Saad v Saad Properties Pty Ltd

Judgment 1HIS HONOUR: The question for decision is whether the plaintiff is entitled to occupy certain premises at Strathfield owned by the defendant for so long as he practises as a solicitor from the premises. The claim is based both in contract and estoppel.

Facts 2The plaintiff, Mr Joseph Saad (Joseph), is a solicitor. He is one of eleven children of Peter and Alazic Saad. Both parents came to Australia from Lebanon: the father in 1950 and the mother in 1954. Six of the children were born in Lebanon and five in Australia. Joseph was born in Australia. Louis Saad (Louis) is the second child and eldest son. 3Members of the family were involved in running various service station businesses in Haberfield, Leichhardt and Lewisham. Louis was the family member making most of the business decisions. The service stations were run through separate companies. The financial arrangements are not made very clear in the evidence, but it does seem clear that another company, Saad Holdings Pty Ltd ("Saad Holdings") was some sort of management company which received all the income from the service station businesses and paid all the expenses. It alone operated a bank account. Joseph at the age of about 22 became a director of Saad Holdings. The other shareholder and director at that time was Louis. 4There are two other companies of significance in this case. The first, Saad Properties Pty Ltd ("Saad Properties") was incorporated in 1977. The original directors were Louis and Joseph. Saad Properties is a trustee company and is trustee of the Saad Unit Trust all units of which are held for the Louis Saad Trust. Joseph and Louis each held four management shares. No other shares were issued. 5The other company of importance is Hardine Pty Ltd ("Hardine"). It was incorporated in 1970 as a company title home unit company owning a block of flats at 130 The Boulevard in Dulwich Hill. The units were occupied in the long run by members of the Saad Family, most, if not all, of whom were shareholders. The shares presumably entitled the holders to occupy a particular unit. Hardine later purchased 128 The Boulevard which was let to tenants. 6It is not disputed that Louis was the driving force behind the family business; nor is it disputed that he made most of the decisions, including the distribution of money from Saad Holdings. That is not to say the distributions were improper as they appear to have been made to family members working in the businesses, presumably in accordance with the work they did, rather than the shares which were held. 7Joseph was admitted as a solicitor in 1983. It appears that he was employed by Saad Properties, or at least he operated on that basis. 8Louis was pleased to have a lawyer in the family. He encouraged Joseph to look for suitable premises for purchase from which a solicitor's practice could be conducted. Joseph located a property in Strathfield Square and told Louis of it. Louis inspected it and according to Joseph said: "We're going to buy this property and you'll be running your legal practice from there very soon." 9Saad Properties purchased the property at auction for $481,000 in October 1985. It is now the land contained in Certificate of Title Folio Identifier 1/433421. The purchase was settled in December 1985. Paragraphs 83-86 of the affidavit of Joseph are as follows: "83. The contract was completed on or about 15 December 1985. No mortgage was required to complete the purchase. The purchase price was paid from monies from various companies within the Saad group of companies. The sourcing of these monies was determined and undertaken by Louis. I was not involved in sourcing the funds. 84. On or about 15 December 1985, I had the following conversation with Louis: I said: 'You said when we first saw the property that it will be the place for me to set up my law practice' I then said in Arabic 'Izeh Allah be read' meaning 'God willing' and then continued 'and we did it.' Louis said: 'Mate. We're the Saad brothers. I keep saying to you all if we stick together, we can achieve anything. United we stand, divided we fall. We have to stay united to be strong. We've got a solicitor in the family and that's what we've all worked so hard for.' 85. Louis also said the Arabic phrase 'Neh ner bin shouf hallne fique', meaning 'we take pride in and share in your achievements and success'. Louis often said this when someone in the family achieved something significant and brought honour to the family. 86. Louis also said: 'Now you will always have somewhere to run your practice and be your own boss. You will never have to pay rent or answer to anybody.' I said: 'You know I will always do my best for you and the family. Pop (my father), would be over the moon.'" 10After the purchase was completed Joseph moved into the Strathfield Square property and has practised from there ever since. Louis arranged the purchase price with the Saad companies but the details are not in evidence. The practice income was paid to Saad Holdings and as I have said, Saad Holdings paid Joseph a salary. It also paid all the outgoings on the Strathfield Square property. This continued up to 1990. 11The Strathfield Square property was and is on one level. It was undivided on purchase but later converted into three office suites. Joseph occupied one for his legal practice. His sister, Therese, came to work for him as secretary. At the same time she did other work for the Saad companies. She was paid by Saad Holdings. 12Towards the end of 1989 Joseph, who was by then married with one child and another on the way, told Louis that he and his wife wished to start looking for a house. Louis said: "You can't afford it. You don't need a house. Unit 2 (where we lived) is plenty. I'm not buying a house for Sharon Herman." Sharon Herman is the wife of Joseph. Louis did not like her and insisted on referring to her by her maiden name. 13Joseph did not have sufficient funds to buy a house but he thought it could be financed by sale of his shares in the home unit company as had happened when three of his brothers purchased homes. He commenced looking for a house. 14In December 1989 Joseph and his wife found a suitable house in Cooper Street, Strathfield which was for sale for about $530,000. Paragraphs 99, 100, 102, 103, 104 of his affidavit are as follows: "99. At that time, I expected to be approximately $150,000 short of the purchase price for the property and that those funds would be required to be sourced from within the Saad family business. 100. Louis replied: 'If you want to transfer your shares in Hardine, you will have to resign as a director of all the companies and transfer all your shares.' ... 102. I replied: 'Why?' Louis said: 'I want Donna (his daughter) to leave Price Waterhouse (where she was employed as an auditor) and come to work for me full time. She can take your place in the group.' I said: 'What about the practice?' Louis said: 'Nothing will change there. You and Therese can keep running the practice as part of the group.' I said: 'That's not possible. I will have to run the practice myself separately from the group with Therese. The practice is mine. Although I can still continue to do the family work and anything else you need.' Louis said: 'Fair enough. You and Therese run the practice on your own and continue to do the family legal work. I need you.' 103. At this point in the conversation, my mind was focussed on my financial future. 104. I said: 'You're making me resign as a director of Saad Properties and Saad Holdings and transfer my shares to give you full control of Saad Properties and Saad Holdings. I need something in writing to secure my position so I can continue to operate my practice from Suite 1 rent free.' Louis said: 'We don't need anything in writing. We originally bought Strathfield for you to have a place for your practice and that will continue for as long as you want. You will never have to pay rent. Just look after the outgoings. We are brothers. I don't want to make money from you.' I said: 'What about the other companies?' Louis said: 'Nothing will change. I am in control of everything. I am the head of the family and I will always look after everybody like I always have. That will never change. We're still the Saad brothers.'" 15Following from this conversation the following transfers took place in December 1989 in respect of Hardine. a) From Joseph to Lisa Saad and Donna Louise Saad 1,250 shares consideration $115,000; b) From Joseph to Peter Anthony Saad 870 shares consideration $115,000; c) To Louise Saad, Julieanne Therese Saad and Tania Cecilia Saad 1,140 consideration $115,000. The total was $345,000. 16On 11 January 1990 the plaintiff received the following cheques in payment of loan accounts from the companies listed: a) From Saad Holdings Pty Ltd $78,584.05; b) From Hardine Pty Ltd $1,853.23; The total was $80,437.28. 17Although there is no direct evidence, it would seem that as Louis exercised control over all the companies, the payments and transfers were arranged by him. 18In March 1990 Joseph said that Louis said to him: "I want you to prepare the paper work for you giving up your shares and for you to resign your directorships and to appoint Donna in your place. And I want you to prepare the same deed that George and Neil signed to finalise the payment of all loan accounts in the companies." 19Joseph prepared and signed the documents in April 1990. These were: (a) Resignations as director of Saad Properties, Saad Holdings, Hardine Pty Ltd, Hillview Pint Pty Ltd and LP & R Saad Pty Ltd; (b) Resignation as a trustee of the Louis Saad Trust; (c) Deed of release. How what was described as the forfeiture of shares in Saad Holdings was brought about is not clear, but it is accepted that it happened. 20The deed of release seems to have followed the form used when two of the brothers of Joseph and Louis were paid out their various loan accounts. Joseph is the releasor and the five companies mentioned in 19(a) above are the releasees. The deed contained recitals as follows: "THIS DEED is made on the date set forth in the Schedule hereto between the party whose name is set forth in the Schedule beside the words 'First Releasor' (hereinafter called 'the First Releasor') whose address for service of notices is set forth in the Schedule besides the words 'First Releasor's Address for Service' of the one part and the parties whose names are set forth in the Schedule besides the words 'The Saad Group of Companies' (hereinafter called the 'the Saad Group of Companies[']), whose address for service of notices is set forth in the Schedule besides the words 'Saad Group of Companies' Address for Service' of the other part WHEREAS the First Releasor holds certain shares in the Saad Group of Companies set forth in the Schedule hereto besides the words 'The First Releasor's Shareholdings' and is owed certain moneys by the Saad Group of Companies as disclosed in the First Releasor's Loan Account in Saad Holdings Pty Limited and set forth in the Schedule hereto besides the words 'The First Releasor's Loan Account Balance' AND WHEREAS the First Releasor is desirous of terminating his relationship with the Saad Group of Companies as shareholder and debtor and director AND WHEREAS the Saad Group of Companies is desirous of paying to the First Releasor the whole of the moneys owed to the First Releasor by the Saad Group of Companies AND WHEREAS the First Releasor is desirous of forfeiting the whole of his right, title and interest in all the shares held by the First Releasor in the Saad Group of Companies to which he has any legal or beneficial entitlement whatsoever AND WHEREAS it has been agreed that the parties shall execute this Deed in satisfaction of all claims which either but for this Deed would have against the other." 21The operative clauses 1 and 2 are as follows: "1. In consideration of the sum of moneys set forth in Schedule besides the words 'The Consideration' paid by the Saad Group of Companies to the First Releasor (receipt of which is hereby acknowledged) each of them, the Saad Group of Companies severally and jointly and the First Releasor, hereby releases the other of them from all sums of money accounts actions proceedings claims demands costs and expenses whatsoever which either of them at any time had or has down to the date of this Agreement against the other for or by reason or in respect of any act cause matter or thing. 2. The First Releasor agrees to forfeit all shares set forth in the Schedule hereto besides the words 'The First Releasor's Shareholdings' held by him in the Saad Group of Companies in which the First Releasor has any beneficial [or] legal entitlement whatsoever in consideration of the payment referred to in Clause 1 hereof to the First Releasor and the First Releasor hereby agrees to resign all positions of Director, Secretary or Public Officer held by the First Releasor in the Saad Group of Companies forthwith." 22The Schedule is as follows: "THE SCHEDULE HEREINBEFORE REFERRED DATE OF MAKING OF THIS DEED: APRIL 1990 FIRST RELEASOR: JOSEPH PETER SAAD FIRST RELEASOR'S ADDRESS FOR SERVICE: 5 STRATHFIELD, SQUARE STRATHFIELD SAAD GROUP OF COMPANIES: SAAD HOLDINGS PTY LIMITED L.P. & R. SAAD PTY LIMITED SAAD PROPERTIES PTY LIMITED HILLVIEW PENT PTY LIMITED HARDINE PTY LIMITED SAAD GROUP OF COMPANIES ADDRESS FOR SERVICE: 98 GYMEA BAY ROAD, GYMEA NSW 2227 THE FIRST RELEASOR'S LOAN ACCOUNT BALANCE: $80,437.28 THE FIRST RELEASOR'S SHAREHOLDINGS: SAAD HOLDINGS PTY LIMITED: L.P. & R. SAAD PTY LIMITED: SAAD PROPERTIES PTY LIMITED: HILLVIEW PENT PTY LIMITED: HARDINE PTY LIMITED: THE CONSIDERATION: $80,437.28 PROPER LAW OF THIS DEED: NEW SOUTH WALES." 23Donna Saad, a daughter of Louis, was appointed to the directorships from which Joseph resigned. 24At the time that the transfers took place Louis and Joseph were the only directors and members of Saad Properties. Louis would not have been able to pass any resolution of directors or members if Joseph opposed it, other than by exercising a casting vote as chairman given under articles 56 and 84 of the Articles of Association of the company. 25Balance sheets for Saad Holdings in evidence show that the year ended 30 June 1990 the company had assets of $1,022,277 and liabilities of $895,285 leaving a net equity of $126,992.51. For the previous year the figures were $1,667,719, $1,539,528 and $128,191. 26According to the ASIC return the capital of Saad Holdings is divided as follows: A Class shares - 1 B Class shares - 1 C Class shares - 997 D Class shares - 1,000 E Class shares - 1,000 F Class shares - 1,000 G Class shares - 1,000 Ordinary shares - 4,997 The Articles of Association amend the then Table A rules and attach certain conditions which no longer apply to the Class A and Class B shares, but in the absence of such conditions all shareholders are entitled to one vote for each share held. The directors have power to distribute profits by way of dividends among such classes of shareholders as they determine. On a winding-up all ordinary shareholders, including shareholders of class shares, are entitled to share in the assets. 27Louis is now the owner of all those shares. It seems all those shares apart from the B Class share were previously held by Louis and Joseph as joint holders. The B Class share was held by Donna. The ASIC documents listing past shareholders show Donna as a joint owner of all the other shares with Louis and Joseph. What can be gleaned from this unsatisfactory evidence is that Louis and Joseph and perhaps Donna were joint holders of the shares. As the ASIC documents in evidence just name former shareholders and show Joseph, Donna and Louis as previous joint holders I think more likely than not that as Donna was to replace Joseph and he was a former joint holder with Louis, then Donna became a joint holder with Louis and now Louis is the sole shareholder. Thus Joseph had at least a one-third interest and more likely a one-half interest in the shares. Those shares had a value, and taking a mid point between the 1989 and 1990 figures, the value of the company might have been about $127,561, but the accounts are historical in that a Moss Vale property is included as an asset at cost of $180,497. 28Joseph continued to practise from the Strathfield Square property, but independently of the family businesses, although he did work for the family for which he made no charge until mid to late 1990s when Louis said that he should charge for such work. Things went along on this basis until November 2002 when Louis' wife (Rhonda) and Louis were to see Joseph about the estate of Rhonda's mother. Just prior to this Joseph said the following conversation took place: "Louis said: 'I want you to prepare something simple about how you occupy Strathfield. The girls [his daughters] keep asking me 'why doesn't Uncle Joe pay rent for Strathfield'. I tell them Uncle Joe and I have an arrangement that he will never have to pay rent at Strathfield.' I said: 'What sort of document do you want?' Louis said: 'Nothing complicated. I just want something very simple that sets out our arrangement.' I said: 'I think I can do that.' Louis said: 'Will you have it ready for our meeting with Rhonda?'" 29Joseph prepared a draft deed. The draft was as follows: "THIS DEED is made on this 27th day of November 2002 BETWEEN: SAAD PROPERTIES PTY LIMITED ACN 001 470 891 the Registered Office of which is Unit 4, 19-21 Central Road Miranda AND: JOSEPH PETER SAAD of 5 Strathfield Square Strathfield THIS DEED HEREBY records the Agreement between the Parties made on or about 15th December 1985 that Joseph Peter Saad is granted a life Estate in Property known as Suite 1, 5 Strathfield Square Strathfield being part Folio Identifier 1/433421 ('the Premises') and being the legal offices occupied by Joseph Peter Saad trading as Joseph P. Saad & Co, Solicitors since on or about the 15th December 1985 WHILSTEVER Joseph Peter Saad continues to use the Premises as legal offices and keeps the Premises well maintained and pays outgoings in respect of the premises as agreed between the Parties from time to time." 30According to Joseph the following conversation then took place: "Louis said: 'I'm not going to sign this. I don't give anybody anything for life. Not even my children.' I said: 'Lou, you've asked me to set out something simple to set out our arrangement and I did. We originally purchased Strathfield for me to set up a legal practice and I have been here ever since. I have never paid rent. Everybody knows that.' Louis said: 'I'm not signing this. What's in it for me?' I said: 'You got me to resign as a director of Saad Properties and Saad Holdings and to transfer my shares. So you got full control of Saad Properties and Saad Holdings. I got the right to remain in suite 1 and to continue to run my practice rent free. That's a life interest.' Louis said: 'So if I sell the property, I will have to pay you about $600,000.' I said: 'Something like that, so that I can replace what I have with something similar.'" 31Part of the case of Joseph is that this conversation amounted to an admission that he had a life interest or even a one-third absolute interest in the Strathfield Square property, but I think it was more a denial than an admission. 32From 2002 to 2011 Joseph continued as before, carrying on his practice from Strathfield Square, paying the outgoings and paying no rent. In June 2011, Joseph was contacted by Mr McGowan, solicitor, acting for Louis. Joseph had been told by Louis that this might occur. Mr McGowan told Joseph that Louis wanted him to sign a commercial lease and pay rent from July. Shortly thereafter, Joseph spoke to Louis. In paragraph 125 of his affidavit he said the following conversation took place: "... I said: 'This is really not the time to talk about this, but I've just received a very disturbing phone call from Phillip McGowan who is doing your will and estate planning stuff.' Louis said: 'That's right.' I said: 'McGowan said that you want me to sign a commercial lease and start paying a market rent from the first of July 2011. Is that correct?' Louis said: 'Yes it is. I want my affairs in order and I want it done right. You've been there for the last 26 years paying no rent and that has to stop. You have to pay proper market rent and I want that to start on the first of July.' I said: 'Lou, firstly I can't deal with this now. This is the first I've heard of this and I'm shocked. But mate, Mum is critically sick in intensive care and I'm very worried about her. This is not the time to bring this on. Can you and I get together and talk about this brother to brother instead of you sending me a solicitor's letter?' Louis said: 'There is nothing to talk about. You need to start paying.' I said: 'Lou, I've got a life interest in this property.' Louis said: 'Listen mate, when I asked you to prepare something in 2002 you sent me a piece of paper which said you had a life interest. I never agreed with that. As a matter of fact, I got that paper and wrote "BULLSHIT" on it.' I said: 'Lou, it's not bullshit, it's the way it is. I've just heard for the first time, five minutes ago, from your lawyer that you want me to start paying a market rent, which I couldn't afford to pay anyway, and we're discussing this now when Mum is in hospital. Lou, this is just not right. We need to talk, please.' Louis said: 'You have not just heard about this. You got a letter from my solicitor ages ago.' I said: 'Listen Lou, I swear to you that I have never received a letter from your lawyer. He told me that he sent me a letter on the sixth of May but I never received any letter. If I did, I would have responded immediately like I am doing now. McGowan said he would email the letter to me this afternoon.' Louis said: 'I've paid this solicitor sixteen thousand dollars so far. You're a solicitor. Explain to me how a solicitor can say he sent a letter to you and you didn't receive it.' I said: 'Lou, I don't know whether he sent the letter or not. I can only tell you on our father's grave that I did not receive any letter from your solicitor. Mum is sick in intensive care. I can't deal with this now. Can't we just get together and talk next week?' Louis said: 'Alright mate. I'll ring you on Monday and we'll have a meeting. But Suzanne will have to attend. She looks after all my stuff now.' I said: 'That's fine. Therese and I will be here.' Louis said: 'Good. I want Therese there. This affects her.' I said: 'You should ring McGowan and tell him that you and I are going to have a meeting and get his OK as your solicitor. I will ring him on Monday and tell him that I will respond to him after our meeting.' Louis said: 'Just remember you have to pay and don't ignore the letter.' I said: 'Let's just talk first.'" 33The proposed meeting did not take place. Mr McGowan sent a proposed draft lease for a rent of $70,500 per annum plus outgoings. This has not been signed. Joseph then entered a caveat against the title to the Strathfield Square property. The nature of the interest claimed under the caveat was stated to be "equitable life interest". The facts said to have given rise to such interest were stated to be: "1. For an unbroken period of approximately 26 years commencing on or about 15 December 1985 to date and continuing Joseph Peter Saad has been in exclusive possession of part of the property comprised in Folio Identifier 1/433421 being premises known as Suite 1, 5 Strathfield Square Strathfield ('the premises'). Joseph Peter Saad has paid all the outgoings for the premises. 2. An equitable life interest in the premises were granted to Joseph Peter Saad pursuant to and arising out of an oral agreement/promise between Saad Properties Pty Limited and Joseph Peter Saad in or about March 1990. The oral agreement/promise was made in a conversation between Joseph Peter Saad and Louis Peter Saad. Pursuant to that agreement/promise, Joseph Peter Saad transferred his shares in Saad Properties Pty Limited at the direction of Louis Peter Saad and resigned as a director of that company. 3. Joseph Peter Saad has remained in exclusive possession of the premises for more than 21 years to date and continuing pursuant to his equitable life interest or alternatively by reason of a proprietary estoppel arising out of the same facts specified herein". 34Paras 137-142 of Joseph's affidavit are as follows: "137. On 8 October 2011, I was present at my brother George's home. I was visiting George and his wife Helen at their home at 18 Gelling Avenue, Strathfield. Whilst I was there, Louis, Rhonda and my sister Loris arrived unexpectedly and unannounced. During that visit, I had [a] conversation with Louis in the presence of everybody referred to. I said to Louis: 'What do you want from me?' Louis said: 'You've been at Strathfield paying no rent for long enough. You've made billions. It's time you paid your way. I want to sell the property and that's all there is to it.' I said: 'You know I have a life interest in the property and I will not stand in your way if you want to sell the property. I only want compensation for my life interest.' Louis said: 'You don't have anything in writing and I won't pay anything. Either pay rent or get out.' I said: 'When you came to see me with Rhonda in 2002, you said to me that you did not want to sign the document you asked me to prepare. But you said to me that if you sell the property, you have to pay me about $600,000.' He said: 'I don't remember ever saying that and when we first bought the property I told you I will give you 3 years to establish your practice and if you were not successful by then, you were never going to be.' I said: 'You never said those words to me. You only ever said I can remain at Strathfield for as long as [I] want to operate my practice rent free and to pay the outgoings, which I have done. The first I hear that you want to change the situation is a phone call from a solicitor.' Lou said: 'Mate, you've got nothing in writing.' 138. During this conversation, Rhonda said: 'Joe, would you be prepared to pay a nominal rent?' I said: 'I will pay any reasonable rent, provided I receive compensation for my interest.' 139. Rhonda also said: 'I do not recall Louis saying that he would pay you $600,000 if he sold the property.' 140. During this conversation, my brother George said to Louis: 'I remember you told me that Joe will never have to pay rent at Strathfield because he [is] supporting mum and the girls.' 141. This comment was never made to me by Louis. 142. Louis also said during this conversation: 'I've put this in the hands of my solicitor to fix and I will do whatever my solicitor instructs me to do.'" 35On 12 October 2011 Joseph was served with a notice to quit the premises at the expiration of six months. While at one stage this notice to quit was challenged, no argument or evidence was addressed to this. It would follow as a matter of course that unless Joseph is successful and in lawful possession, an order for possession will be made. It has been agreed that in that event a period of six months would be given to Joseph to vacate.