trust over the proceeds of sale in favour of the plaintiff, the right arising from the money paid pursuant to the alleged contract. The right arose independently of the conduct involved in failing to comply with s 438B. At the highest, it may be contended that the alleged failure to disclose the claim prevented it from being called upon to satisfy the company's debts. However, there is no evidence going to the circumstances in which disclosure may or may not have been called for or as to whether those circumstances support an inference that, if the directors did fail to disclose the claim, that failure was done deliberately or in order to obtain an (if not present then future) illegitimate gain.
318Any such failure would seem to me to be a matter weighing against any exercise of discretion in the grant of equitable relief since it would arguably reward the present owner of the company (Mr Mijatovic) at the expense or potential expense of creditors who agreed to the deed of company arrangement in the absence of full information as to the company's assets or potential assets. However, while it seems to me that there is at least a potential inference that Mr Mijatovic waited until the company was out of external administration (and no longer subject to a deed of company arrangement) to pursue (with or without his then co-directors) the opportunity for purchase of the land and/or to recover the moneys that are said to have been paid on behalf of the company, that is not a matter on which I can make a finding and ultimately I have not taken that into account in my final decision in this matter.
Laches
319As noted by Mr Stitt, a defence of laches, acquiescence and delay is pleaded at [15] of the Defence to the Further Amended Statement of Claim in respect of any equitable claim relied upon by the plaintiff. To the extent that the Court is being asked to use its discretion to extend an equitable remedy to Nu Line Construction, it is submitted by Mr Stitt that this is not appropriate having regard to the "unexplained" delay in prosecuting these claims and having regard to the complaints made as to the manner in which it has acted.
320Emphasis was again placed in this context on the inference that Nu Line Construction did not disclose the alleged financial arrangement to the external administrators (pursuant to the statutory obligations of the directors in relation to such disclosure or otherwise). I was invited to draw the inference that the delay in commencement of the proceedings was due to a wish on the part of one or more of the directors of Nu Line Construction (which went into voluntary administration on 7 April 2003 and was, from 28 May 2003 until 27 June 2005, under external administration and subject to a deed of company arrangement) not to disclose to its creditors that it might have a cause of action against the defendants (whether to compel the sale of the Wetherill Park property or to recover moneys paid in relation to the proposed purchase of that land).
321Mr Stitt submits that it can be inferred that there was no disclosure to the external administrator, whether in his capacity first as voluntary administrator and then as deed administrator, of any claim that Nu Line Construction might have had in relation to the proposed purchase and hence that Nu Line Construction deliberately refrained from pursuing any common law remedy for moneys had and received within the limitation period. Thus, Mr Stitt submits that it is Mr Mijatovic's own actions that have led to the position in which he is now placed. Whether or not that is the case is not the issue. For laches to be considered it would be necessary to point to some particular prejudice to the defendants as a result of the delay. It is noted in Meager Gummow and Lehane (at [36-005]) that mere delay is not enough to constitute either laches or acquiescence (there citing Jones v Stones [1999] 1 WLR 1739 and further discussing the question of delay in this context at [36-070]).
322In light of the conclusions reached in relation to the limitation defence to the restitutionary claim, this issue is not necessary for determination. Suffice it note that I am not satisfied that the defence of laches is made out on the present case.
Conclusion
323For the reasons set out above, while I consider that as at mid 2002 there was a good cause of action in restitution against Mr Fowler to recover the sum of $60,000 paid in part payment of the purchase price for the Wetherill Park property (and to recover such of the invoice payments as it was established had been made with a view to being offset against any ultimate purchase price, though on the evidence before me the only payment so established was the $9,075 Eric's Art invoice), and that Nu Line Construction had standing to bring that claim, I have concluded that by the time these proceedings were commenced the claim was statute barred.
324This is because I am of the view that the time at which, objectively viewed, the contemplated state of affairs in anticipation of which the said moneys were paid (namely, the purchase of the Wetherill Park property, whether at the stipulated contract price or at some other price) had failed to materialise was at or about mid 2002. I draw that conclusion from the fact that Nu Line Construction, over a period of some four months, had chosen not to respond to successive requests for confirmation of its intention to proceed with the purchase. Objectively, as at mid 2002 there was no active step being taken to progress the purchase (unlike the period up to early 2002 when steps were being taken through the lawyers acting on both sides to progress the matter).
325Insofar as reliance is placed on the discussion that took place in 2004 in relation to the retaining wall payment (as indicating that the parties understood the proposed purchase still to be on foot at that stage), it seems to me that the evidence is inconclusive. It would be consistent with Mr Fowler (who, as it was, thought it had been unnecessary to pay the money) simply not pursuing the issue with Mr Lebic (on the basis that the money had already been paid so there would be no point in doing so). It would also be consistent with Mr Fowler not being averse to the possibility that the stalled purchase negotiations might later be revived. It does not, however, necessarily mean that as at mid 2002 there was objectively an ongoing purchase in contemplation.
326Had I been of the view that the claim was not statute-barred, I would have found for Nu Line Construction in the sum of $69,075 and awarded restitutionary interest on that amount as from the date on which the contemplated state of affairs had failed to materialise (which, on the hypothesis on which a conclusion that the claim was not statute barred would then have been based, would have been from July 2006) and statutory interest from the date the proceedings were commenced.
Orders
327I dismiss the plaintiff's claim. In the ordinary course, costs would follow the event. Before I make any final order for costs I will hear any submissions the parties wish to make in relation thereto.