The Owners - Strata Plan No 87265 v Saaib; The Owners - Strata Plan No 87265 v Alexandrova - [2021] NSWSC 150 - NSWSC 2020 case summary

Catchwords

[2014] FCAFC 65 Anthony v Morton [2018] NSWSC 1884 Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119[2013] HCA 54 Bective Station Pty Ltd v AWB (Australia) Ltd [2006] FCA 1596 Bellgrove v Eldridge (1954) 90 CLR 613[1938] HCA 34 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592[2004] HCA 60 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304[2009] HCA 25 Carr v Miller [2018] NSWSC 1424 CH Real Estate Pty Ltd v Jainran Pty LtdBoyana Pty Ltd v Jainran Pty Ltd [2010] NSWCA 3714 BPR 27,361 Chapman v Taylor[2014] NSWCCA 303 Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471[2003] HCA 22 Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435[2013] HCA 1 Gould v Vaggelas (1985) 157 CLR 215[1985] HCA 75 H S D Co Pty Limited v Masu Financial Management Pty Limited [2008] NSWSC 1279 Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 35743 IPR 545 Henville v Walker (2001) 206 CLR 459[2001] HCA 52 Houghton v Arms (2006) 225 CLR 553[2006] HCA 59 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109

Judgment (70 paragraphs)

[1]

eal Estate Pty Ltd v Jainran Pty Ltd; Boyana Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37; 14 BPR 27,361 Chapman v Taylor; Vero Insurance Ltd v Taylor [2004] NSWCA 456 Commonwealth v Amann (1991) 174 CLR 64 Downer EDI Rail Pty Ltd v John Holland Pty Ltd (No 4) [2018] NSWSC 326 Dynamic Lifter Pty Ltd v Incitec Ltd (1994) 30 IPR 198 Elomar v R (2014) 300 FLR 323; [2014] NSWCCA 303 Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 Fabre v Arenales (1992) 27 NSWLR 437 Field v Shoalhaven Transport Pty Ltd [1970] 3 NSWR 96 Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75 H S D Co Pty Limited v Masu Financial Management Pty Limited [2008] NSWSC 1279 Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; 43 IPR 545 Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41 Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 106 FCR 51; [2000] FCA 1886 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Junker v Hepburn [2010] NSWSC 88 Manly Council v Byrne [2004] NSWCA 123 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 Meandarra Aerial Spraying Pty Ltd v GEJ & MA Geldard Pty Ltd as trustee for the G & M Geldard Family Trust [2013] 1 Qd R 319; [2012] QCA 315 Mistrina Pty Ltd v Australian Consulting Engineers Pty Ltd [2020] NSWCA 223 Nominal Defendant v McLennan [2012] NSWCA 148 Painter v Hutchison [2007] EWHC 758 (Ch) Pola v Commonwealth Bank of Australia (Federal Court, Sundberg J, 19 December 1997, unrep) Rail Corp New South Wales v Donald; Staff Innovations Pty Ltd [2018] NSWCA 82 Re HIH Insurance Ltd (In Liq) [2016] NSWSC 482; 335 ALR 320 RHG Mortgage Corporation Ltd v Iaani [2016] NSWCA 270 RHG Mortgage Ltd v Rosario Ianni [2015] NSWCA 56 Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88 Seven Network Ltd v News Ltd [2007] FCA 1062 Smouha v Fleming (1997) 8 BPR 15,419 Symes v The Proprietor Strata Plan No. 31731 [2001] NSWSC 527 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) (2009) 236 CLR 272; [2009] HCA 8 Tonna v Mendonca [2019] NSWSC 1849 Twynam Pastoral Co Pty Limited v AWB (Australia) Limited [2008] FCA 1922 Ucak v Avante Developments Pty Ltd [2007] NSWSC 367 Volonakis v Erceg [2019] NSWSC 1875 Vukmirica v Betyounan [2008] NSWCA 16 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 Warner v Hung, In the matter of Bellpac Pty Limited (Receivers and Managers appointed) (In Liq) No 2 (2011) 297 ALR 56; [2011] FCA 1123 Watson v Foxman (1995) 49 NSWLR 315 Westpac Banking Corporation v Velingos [2011] NSWSC 607 Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 White v Johnston (2015) 87 NSWLR 779; [2015] NSWCA 18 Yorke v Lucas (1985) 158 CLR 661 Texts Cited: G E Dal Pont, Law of Agency (4th ed, 2020, LexisNexis) Neville Moses, Ross Tzannes and Diane Skapinker, Strata Titles NSW (2017, Thomson Reuters) Peter Butt, Land Law (7th ed, 2017, Thomson Reuters) Philip Bambagiotti, Building Disputes & The Home Building Act 1989 (NSW) (2012, Thomson Reuters) Sydney Jacobs, Commercial Damages (Westlaw AU) Category: Principal judgment Parties: Proceedings 2016/382268

[2]

The Owners - Strata Plan No 87265 (Plaintiff) Tony Saaib (First Defendant)

[3]

The Owners - Strata Plan No 87265 (Plaintiff) Irena Alexandrova (also known as Irina Alexandrova) (Defendant) Representation: Counsel: N Kidd SC with S Ahmed (Plaintiff 2016/382268 and 2019/235463) S Lawrance with M Fernandes (First Defendant 2016/382268)

[4]

Solicitors: Mills Oakley (Plaintiff 2016/382268 and 2019/235463) Centurion Lawyers (First Defendant 2016/382268)

[5]

Self-represented: Irena Alexandrova (Defendant 2019/235463) File Number(s): 2016/382268; 2019/235463 Publication restriction: Nil

[6]

Judgment

These reasons deal with two proceedings, which were heard together with evidence in the one being evidence in the other, involving disputes arising from the construction of 11 townhouses located at Livingstone Road, Marrickville, New South Wales (Marrickville property) in 2011 and 2012.
The Plaintiff in both proceedings is the Owners Corporation of the strata scheme relating to the Marrickville property, the successor in title to the previous owner of the land and developer of the Marrickville property, Transformer Group Pty Ltd (Transformer Group).

[7]

Saaib proceedings

The first proceedings (2016/382268) are against Tony Saaib, the builder named in a residential building contract with Transformer Group dated 4 October 2010 relating to the construction of the Marrickville property (4 October Contract).
The Owners Corporation alleges that, by the 4 October Contract, Mr Saaib contracted to do residential building work on the common property, that the work has been done in breach of the warranties implied by the Home Building Act 1989 (NSW) (HBA) and that it has suffered loss as a result. The Owners Corporation seeks damages for the total costs of rectifying the common property defects, which are estimated to be around $3,677,491.
The dispute in the proceedings is whether Mr Saaib entered into the 4 October Contract and is the builder of the Marrickville property. It is common ground that the signatures on the 4 October Contract purporting to be Mr Saaib's are not his.
The Owners Corporation's case is that Mr Saaib authorised his nephew, William Zaatini, to enter into the 4 October Contract on his behalf. It also contends that Mr Saaib authorised Mr Zaatini to deal with his insurance broker, Irena Alexandrova, to arrange home warranty insurance for the construction of the Marrickville property.
Mr Saaib denies authorising Mr Zaatini to enter into the 4 October Contract on his behalf or authorising Ms Alexandrova (or Mr Zaatini) to arrange home warranty insurance in his name. On Mr Saaib's case, the 4 October Contract and the home warranty insurance application are some of the many forged documents that were brought into existence without his knowledge by Mr Zaatini and/or Joe Antoun and Nemer Antoun (who are associated with Transformer Group) in order to obtain home warranty insurance and bank finance for the development.
Mr Saaib also raises by way of defence that he did not undertake or supervise any building works on the Marrickville property and takes issue with the Owners Corporation's contention that Transformer Group also assented to the 4 October Contract.
It is common ground that there are defects to the common property and there is substantial agreement between the Owners Corporation and Mr Saaib on the extent of the defects and quantum. The remaining disputes are whether some of the defects relate to lot or common property and the total quantum of the claim.

[8]

Alexandrova proceedings

The second proceedings (2019/235463) are against Ms Alexandrova. They are brought against the possibility that the Owners Corporation's claim against Mr Saaib does not succeed and his contentions that he did not enter into the 4 October Contract, authorise anyone to enter into that contract on his behalf or authorise Ms Alexandrova to lodge documents with the insurer are correct.
The Owners Corporation claims that if Mr Saaib's contentions are correct, Ms Alexandrova is liable for the costs of rectifying the defects on the basis that she engaged in misleading and deceptive conduct in contravention of s 18 of the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law (ACL) or s 42 of the Fair Trading Act 1987 (NSW) in force at the relevant time (FTA). The conduct that is alleged to be misleading or deceptive is an implied representation that Ms Alexandrova was authorised by Mr Saaib (as the builder) to submit documents to obtain home warranty insurance for the Marrickville property, when she was in fact not so authorised, and the submission of documents to the insurer that were not signed by Mr Saaib.
The Owners Corporation claims that Ms Alexandrova's misleading or deceptive conduct was a material cause of the issuance of the home warranty insurance and construction of the defective Marrickville property and seeks damages from her for the amount that would have been recoverable from a licensed builder or under a valid home warranty insurance policy in respect of the common property defects.
Ms Alexandrova was self-represented at the hearing and has not filed a response to the technology and construction list statement filed by the Owners Corporation. At the hearing, the Owners Corporation proceeded on the basis that the allegations it makes against her are denied.
In essence, Ms Alexandrova contends that Mr Saaib authorised her to send documents relating to the Marrickville project to the insurer, she had no duty to verify the signatures on the documents submitted to her and she is not liable for any claims made in respect of the defects to the Marrickville property.
Other than on one aspect, Ms Alexandrova did not challenge the defects and quantum evidence relied on by the Owners Corporation on the issues of damages.

[9]

The evidence and witnesses

The Owners Corporation and Ms Alexandrova rely upon two affidavits sworn by her. The first is dated 14 August 2019 (Alexandrova I). The second is undated and filed on 17 December 2019 (Alexandrova II). Ms Alexandrova was cross-examined.
Mr Saaib swore three affidavits dated 28 February 2019 (Saaib I), 10 September 2019 (Saaib II) and 15 January 2020 (Saaib III) and was cross-examined. He read affidavits from five other lay witnesses, none of whom were cross-examined, and subpoenaed one lay witness, Noel Dona, to give evidence who gave evidence orally and was cross-examined.
As will appear, there is a significant conflict in parts of the evidence given by Ms Alexandrova and Mr Saaib about whether Mr Saaib told Ms Alexandrova that he was to be the builder of the Marrickville property and whether he authorised her to lodge documents with the insurer (which Mr Saaib denies). The parties made submissions concerning the credit and reliability of their evidence which I deal with later in these reasons. In summary, I did not find Ms Alexandrova or Mr Saaib to be reliable witnesses and have approached their conflicting evidence on the basis that the contemporaneous records provide a more accurate reflection of what happened than their recollections of what was said (or not said) more than nine years ago.
Mr Zaatini was not called to give evidence and a submission was made by the Owners Corporation that an adverse inference of the kind made in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 (Jones v Dunkel) should be drawn from Mr Saaib's failure to call him as a witness. Mr Saaib also takes a tendency evidence objection in relation to his evidence in cross-examination about a building project at Mount Hay Road, Leura (Leura project).

[10]

Expert evidence

The Owners Corporation tendered ten expert reports in relation to defects and quantum. None of the Owners Corporation's experts were cross-examined. Ms Alexandrova was informed that she had a right to question them and chose not to do so. [1] Ms Saaib tendered four expert reports from Steve Dubedat, a forensic document examiner, who opined on whether the signatures attributable to Mr Saaib on 13 documents, including the 4 October Contract, were signed by him. In Mr Dubedat's opinion they were not.
Mr Dubedat was cross-examined. He was asked whether being limited to a pictorial representation of the questioned signatures impacted his opinion. He gave evidence that, in this case, there were such significant differences and no significant similarities that the pictorial features were enough to form a positive opinion.
During his cross-examination, Mr Dubedat was shown another questioned signature (Exhibit I) and asked whether, using the methodology that he applied in his reports, he would have concluded that it was not the genuine signature of the writer of the specimen signatures. Mr Dubedat's evidence was that, before coming to any conclusion, he would have to be satisfied that the other questioned signature was written within the same timeframe as the sample signatures and, if he was satisfied of that, then he would agree that the other questioned signature was not the normal or genuine signature of the sample signature writer in that particular time frame. His evidence was that the appropriate timeframe will vary from person to person as some people will change signatures over many years, while others may change their signature overnight. The other questioned signature shown to Mr Dubedat was from a declaration of wages document signed by Mr Saaib in March 2006 (Exhibit F). Mr Saaib's evidence is that he changed his signature after his divorce in around 2005.
Overall, I am persuaded by and accept Mr Dubedat's evidence that, on the balance of probabilities, the 13 documents Mr Dubedat reviewed with signatures attributable to Mr Saaib were not signed by Mr Saaib. I identify each of those documents in the factual summary below.

[11]

FACTS

The following is a narrative of the facts and summary of the evidence relating to the Marrickville project, the events leading to the Saaib and Alexandrova proceedings and the Leura project. Unless indicated otherwise, I am satisfied of the following matters.

[12]

The principal players and their relationships

The Owners Corporation was created and became the successor in title to Transformer Group and owner of the common property on 10 July 2013, when Strata Plan 87265 for the Marrickville property was registered.
Transformer Group obtained development consent for the construction of the Marrickville property on 6 August 2008 (Marrickville project). It was deregistered on 17 December 2017. From 2008 to June 2013, Nemer Antoun was Transformer Group's sole director. Nemer Antoun is the brother of Joe Antoun (now deceased) who had been the sole director of a building company, Award Build Pty Ltd, between September 2008 and February 2012. Award Build was deregistered on 27 January 2013.
Mr Saaib migrated to Australia in 1986 and has worked in the building industry since that time, primarily as a formworker. He obtained his builder's licence on 18 October 2001. Between August 2004 and 31 March 2012, Mr Saaib was licensed to carry out building work that required home warranty insurance.
Mr Saaib is a director and secretary of Australian Metropolic Developments Pty Ltd (previously known as Australian Metropolic Formwork Pty Ltd) (AMD), a building company that has held various contractor and builder's licences. He has also been a shareholder and director of Saaib Construction Pty Ltd, a building company involving his brother, and is listed as the nominated supervisor on the builder's licence held by Everlasting Developments Pty Ltd, a company associated with Mr Saaib's brother-in-law.
Mr Saaib does not know how to use a computer, has difficulties with written English and typically communicates by telephone.
Mr Saaib's nephew, William (Wajih) Zaatini, is also known as William Mowad.
During the period from 2009 to at least 2012, Mr Saaib had a very close relationship with Mr Zaatini. They spoke regularly, almost daily during some periods, and Mr Saaib often spent time at Mr Zaatini's office in Kingswood from which a business called "Joe'n'Sons" operated. On many occasions, Mr Zaatini helped Mr Saaib with paperwork as a favour to Mr Saaib. Mr Saaib's evidence is that Mr Zaatini's sister, Barbara, worked as a bookkeeper from Mr Zaatini's Kingswood office, did Mr Saaib's books and liaised with his accountant, Kamel Jabour. He also gives evidence that copies of his tax returns and other paperwork were held at Mr Zaatini's Kingswood office.

[13]

Phone records

There are phone records in evidence of outgoing calls and text messages from a mobile telephone number XXXX XXX 090 registered in Mr Saaib's name for the period 1 August 2010 to 30 November 2010 and from a mobile telephone number XXXX XXX 703 registered in Award Build's name (with invoices issued to Nemer Antoun) for the period 1 July 2010 to 14 January 2011.
The phone records identify calls made to the mobile telephone number XXXX XXX 503 registered in Ms Alexandrova's name and the mobile telephone number XXXX XXX 545 registered in Mr Zaatini's name. There are no phone records of outgoing calls and text messages from Ms Alexandrova's number or Mr Zaatini's 545 number.
There are records of two calls and eight text messages from Award Build's 703 to Mr Zaatini's 545 number in September and October 2010. While this suggests that someone other than Mr Zaatini was using the 703 number, the coincidence of the timing of calls from Award Build's 703 number to Ms Alexandrova's number and references in emails to discussions with Mr Zaatini, together with Ms Alexandrova's evidence that she only spoke to Joe Antoun once or twice and dealt with Mr Zaatini on Award Build matters and the Marrickville project, satisfy me that Mr Zaatini used Award Build's 703 number to make calls to Ms Alexandrova and Mr Saaib during the second half of 2010 and early 2011.

[14]

First Contract

On 4 November 2009, Nemer Antoun, on behalf of Transformer Group, appointed Capital One Funds Management Pty Ltd to arrange finance for the Marrickville project. A condition of finance was a "[t]ripartite agreement between the Builder, Lender/(s) and Borrower".
In evidence is a document dated 24 November 2009 described as a residential building contract between Nemer Antoun as the Owner and Mr Saaib as the Builder for works at the site of the Marrickville property, with a contract price of $2.4 million and a commencement date for construction of 11 January 2010 (First Contract) (Exhibit C). The First Contract purports to be signed by the Owner (Nemer Antoun) and the Builder (Mr Saaib) on each page, with one exception; on page 9, the Owner's signature appears twice. The execution block is not signed by the Builder but is stated to be witnessed by "William Mowad", who is also listed as the witness of the Owner's signature.
The First Contract includes Mr Saaib's builder's licence number, the ABN for Saaib Construction Pty Ltd and contact details for Mr Saaib that refer to his Mulgoa address, Award Build's 703 number and a fax number that does not belong to him. It contains the standard form BC4 residential building contract terms and includes clause 3 of Schedule 1, which states that the Builder must provide the Owner with a certificate of home warranty insurance (for work over $12,000) before the commencement of work and the demand or receipt of any payment.
Mr Saaib's evidence, which I accept, is that he did not sign the First Contract. He also denies authorising anyone to sign it on his behalf (Saaib II at [8]).

[15]

Early 2010: dealings between Ms Alexandrova, Mr Zaatini and Award Build

Ms Alexandrova gives evidence that, in early 2010, she had a conversation with Mr Saaib in which he asked her to help his nephew, Mr Zaatini, with obtaining home warranty insurance in relation to Award Build (Alexandrova II at [15]; T175:38-176:21). Mr Saaib denies asking Ms Alexandrova to help Mr Zaatini on some construction projects and gave evidence that Mr Zaatini already knew Ms Alexandrova and, if he needed help, could call her directly.
Ms Alexandrova deposes that she spoke to Mr Zaatini in February 2010, at which time he introduced himself as Mr Saaib's nephew, told her he was in the building industry and asked her to assist him with home warranty insurance, which she agreed to do (Alexandrova II at [16]).
Ms Alexandrova says that, from February 2010, she assisted Mr Zaatini to obtain eligibility for home warranty insurance and project specific home warranty insurance for Award Build (Alexandrova II at [17]). She annexes three documents relating to those matters: a home warranty insurance eligibility application by Award Build to Calliden Insurance signed by Joe Antoun on 18 February 2010; an undated "[t]o whom it may concern" letter from "Mr Joseph Antoun" with an "AWARD BUILD PTY LTD" letterhead listing a number of building jobs "we are active in" (but not referring to the Marrickville project) ("to whom it may concern" letter); and two certificates of insurance relating to home building work to be carried out by Award Build at Ewell Street, Balmain dated 12 March 2010.
Ms Alexandrova's evidence in cross-examination was that she received the "to whom it may concern" letter by email from Mr Zaatini and it was prepared because Award Build was intending to lodge an application to increase its eligibility for home warranty insurance so it could undertake the Marrickville project.
Pausing here, pursuant to ss 92 and 99 of the Home Building Act 1989 (NSW), a builder is required to obtain home warranty insurance in relation to work to be done under a residential building contract before the building work is undertaken. In order to obtain home warranty insurance, a builder must first be licensed to undertake building work that requires home warranty insurance and be eligible to obtain home warranty insurance from an insurer to cover the value of the contract works or in respect of the type of building works to be undertaken. A builder's eligibility for home warranty insurance on building projects may be limited by dollar value and by type of works and a builder may apply to an insurer to obtain an increase in eligibility limits.

[16]

Second Contract, 13 September letter, Builder's Side Deed and ANZ offer of finance

On 15 April 2010, Australia and New Zealand Banking Group (ANZ), the bank that provided construction finance to Transformer Group, appointed Newton Fisher & Associates Pty Ltd as the quantity surveyor for the Marrickville project. The next day, Newton Fisher wrote to Transformer Group with a list of required information for the Marrickville project that included the following: a signed building contract; the builder's licence details; home warranty insurance certificates; certificates of currency for "Contract Works Insurance", "Public Liability Insurance" and "Workers Compensation Insurance"; and a pro forma statutory declaration from a director of the builder that all wages and amounts due to sub-contractors and suppliers have been paid.
On 5 May 2010, Mr Zaatini emailed Community Mortgage Corporation Pty Limited (who forwarded Mr Zaatini's email to Capital One) about items on Newton Fisher's list, noting that there was already a signed building contract (presumably a reference to the First Contract) and that the owner/builder requirements were not applicable. Mr Zaatini's email is sent from "@awardbuild.com" and refers to Award Build's 703 number as Mr Zaatini's contact number. I infer from this that Mr Zaatini was working with and/or for Award Build in relation to the Marrickville project at this time.
Sometime between 17 June and 6 September 2010, another building contract for the Marrickville project came into existence (Second Contract). It is not clear on the evidence who was responsible for the Second Contract but it appears to have been created because Newton Fisher had identified that the Owner referred to in the First Contract was Nemer Antoun and the borrower (of the construction finance from ANZ) was Transformer Group. In a report issued to ANZ on 17 June 2010, Newton Fisher advised that the executed building contract (the First Contract) was to be amended to replace the Owner's name with Transformer Group and that home warranty insurance was a precondition to payment. The Second Contract was sent to ANZ on 6 September 2010, provided to Newton Fisher on 7 September 2010 and referred to in an email from Newton Fisher to ANZ on 10 September 2010.
The Second Contract is a residential building contract dated 24 November 2009 and is in almost identical terms to the First Contract. The key differences which the Second Contract has with the First Contract are as follows: it identifies Transformer Group (not Nemer Antoun) as the Owner; it includes a signature for the Builder (Tony Saaib) on the execution page; "2.65m" is written above the $2.4 million Contract Price and then crossed out; and delay costs, payment of contract price and the method of payment have been included in Schedule 2.

[17]

29 and 30 September 2010: emails between Ms Alexandrova and Mr Zaatini and alleged conversations between Mr Saaib and Ms Alexandrova

Ms Alexandrova deposes (Alexandrova II at [20]) that, in or about mid-2010, she had a telephone conversation with Mr Saaib in the following terms: Mr Saaib: I have a new project which I will be doing with my nephew William. It's on Livingstone Road in Marrickville. It will be 11 residential units. William will give you the details and other information you need. He will act on my behalf. Ms Alexandrova: Why are you doing this? You don't need a business partner. Don't you remember what happened to you and your last business partner? He got into trouble and it ended up in Court and it cost you. Mr Saaib: William is my nephew. I trust him. It's going to be OK. Can you give an estimate of the cost for the insurance for this new Marrickville project. William will give you all the details.
Mr Saaib denies this conversation. His evidence in cross-examination was that he had no knowledge of the Marrickville project at that time (indeed, his evidence is that he did not know about it until 2014), he did not tell Ms Alexandrova that Mr Zaatini would give her details and other information she needed, and he never had a job in Marrickville.
At 12:32pm on 29 September 2010, Ms Alexandrova emailed to Mr Zaatini a certificate of home warranty insurance for Award Build for a building project at Belemba Ave, Roselands.
Later that day, five emails were exchanged between Mr Zaatini and Ms Alexandrova relating to the Marrickville project, some of which refer to Mr Saaib.
At 4:08 pm, Mr Zaatini sent an email from "@joensons.com" to Ms Alexandrova that states: Irena we are ready for the site at Marrickville now the details are … Livingston rd, Marrickville. We will be building 11 townhouse you already have the details as you did quote us under Tony Saaib. Can you please revisit that quote and make the policy ready so I can arrange the payment for it.
There is no document in evidence of a "quote…under Tony Saaib". Ms Alexandrova's evidence is that she "didn't quote" but may have given an estimate of the likely insurance cost (Alexandrova II at [24]; T181:11-13). She also gave evidence in cross-examination that she understood the references to "we" in the first and second paragraphs of the email to be to Award Build.

[18]

The 4 October Contract

At 5:29pm on 5 October 2010, Mr Zaatini sent an email to Ms Alexandrova referring to a phone call that afternoon. There is a record of a call at 3:14pm from Award Build's 703 number to Ms Alexandrova's number lasting 186 seconds (3.1 minutes), which I infer is a call from Mr Zaatini to Ms Alexandrova.
Mr Zaatini's 5 October email attaches "the application as 4 pages and the contract as 5 pages" and states that he will email the "rates and letter from the bank soon". The attachments to the email are: 1. the 4 October Contract; and 2. a completed version of a 4-page QBE Builder's Warranty Insurance application (QBE Application).
The 4 October Contract is five pages long. Mr Dubedat's evidence, which I accept, is that most of the 4 October Contract, including the signatures, is superimposable with the corresponding parts of the Second Contract (Affidavit of Steve Dubedat dated 22 August 2019 at [5]-[7]).
There are several differences between the 4 October Contract and the Second Contract: the 4 October Contract does not include "2.65m" written above the $2.4 million Contract Price and then crossed out; 4 October 2010 (not 24 November 2009) is stated to be the date that the parties signed on page 3 and the owner signed the acknowledgement on page 6; and the 4 October Contract does not include Schedules 2, 3 and 4 or the terms and conditions after Schedule 4, or state any commencement date for the works. I infer from this and from Mr Dubedat's evidence that the 4 October Contract was not signed by any party on 4 October 2010 and that it was created from the first page of the First Contract and pages 2, 3, 4 and 6 of the Second Contract with only the dates changed.
The Owners Corporation accepts that Mr Saaib did not sign the 4 October Contract. Mr Saaib also denies authorising anyone to sign the 4 October Contract on his behalf or that he authorised anyone to enter into it on his behalf (Saaib I at [9]).
It is not apparent from the evidence why the 4 October Contract, with a different date, was created or who created it.
The QBE Application attached to Mr Zaatini's 5 October email is an application described as "QBE Application for Job Specific Policy Multi-Unit Developments". It refers to Mr Saaib as the Builder Entity, gives Award Build's 703 number, lists the Silverwater PO Box referred to in the "to whom it may concern" letter as the office address and identifies Transformer Group (with Nemer Antoun as the contact) as the Owner/Developer. It refers to a signed contract date of "1/10/10" with a fixed price contract of $3,165,450 and describes the development as "11 Townhouses". Section 9 on page 4, "Builder Declaration and Acknowledgement", identifies William Zaatini, Construction Manager, as having signed the application "for and on behalf of" Mr Saaib.

[19]

6 October 2010: Ms Alexandrova sends the 4 October Contract and QBE application to OAMPS

On 6 October 2010 at 12:47pm, Ms Alexandrova sent an email to Tyron Marais, a broker at OAMPS, with the subject "TONY SAAIB - QBE Application - Marrickville 11 t/houses" attaching copies of the 4 October Contract and the QBE application. The email states: Please find the application and Fixed price Contract for TONY SAAIB attached. His eligibility is with QBE. Council Rates are following by next email. Letter of finance approval will be emailed tomorrow morning. Can you please quote the premium subject to finance approval so I could organise the payment.
At 1:34pm that day, Ms Alexandrova emailed Mr Zaatini and told him that QBE would get the premium soon, that there was a short delay and that she would escalate and advise shortly.
At 1:46pm, a call was made from Award Build's 703 number to Ms Alexandrova's number (which I infer to be from Mr Zaatini) lasting 214 seconds (3.57 minutes). Shortly after, at 1:57pm, Mr Zaatini sent an email to Ms Alexandrova attaching, as requested, the drawings for the Marrickville project.
Later that day, at 3:58pm, Ms Alexandrova faxed to Mr Marais a copy of Mr Saaib's Certificate of Eligibility from Calliden Insurance Ltd (dated 20 January 2010) which identified that Mr Saaib was eligible to obtain home warranty insurance in relation to building contracts not exceeding $500,000. The fax is marked to the attention of "Tyron" with the subject "Re: SAAIB" in handwriting.

[20]

7-12 October 2010: Start of eligibility review application process

On 8 October 2010, at 2:28pm, Ms Alexandrova emailed Mr Zaatini. The email has a subject line, "Home Warranty Eligibility Review", and states: As discussed, please send over the weekend the following docs so I could finish the proposal by Mon and send it to the Insurer for the approval: 1. Amended architect letter as per my email of yesterday; 2. A letter from the Builder re 2009 and 2010 trading - draft emailed 3. A letter from engineers or certifiers saying Tony build in the past (until July 2008) multi unit projects; 4. Application for review of his eligibility - emailed on Thur
There are records of four calls made on 7 October 2010 from Award Build's 703 number to Ms Alexandrova's number, the last of which was at 3:40pm for 582 seconds (9.7 minutes). Based on Ms Alexandrova's 8 October email, I infer that these calls were from Mr Zaatini to Ms Alexandrova and they discussed what was required for her to complete a proposal for an application to be made to increase Mr Saaib's eligibility for home warranty insurance from $500,000 to cover the $2.4 million Marrickville project, which involved, amongst other things, completing a Builder Eligibility Profile Change Application (Eligibility Application).
The "email of yesterday" regarding the architect's letter (point 1), the letter from the builder "draft emailed" (point 2), and the application for review of eligibility "emailed on Thur" (point 4) referred to in Ms Alexandrova's 8 October email are not in evidence.
At 8:05pm on 11 October 2010, Mr Zaatini sent an email to Ms Alexandrova referring to what he "emailed [her] this morning" (which is not in evidence) and attaching the "art ref letter amended as you requested", which is presumably a reference to an amended architect letter. Mr Zaatini asks Ms Alexandrova to send the forms "to fill out" which he will get signed and emailed back, noting that he had faxed a form on 7 October at 3pm which is also not in evidence.
At 8:56pm on 11 October 2010, Ms Alexandrova sent an email to Mr Zaatini stating the following: that different forms for "Construction Insurance and Home Warranty Policies" had been faxed; the "Urban Link reference [the architect ref] - pls include address, year, units number and contact volume"; that she needed one more reference from engineers or certifiers; that the "Builder's letter is ok"; and that she hoped to "get it [eligibility increase] done with old Financials" she had. Ms Alexandrova's evidence in cross-examination was that the references to the "old financials" are to financials that she had received by fax from Mr Zaatini.

[21]

13 October 2010: Eligibility Application

At 6:47am on 13 October 2010, Mr Zaatini sent an email to Ms Alexandrova attaching "builders eligibility forms", asking her to let him know if anything needed to be amended and that "the guys have gone over them and they said that they are fine". Mr Zaatini's email also states that he would email the letter from the engineer "this afternoon" and that he is ready to make payment for both insurances.
There was some debate at the hearing about what "builders eligibility forms" were attached to Mr Zaatini's email as the email records produced by Ms Alexandrova are incomplete and do not make it clear. Based on the description of "builders eligibility forms" and the emails that followed, I infer that what was attached to Mr Zaatini's email was a partially completed Eligibility Application dated 12 October 2010 that Mr Saaib accepts he signed and dated when it was a blank form.
The partially completed Eligibility Application in evidence includes Award Build's 703 number, the ABN for Saaib Construction Pty Ltd, the Silverwater PO Box for a postal address, and identifies "William" at the Joe'n'Sons email address as the key contact. Section 3 ("Builder Profile Change Request") is incomplete with "N/A" written on it. Under section 2 ("Builder History"), the partially completed Eligibility Application states that Mr Saaib acted as the project manager for a "multi-level unit" at Hillcrest Street, Homebush for $15 million in 2009, a project at Imoyes Street, Marrickville for $1.5 million in 2008, and for the construction of 50 units at Watt Street, Gosford for $25 million in 2006. It is common ground that Mr Saaib did not work on these projects. There is no mention anywhere of Livingstone Road or the Marrickville project on the partially completed Eligibility Application.

[22]

Mr Saaib's evidence about signing the Eligibility Application

Mr Saaib's evidence is that, on or about 12 October 2010, he signed and dated pages 3 and 5 of a blank Eligibility Application when he was at Mr Zaatini's office. He says that he signed the pages after Mr Zaatini told Mr Saaib that there were lots of construction jobs around, that he may be able to get Mr Saaib some of the jobs, that Mr Saaib would need home warranty eligibility to do the jobs, and that he would organise the eligibility for him. Mr Saaib says that after Mr Zaatini printed the form from the computer, he signed and dated the two pages and handed them back to Mr Zaatini who told him he would ask Ms Alexandrova to deal with the application (Saaib I at [54]). Mr Saaib also deposes that, when he signed the blank form, he assumed he would need to pay something if the application was approved, but that Mr Zaatini did not ask him to pay anything or mention the application again and Mr Saaib thought nothing more about it (Saaib I at [56]).
Mr Saaib was challenged in cross-examination about the circumstances in which he signed the blank Eligibility Application, his understanding of why it was needed, who would complete the form and what information would be needed to progress the application, and his evidence that he thought nothing more about it.
Mr Saaib's evidence in cross-examination was that Mr Zaatini had a bundle of plans in his office and told Mr Saaib that he needed to get "high eligibility" for home warranty insurance and that he got him to sign the form (T302:41-5). Mr Saaib also gave evidence that Mr Zaatini showed Mr Saaib how many plans "he got" and that he needed to check how much eligibility he had, but it was not for any job or for Marrickville (T303:5-11). He stated that he knew Mr Zaatini would fill in the Eligibility Application form and send it by email to Irena (T304:33-38, T327:35-38), that he knew when he saw the bundle of plans that he needed high eligibility and that Mr Zaatini showed him the plans and said, "look how much plan I've got from builder, I can get you job. You need to make high eligibility and to get home insurance and higher eligibility" (T306:11-17).
In cross-examination, Mr Saaib accepted he knew that information was required to be added to the form showing he had experience with large home building projects to get an increase in eligibility (T327:44-47) and agreed that, in 2010, he did not have experience in large home building projects (T328:3-12, T328:19-29). Mr Saaib did not accept that he knew Mr Zaatini would be putting information on the form which would falsely state that Mr Saaib had experience with large home building projects (T328:40-43,T333:23-T334:41).

[23]

13 October 2010: Home Warranty Application

At 11:01am on 13 October 2010, Ms Alexandrova sent an email to Mr Zaatini raising four items to be dealt with before lodgement that afternoon.
The first item relates to the "Application for HW policies (attached)". In her email, Ms Alexandrova says it "must be the same signature as on Application for Review" but notes that Mr Zaatini sent the application with a different signature and asks him to get "Tony to sign Page 4 Sec 6 (one page only)".
There was some debate at the hearing and cross-examination of Ms Alexandrova about the references to the "Application for HW policies" and "different signature" in the 13 October email; the attachments to Ms Alexandrova's email are not in evidence. Based on the wording of that email, the previous emails that refer to "eligibility" and Ms Alexandrova's evidence, I accept the Owners Corporation's submission that the attachment was likely a blank application for multiple dwelling projects home warranty insurance and that Ms Alexandrova's email is to be read as asking Mr Zaatini to ensure that page 4 (of the blank form) was signed by Mr Saaib in his personal capacity, not like the QBE Application that had been signed by Mr Zaatini on Mr Saaib's behalf (T422:23-42315).
The second item of Ms Alexandrova's 13 October email raises a query as to whether the price of the contract is $2.4 million as per the contract, noting that "the application is for $3,165,450" (presumably a reference to the price referred to in the QBE application). The third item notes that the architect's reference does not say that Mr Saaib was a project manager. The fourth item states that the Builder's letter is not signed. As to this last point, when Ms Alexandrova approved the "Builder's letter" in her email of 11 October 2010, presumably she was referring to an unsigned version that is not in evidence.
At 11:27am on 13 October 2010, Mr Zaatini replied to Ms Alexandrova's email, indicating that the construction cost is $2.4 million and that he will get the home warranty application re-signed by Mr Saaib, the architect's letter amended and the Builder's letter signed as soon as possible.
At 11:41am on 13 October 2010, Ms Alexandrova replied asking for a call as "[t]his will not be accepted by the Insurer", referring to the difference between the $2.4 million contract price and the $3,165,450 amount.

[24]

13 October 2010: calls between Mr Saaib, Mr Zaatini and Ms Alexandrova

At 8:40pm on 13 October 2010, a call was made from Mr Saaib's number to Mr Zaatini's 545 number lasting [160] seconds (2.67 minutes). At 8.44pm that night, a call was made from Mr Saaib's number to Ms Alexandrova's number lasting 21 seconds.
Ms Alexandrova deposes (Alexandrova II at [47]) that, on 13 October 2010, she and Mr Saaib had a discussion, which may have been after he left her a message, in the following terms: Mr Saaib: How are we going with the Marrickville project insurance application? Ms Alexandrova: William has been sending me documents for the application for home warranty insurance for the Marrickville project. You need to sign the documents because you are the builder. William sent me a document signed in your name, but it's not your signature. I asked William to get you to sign it. Mr Saaib: Don't worry, William has been helping me complete the documents. It's no problem. I will sign whatever needs to be signed. Ms Alexandrova: Also, do you have your 2009 and 2010 financial statements? I don't know whether your letter will be sufficient. The insurer might want to see the financial statements for your business. Mr Saaib: I'll talk to my accountant about it and see what he can do.
Mr Saaib denies that conversation although, based on the call record, he accepted in cross-examination that he spoke to Ms Alexandrova after he spoke to Mr Zaatini. His evidence was that he did not remember what they talked about, that maybe she asked, "do you sign the document," and he told her yes, but that he never knew anything about the Marrickville project and rejected that it was discussed.

[25]

14 October 2010: call between Mr Saaib and Ms Alexandrova

At 11:49am on 14 October 2010, a call was made from Mr Saaib's number to Ms Alexandrova's number lasting 41 seconds. Ms Alexandrova deposes (Alexandrova II at [49]) that she and Mr Saaib had a discussion, which may have been after he left her a message, in the following terms: Mr Saaib: I have spoken to my accountant. My 2009 financials do not have trading income. My 2010 financials haven't been completed. Ms Alexandrova: OK let's just wait and see what the insurer requires.
Mr Saaib accepted in cross-examination that he spoke to Ms Alexandrova on 14 October 2010 and had a further conversation with her, but he "never remember what [he] said to her or what she say to [him]" (T340:03-13, 41-44).
Ms Alexandrova's evidence in cross-examination was that her discussions with Mr Saaib on 13 and 14 October 2010 were about his eligibility upgrade for the purposes of the Marrickville project. She explained that the wording of her affidavit evidence which did not refer to Marrickville being mentioned (Alexandrova I at [12]) was "incorrect" and not what she meant and that Mr Saaib "applied for upgrade of his eligibility" because he joined the Marrickville project (T195:39-43, T196:16-24).

[26]

15 October 2010: Lodgement of Eligibility and Home Warranty Applications

At 6:27am on 15 October 2010, Mr Zaatini sent Ms Alexandrova an email stating the he waited for her to call last night, but didn't hear back from her and asked her to call him that morning.
At 11:11am that day, Ms Alexandrova sent an email to Mr Zaatini which states: I have asked Tony about 2009 and 2010 Financial Statements. He has only 09 which does not have trading income. The Insurer might still require to [sic] provide 09 and 10 Statements for his business if his letter is not sufficient. Please note there might be further delay as we have to wait for the accountant to prepare the statements. If I receive today all docs as per my previous email, I will submit the proposal today. The ball is in your court.
At 11:31am, Mr Saaib sent Ms Alexandrova a text message. Ms Alexandrova no longer has a copy of that text message. Initially, she deposed that the text message from Mr Saaib was to the following effect (Alexandrova II at [53]): I'm meeting William this afternoon. Please lodge the insurance application for Marrickville today or William says we will lose contract.
In cross-examination, Ms Alexandrova's evidence was that the text message said "Please call me". She accepted that, in 2010, Mr Saaib wasn't proficient in writing English, that he sent "Please call, Irena" because he couldn't properly ask for anything else in a text message and that normally she would contact him because she was trying to be a good broker (T197:13-24).
Mr Saaib gave evidence in cross-examination that he does not know how to send text messages himself and that family members or workers help him to send them instead (T341:47-T342:10). He accepted that he was trying to get in contact with Ms Alexandrova that day, that maybe he contacted her about the eligibility application to see how it was going and if there was anything he needed to provide her, but he wasn't sure what they spoke about after 10 years (T343:6-14). He also gave evidence in cross-examination that he was pouring concrete on 15 October 2010, which he remembered because he had done a tax invoice for the job that day but didn't get paid for the work as it had been done late (T342:12-16, T342:26-50).
There is a tax invoice in evidence dated 15 October 2010 from Australian Metropolic Formwork Pty Ltd (the previous name of AMD) to Dream Constructions for $7,700.

[27]

October to December 2010: Eligibility and Home Warranty Applications progressed

On 20 October 2010, Ms Alexandrova emailed Troy Williams of OAMPS with the subject line "TONY SAAIB - URGENT", asking him to contact Calliden and advise if anything else was required. Her email refers to needing to "establish this builder a multi-unit profile and get approved his eligibility review". She notes that several documents had already been faxed to Mr Marais in addition to those contained in her 18-page, referring to "loans, fixed price contract, Rates, Finance Approval - all was faxed to Tyron". Ms Alexandrova's fax attaching the loans, rates and finance approval is not in evidence.
By email dated 26 October 2010, Mr Marias advised Ms Alexandrova that the application had been submitted to NSW Self Insurance Corporation and requested further documents in relation to eligibility, including a copy of the rates notice for Mr Saaib's Mulgoa property, his personal tax returns for 2008 and 2009, and further information regarding Saaib Construction Pty Ltd.
On 17 November 2010, Ms Alexandrova and Mr Marais exchanged emails regarding Mr Saaib's Eligibility Application, including QBE's request for a letter of appointment because Mr Saaib's home warranty insurance was "with another broker", and a deed of indemnity.
On 2 December 2010, Ms Alexandrova sent a fax of seven pages to Mr Marais that was marked (in handwriting) to the attention of "TYRON" and "FM: IRENA". The fax consists of two documents.
The first document is Mr Saaib's personal tax return for the financial year ending 2009. According to the header, the tax return was faxed to Ms Alexandrova from the "Joe'n'Sons Constructions" fax number at 11:30am on 2 December 2010. I infer that the document was faxed to Ms Alexandrova by Mr Zaatini.
The second document is a letter dated 2 December 2010 purportedly signed by Mr Saaib which states that Mr Saaib has appointed OAMPS to act for him regarding his eligibility for home warranty insurance with QBE (Appointment Letter). Mr Saaib denies signing the Appointment Letter or authorising anyone to sign it on his behalf. Mr Dubedat's evidence, which I accept, is that the "T Saaib" signature on the appointment letter is not a genuine signature of Mr Saaib.
Ms Alexandrova does not give evidence about who she emailed or spoke to about the Appointment Letter or when or from whom it was received it. Based on their prior dealings, I infer that Ms Alexandrova spoke to Mr Zaatini about the Appointment Letter and that he sent it to her on or around 2 December 2010.

[28]

January 2011: Home Warranty Certificates issued

On 17 January 2011, Mr Zaatini emailed Ms Alexandrova attaching receipts relating to the payment of the home warranty and public liability insurance premiums and Ms Alexandrova's broker fees for the Marrickville project and asked whether he could get the policy so that he could submit it to the "PCA" and the "bank". It is common ground that the home warranty and public liability insurance premiums and Ms Alexandrova's fees were paid by the Antoun family.
On 18 January 2011, QBE issued home warranty certificates of insurance in respect of each of the 11 Marrickville units. The home warranty certificates of insurance identify Mr Saaib as the builder of the works and the contract date as 4 October 2010 and are addressed to Transformer Group at Pile St, Marrickville. On 18 January 2011, QBE also issued a certificate of currency for contract works and public liability identifying Mr Saaib as the insured and ANZ as the interested party.
Ms Alexandrova deposes (Alexandrova II at [82]) that, on 19 January 2011, after receiving the 11 home warranty certificates of insurance, she called Mr Saaib to tell him that she had received them and asked him whether she should send them to him or Mr Zaatini, and that Mr Saaib told her not to do anything until he called her. When it was put to her that she had no recollection of the call, she gave evidence that "Of course there was a conversation. It's general practice inform builder that home building certificates are available" (T204:22-27).
Ms Alexandrova also gives evidence that, on or about 21 January 2011, Mr Saaib called her and asked her to email the certificates to Mr Zaatini with copies sent to him by mail, which she says she did that day to his home address at Mulgoa (Alexandrova I at [83]-[84]). In cross-examination, she gave evidence that the certificates were also posted to Mr Saaib by OAMPS to his home address (T205:31-34).
In cross-examination, Mr Saaib said that it is possible he spoke with Ms Alexandrova on the phone in January 2011 and, while he does not remember what was said, she did not tell him the certificates had been issued (Saaib III at [4]; T355:24-33).
There are no documents evidencing that the home warranty certificates were posted to Mr Saaib's home address by Ms Alexandrova or OAMPS.

[29]

February 2011 to December 2012: Construction of Marrickville property

On 15 February 2011, the construction certificate for the Marrickville project was issued by the Certifying Authority identifying "Nemer Anton" as the applicant. The documents accompanying the application are stated to include the "Home Warranty Insurance - QBE". It appears that work on the Marrickville project commenced soon after.
Between April 2011 and August 2012, Transformer Group sought drawdowns under the ANZ construction facility, purportedly to pay claims by the builder. The evidence indicates that Mr Zaatini and his son, Peter Zaatini, were involved in arranging site inspections for (see, for example, CB1777, CB2224) and providing documents to Newton Fisher, including statutory declarations and updated construction programs (see, for example, CB2037ff, CB1816), that were required in order to for Newton Fisher to recommend payment of the drawdowns to ANZ.
On 8 April 2011, Newton Fisher emailed Peter Zaatini requesting further information in respect of the first drawdown, including "Worker compensation insurance". In response, Peter Zaatini emailed a document to Newton Fisher purporting to be a GIO Workers Compensation Certificate, with policy number WC409802157, in the name of Tony Saaib Pty Ltd, with the ABN for AMD, and identifying the period of the insurance as 11 February 2011 to 11 February 2012 (TSaaib P/L GIO Certificate).
Mr Saaib submits, and I accept, that the TSaaib P/L GIO Certificate is not an authentic GIO Workers Compensation Certificate. Documents produced on subpoena by AAI Limited include documents relating to GIO workers compensation policies held by Australian Metropolic Formwork Pty Limited for periods commencing from 11 February 2009 that have the same policy number as the TSaaib P/L GIO Certificate. The declaration of wages forms produced on subpoena are signed by Mr Saaib as the director of AMD. No documents were produced in the name of Tony Saaib Pty Ltd.
On 13 April 2011, Newton Fisher issued a site inspection report to ANZ and recommended the first drawdown of $475,115. Newton Fisher's report to ANZ enclosed the 11 home warranty certificates of insurance, the T Saaib P/L GIO Certificate and a statutory declaration dated 5 April 2011 that all employees, subcontractors, suppliers and insurance had been paid that was purportedly signed by Mr Saaib.

[30]

Tracing of Marrickville project funds

Mr Saaib has gone to significant effort, by reference to bank statements, to trace where the ANZ construction drawdown advances were paid and to show that they were not received by Mr Saaib. The tracing exercise identifies that the drawdown advances were paid into a Transformer Group ANZ transaction account and sometimes, but not always, moneys were then transferred into a Transformer Group bank account with Commonwealth Bank of Australia (CBA).
The first construction facility drawdown advance of $1,250,000, described as a 'land funding component' in the ANZ Letter of Offer, was used to acquire land for the Marrickville project over which a mortgage in favour of ANZ was granted. The second construction facility drawdown advance of $18,905 was transferred into the Transformer Group ANZ transaction account which had been used to pay the construction facility fee of $20,168.75 three days earlier.
The tracing exercise identifies that, of the remaining $2,565,865 in construction facility drawdown advances that was transferred into the Transformer Group transaction ANZ account: 1. $227,000 was paid out by cash cheque, of which $169,000 was paid to Nemer Antoun and $58,000 had no details; 2. $401,419.37 was paid out to Marrickville Council and other named third parties, including third parties who appear to be related to trades in the building industry, such as "Fix All Plumbing" and "Kwikspark Electrical"; 3. $56,000 was paid out to Award Build; and 4. $1,819,500 was paid out to the Transformer Group CBA account
Of the $1,819,500 paid into the Transformer Group CBA account, Mr Saaib's submissions identify that at least $474,620.58 was paid out to named third parties, including: 1. $331,709.22 paid out to a range of third parties who appear by their names to have been tradespersons or contractors relating to the construction of the Marrickville property; see for example payments to "excavation liv", "pest cont livingst", "ausfab windows" and "kwikspark elec"; 2. $118,531.36 paid out apparently in relation to Award Build, with transaction descriptions such as "award living" and "award build"; and 3. $24,380 paid out apparently in relation to Mr Zaatini, with transaction descriptions such as "william4week", "william contractor" and "william".
The tracing exercise did not identify any payments from either the ANZ or CBA Transformer Group accounts to an account in the name of Mr Saaib. There are no other documents in evidence which identify, or suggest, that Mr Saaib received any money or other benefit from the construction of the Marrickville property.

[31]

Events leading to the Saaib and Alexandrova proceedings

On 15 October 2014, Mr Dona, in his capacity as strata manager for the Owners Corporation at the Marrickville property, sent a letter from Trinity Realty to Mr Saaib notifying him that the Marrickville property has a serious defect issue for which the Owners Corporation holds Mr Saaib responsible. The letter states that Nemer Antoun of Transformer Group had advised Mr Dona that Mr Saaib was the licensed builder of the development, and that Mr Antoun dealt with Mr Zaatini on site during construction and believed Mr Zaatini was related to Mr Saaib.
Mr Saaib's evidence is that he heard about the Marrickville property for the first time when he received Trinity Realty's 15 October 2014 letter (Saaib I at [12]; T236.11-12).
On 24 October 2014, Mr Dona sent an email to Mr Zaatini asking him to "let me know how you go please". The next day, Mr Zaatini replied, advising that he had spoken to Nemer Antoun regarding the matter and that they would be asking some metal roofers to go to the site and inspect the roof and box gutters. The email goes on to state: Again this matter is not the issue of Mr Tony Saaib, as Mr Tony Saaib was never the builder on the site for the Transformer Group, I appreciate the fact that all you want is for the place to be repaired. I will do what I can to assist you in this. I will attend to this as a matter of urgency.
Mr Saaib deposes that, in late 2014, he spoke to Mr Zaatini about Trinity Realty's letter and that Mr Zaatini stated, "remember we priced the job, but we didn't get it," which Mr Saaib rejected. He also deposes that Mr Zaatini then told him not to worry because "you didn't do the job, I didn't do the job" (Saaib I at [14])
On 24 December 2014, LAC Lawyers, acting on behalf of the Owners Corporation, sent a letter to Mr Saaib advising that they intended to make a claim relating to defects in the building under the home warranty insurance policy and asking him to notify his insurer. On 29 January 2015, Mr Saaib's previous lawyers responded stating that Mr Saaib had no knowledge of or any involvement with the building of the Marrickville property.
On 2 March 2015, QBE sent a letter to Mr Saaib notifying him of the potential claim in respect of the Marrickville property and requested that he enter into negotiations with the owner with a view to resolving the listed issues as amicably as possible.

[32]

6 February 2017: Mr Saaib meets with Mr Zaatini

Mr Saaib's evidence is that, on or about 6 February 2017, he had a meeting with his solicitor, Mr Zaatini, and Mr Zaatini's father, Joe Zaatini. Mr Saaib says that, at that meeting, Mr Zaatini handed him documents which appeared to be the statutory declarations to which reference has already been made (Saaib I at [25]). Mr Saaib's evidence is that he had never seen the statutory declarations until Mr Zaatini provided them to him at the meeting (Saaib I at [27]).
Mr Saaib also gives evidence about what Mr Zaatini told him at that meeting, which was subject to objection and admitted on the limited basis of the fact that the conversation took place and the terms of the conversation but not as evidence of the truth of the matters asserted. According to Mr Saaib's evidence, Mr Zaatini told him the following: that the statutory declarations would help Mr Saaib with his case and he could use them; that Mr Zaatini was not involved in the Marrickville project but that he used to supervise and run "the jobs" for the Antouns who were the builders on those projects; and that Mr Zaatini thought Nemer Antoun had forged Mr Saaib's signature on the statutory declarations (Saaib I at [26]).

[33]

February 2017: Contact between Mr Saaib and Ms Alexandrova

Ms Alexandrova deposes (Alexandrova II at [86]) that, in early 2017, Mr Saaib called her and they had a conversation to the following effect: Mr Saaib: I have just been served with a Summons from the Owners of the Marrickville project relating to defective building work. If anyone contacts you about this, don't say anything. Ms Alexandrova: OK Tony, I'll do that.
Mr Saaib denies this conversation and, in his oral evidence in chief, said that he spoke to Ms Alexandrova on the phone before 22 February 2017 and asked her about home warranty insurance for a job that he was going to do (T234:14-24). In cross-examination, Mr Saaib said he never mentioned Marrickville to Ms Alexandrova during any discussion with her in 2017 and did not request that she not say anything about Marrickville if someone asked her about it.
In evidence is an email dated 22 February 2017 that was sent at 6:28pm by Ms Alexandrova to Kamel Jabour, Mr Saaib's accountant, headed "Tony Saab - Australian Metropolitan Formwork P/L - Home Warranty Eligibility" (Exhibit 9). The email states: Tony asked me to restore his Eligibility for Home Warranty, please kindly email 15, 16 Financial Statements for his company Australian Metropolitan Formwork P/L, with notes if applicable, must be signed by the accountants.
Ms Alexandrova's evidence in cross-examination was that she could not recall the 22 February 2017 email and that she was "very curious… to see this letter" as she "absolutely can't recall why Mr Saaib asked [her] to restore his eligibility" (T211:1-34).

[34]

August 2017: Fraud report lodged

On 22 August 2017, Centurion Lawyers, acting for Mr Saaib, wrote to the New South Wales police at Parramatta Police Station requesting advice from them as to whether the original version of the alleged building contract dated 4 October 2010 was in their possession (Exhibit 15). The author of the letter, Mr Draybi, states in the letter that he was advised by Nemer Antoun that he no longer had any documents in his possession relating to the Marrickville project as the police raided his business premises and took many documents after the murder of his brother.
On the same day, Mr Draybi lodged a New South Wales Police Force Fraud Report Form that refers to Mr Zaatini as the suspect/person of interest/offender, Mr Saaib as the witness, the Owners Corporation as another interested party and the Saaib proceedings. In answer to the question on the form, "have you confronted the alleged offender? If so, what were the results?", it is written that "Mr Zaatini denied involvement and says that Mr Nemer Antoun was solely responsibl (sic) for the fraud".

[35]

2019: Events leading to the Alexandrova proceedings

On 12 April 2019, an email was sent to Ms Alexandrova from the "Secretary OC" email account: Dear Irena, Thanks for your time today. I really appreciate it. As discussed, here is a draft document for you to cast your eye over. I think it is very important for the Court to understand your point of view and this document sets out what we have discussed in various conversations.

[36]

For your reference the document contains yellow highlight for questions to be answered by you and green highlight, for documents to be provided by you (if you have them). I look forward to speaking to you on Monday.

Attached to the email is a draft affidavit of Ms Alexandrova which is not signed. The draft affidavit purports to, amongst other things, detail Ms Alexandrova's initial contact with Mr Saaib and the assistance she says she gave to him in obtaining home warranty insurance in relation to the Marrickville property. The draft affidavit is similar but not identical to Alexandrova II. For example, the draft affidavit does not refer to the "don't say anything" conversation Ms Alexandrova asserts she had with Mr Saaib in early 2017 (at [201]).
In June 2019, Ms Alexandrova met with a private investigator, Mr Creighton, who was assisting "[the Owners Corporation] in obtaining the finalisation of [Ms Alexandrova's] affidavit that [she] had agreed to provide" (Exhibit 8). According to Mr Creighton's report, Ms Alexandrova told him that she had no intention of attending the final hearing and that she will "be in Vietnam getting [her] teeth done if necessary."
Ms Alexandrova's evidence in cross-examination was that she was joking when she said she would go to Vietnam, asserting that she did not have to go to Vietnam because she had returned from there just prior to the meeting and had finished her dental procedures (T165:50-166:34). A submission was made, which I do not accept, that Ms Alexandrova's evidence of her "joke" reflects adversely on her credit as a witness.
By summons and list statement filed on 30 July 2019 (List Statement), the Owners Corporation commenced the Alexandrova proceedings.

[37]

The Leura project

Mr Saaib deposes that he obtained home warranty insurance in his own name as a builder for the construction of a house at Mount Hay Road, Leura that belonged to one of his close friends, Youssef (Joseph) Boumelhem, and his wife, Therese Boumelhem. He says that he was happy to assist in the construction as a special favour to Mr Boumelhem, that he was the builder but never got paid for the job, that the works are incomplete and that no works had been undertaken for about five years (Saaib I at [36]; Saaib III at [11]).
Mr Saaib's evidence is that, other than the Leura project and a job in relation to a residential unit and retail shop he owns in Punchbowl, he never conducted construction works in his own personal capacity (Saaib I at [3] and [36])
Mr Saaib's evidence is that, in 2012, he asked Ms Alexandrova to assist him in obtaining home warranty insurance in relation to the Leura project (Saaib I at [36]). Ms Alexandrova's evidence, which I accept, is that she arranged home warranty insurance for Mr Saaib in relation to the Leura project in 2010 (Alexandrova II at [19]). This is consistent with the home warranty insurance certificate issued by Calliden Insurance Limited on 14 May 2010 which identifies that the building works were to be carried out by Mr Saaib for Mr and Mrs Boumelhem in the amount of $200,000.
At the hearing, Mr Saaib took a tendency objection in advance of him being cross-examined about the Leura project. The parties were content for the cross-examination to proceed, for documents to be tendered (Exhibits E and H) and for the Court to determine the objection once it was known how the Owners Corporation intended to rely on the evidence. The following is a summary of the evidence relating to the Leura project from Mr Saaib's cross-examination and Exhibits E and H.
On 3 March 2010, Mr and Mrs Boumelhem received consent to construct a dwelling on the Leura property subject to receiving the builder's details (name, address and licence number) and a copy of the home warranty insurance certificate. According to a Construction Certificate dated 3 March 2010, the development consent was to lapse on 3 March 2012 (Exhibit H).
Mr Saaib's evidence in cross-examination is that Mrs Boumelhem told him she needed a building contract in writing to show to her bank to assist in obtaining construction finance and home warranty insurance for the project (T246:3-19). He says that he told Mrs Boumelhem that he would be the builder and obtain home warranty insurance in his name on the basis that she and her husband would engage and pay for all contractors and materials and he would not get paid. Mr Saaib's evidence is that he agreed to do this as a special favour because of the many favours that Mr Boumelhem had done for Mr Saaib (T244:31-T245:14).

[38]

Assessment of Ms Alexandrova and Mr Saaib

The parties accept that the Saaib proceedings (and thus the Alexandrova proceedings) turn, in part, on the Court's assessment of the credibility of Ms Alexandrova and Mr Saaib and their competing evidence.
What follows is my assessment of Mr Saaib and Ms Alexandrova. My findings of fact relating to the alleged conversations are set out later in these reasons. I should record that, in coming to my views, I have had regard to my notes taken during the hearing and shortly after as well as my review of the transcript, Mr Saaib and Ms Alexandrova's evidence, and the other documents and call records in evidence.

[39]

Irena Alexandrova

Mr Saaib submits that Ms Alexandrova is an unreliable witness and the Court cannot have confidence in her version of conversations with Mr Saaib that occurred nearly 10 years ago. He submits that the Court would be left with the impression that her evidence is based on reconstruction, rather than actual recollection, which is affected by hindsight knowledge of what should have been done, wishful thinking, and her personal interest in the outcome of the litigation.
Mr Saaib places emphasis on the statement by McLelland CJ in Eq from Watson v Foxman (1995) 49 NSWLR 315 at 319: …human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
It is also submitted that Ms Alexandrova's evidence is not based on actual recollection but on presumptions, is inconsistent and unreliable, and involves unsatisfactory witness evidence of evasive and argumentative answers, tangential speeches avoiding the question, disclosure and evidence shortcomings, self-contradiction, internal inconsistency and a shifting case: Volonakis v Erceg [2019] NSWSC 1875 at [151], citing Painter v Hutchison [2007] EWHC 758 (Ch) at [3].
The Owners Corporation submits that Ms Alexandrova's evidence is supported by contemporaneous emails, telephone records and the logic of events and relies on the well-known statement of Gleeson CJ, Gummow and Kirby JJ in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31]: Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances [of witnesses]. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical.

[40]

Tony Saaib

The Owners Corporation contends that Mr Saaib's evidence cannot be accepted unless it is corroborated by reliable evidence or against his interest as he is an unreliable and dishonest witness, pointing to a number of aspects of his evidence. In particular, it refers to his evidence regarding the Leura project, the circumstances in which he signed the Eligibility Application form on 12 October 2010 and what he knew about the outcome of the application which it submits shows him to be a wholly unsatisfactory witness and a dishonest person.
Mr Saaib accepts that his evidence was not without difficulties but says that the Court should be left with the impression that his denial of knowledge of the Marrickville project was truthful.
Mr Saaib's evidence in cross-examination that he was neither the builder of nor involved in the Marrickville project and knew nothing about it was given in an assertive manner. He was not moved from that position and came across as someone who believed he was not involved as the builder. He gave the appearance of someone who believed that Mr Zaatini had taken advantage of him, describing Mr Zaatini as a "liar" and a "bullshit person" (see T237:36-37, T354:23). He also accepted that it was "stupid" to trust Mr Zaatini when he signed the blank eligibility form on 12 October 2010 (see T294:32).
That said, I acknowledge that the appearance of a witness who has a fixed or strong view is not a reliable indicator of truthfulness. I also accept the force of some of the Owners Corporation's submissions. I have found aspects of Mr Saaib's evidence to be unsatisfactory and unreliable although I do not conclude that he deliberately gave false evidence and make no finding of dishonesty.
During the course of the hearing, it was apparent that Mr Saaib's English language skills impacted his evidence, English not being his first language. On occasion, he did not understand a question or the import of his answer and, at other times, his evidence was far from clear and difficult to follow (see for example, T236:25-30, T299:17-41). In assessing his evidence, I have taken this into account and have been cautious before attaching significant weight to evidence that may have involved a misunderstanding of what was asked and answered.
Mr Saaib's insistent evidence that he knew nothing about the Marrickville project led to him giving evidence that was, at times, clearly not correct. For example, he said he knew nothing about the Marrickville project when he spoke to Ms Alexandrova on 22 February 2017 before agreeing that "of course" he knew about it at that time. He then reverted to asserting "I don't know nothing about Marrickville" and denied that he knew that Ms Alexandrova had obtained home warranty insurance for Marrickville in his name, before then giving evidence saying that she did. While this was unsatisfactory, I do not consider Mr Saaib knowingly gave false evidence. Rather, I was left with the impression that Mr Saaib's answers may have been the result of his habit of answering questions before they had been fully put to him, some words being 'lost in translation' and his desire to emphasise his denial that he was involved in the Marrickville project.

[41]

Issues for determination

In the Saaib proceedings, the issues are as follows: 1. Did Mr Saaib authorise Mr Zaatini to enter into the 4 October Contact on his behalf? 2. If so, did Transformer Group assent to the 4 October Contract? 3. Did Mr Saaib undertake building work in relation to the Marrickville property? 4. The extent and quantum of the common property defects.
Before turning to these issues, I first deal with the tendency objection relating to the Leura project evidence.

[42]

Leura project: tendency objection

Mr Saaib objects to the Leura project cross-examination and Exhibits E and H as tendency evidence as he says that the Owners Corporation is seeking to adduce that evidence to prove that Mr Saaib had a tendency to allow "his name [to] be used as the licensed builder for this building work, but on the basis that others would in fact do the building work and Mr Saaib wouldn't be paid" (T6:41-43; Mr Saaib's Outline of Closing Submissions at [33].
Mr Saaib points to comments made by the Owners Corporation's Senior Counsel during the hearing that "a very similar thing probably happened in relation to the Marrickville development" (T6:44-5) and that "the cases say that, when looking at whether authority has been given for someone to do something, you can look at the prior habits of the principal" (T262:5-6) to argue that the evidence is being adduced to provide a basis for the Court to infer, based on the alleged tendency, that Mr Saaib likely behaved "in conformity with that tendency" in relation to the Marrickville project.
Evidence is tendency evidence within s 97(1) of the Evidence Act if it is relevant to a fact in issue because it establishes that a person has or had a propensity to act in a particular way and that propensity is a link in the process of proving that the person behaved in the particular way on the occasion in question: Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 106 FCR 51; [2000] FCA 1886 (Jacara) at [61]. It is evidence that provides the foundation for an inference, namely that because a person had the relevant tendency, it is more likely that they acted in a way asserted on an occasion the subject of the proceedings: Elomar v R (2014) 300 FLR 323; [2014] NSWCCA 303 (Elomar v R) at [359].
Section 97 of the Evidence Act does not preclude the admissibility of the evidence but makes it inadmissible to prove that a person (in this case Mr Saaib) had a tendency to act in a particular way: White v Johnston (2015) 87 NSWLR 779; [2015] NSWCA 18 (White v Johnston) at [136]. If the evidence is inadmissible as tendency evidence but admissible for another purpose, it cannot be used for the tendency purpose referred to in s 97(1) of the Evidence Act: Evidence Act, s 95; White v Johnson at [139].
Tendency evidence is only admissible if it has significant probative value, whether by itself or with other evidence. When assessing the probative value of the evidence, the focus must be on the cogency of the evidence relating to the person's conduct, the strength of the inference that can be drawn from that evidence as to the tendency of the person to act in a particular way and the extent to which that tendency increases the likelihood that a fact in issue did, or did not, occur: Jacara at [76].

[43]

Did Mr Saaib authorise Mr Zaatini to enter into the 4 October Contract on his behalf?

[44]

The Owners Corporation's submissions

The Owners Corporation contends that the Court should find that Mr Zaatini had implied actual authority from Mr Saaib to enter into the 4 October Contract on Mr Saaib's behalf.
It is submitted that the Court should reject Mr Saaib's evidence for reasons directed to his honesty and credibility as a witness and the implausibility of his denials and accept Ms Alexandrova's evidence as being inherently more likely and consistent with the contemporaneous records.
Irrespective of whether the Court accepts Ms Alexandrova's testimony, the Owners Corporation contends that a close examination of the evidence and the logic of events gives rise to the following inferences: that Mr Zaatini and Mr Saaib had discussed and agreed that Mr Saaib would be named in the 4 October Contract as the builder of the Marrickville property; that Mr Zaatini had been authorised by Mr Saaib to provide to Ms Alexandrova the documents that he did, including the 4 October Contract; and, therefore, that Mr Saaib had authorised Mr Zaatini to enter into a building contract on his behalf relating to the Marrickville project.
In support of those inferences, the Owners Corporation emphasises the nature of the relationship between Ms Alexandrova and Mr Saaib (namely one of trusted agent and client), the lack of evidence that Ms Alexandrova was to keep what she was doing secret from Mr Saaib or any motive for her to do so, and the evidence that they spoke regularly in 2010.
The Owners Corporation also points to Mr Zaatini's engagement of Mr Saaib's trusted insurance agent and the absence of any evidence to suggest that she was asked to keep the project secret from Mr Saaib which it says cannot be reconciled with Mr Saaib's claim that Mr Zaatini never mentioned the Marrickville project to him and was dealing with Ms Alexandrova without Mr Saaib's knowledge or authority. It submits that the Court should infer that Mr Zaatini was not concerned about Ms Alexandrova speaking to Mr Saaib regarding his role as the builder on the Marrickville project and, in fact, expected her to speak to him about that matter.
The Owners Corporation argues that there is no apparent logic or rational reason for why Mr Zaatini would not disclose the Marrickville project to Mr Saaib in circumstances where Mr Saaib's evidence is that the purpose of signing the blank eligibility application was to obtain an increase in his eligibility for "bigger jobs". It contends that Mr Saaib's evidence that he and Ms Alexandrova did not discuss the Marrickville project and the home warranty insurance application when they spoke on 13, 14 and 15 October 2010 is implausible, as is his evidence that having signed the blank eligibility application and discussed it with Ms Alexandrova, he took no steps to find out its fate. It submits that the Court should infer that Mr Saaib learned that his Eligibility Application was approved in December 2010 and, when he did, Ms Alexandrova told him that the Home Warranty Application for the Marrickville project had also been approved.

[45]

Mr Saaib's submissions

Mr Saaib submits that the Court would not feel an actual persuasion that Mr Saaib authorised Mr Zaatini to enter into the 4 October Contact on his behalf on the relevant date.
It is submitted that Mr Saaib's denial that he authorised Mr Zaatini to enter into the 4 October Contract is supported by the objective evidence, namely the 4 October Contract and other unauthentic documents, and the evidence that points to Mr Saaib not having been paid for and not doing any work on the Marrickville project.
Mr Saaib says that the lengths to which the Antouns and/or Mr Zaatini were prepared to go to create so many documents in Mr Saaib's name is a positive basis on which to conclude that Mr Saaib had no knowledge of the Marrickville project at the time, did not authorise Mr Zaatini to create the 4 October Contract in his name and was the subject of a widespread fraud perpetrated by them to obtain bank finance and home warranty insurance for the construction of the Marrickville property. Mr Saaib also points to the use of Award Build's 703 number and a PO Box unrelated to Mr Saaib on the various documents as suggesting an intention on the part of the Antouns and Mr Zaatini to intercept queries directed to him by third parties and conceal what they were doing from him.
Mr Saaib submits that Mr Zaatini was a brazen risk taker who also duped Ms Alexandrova, referring to the creation of unauthentic documents involving third parties, such as the GIO certificate, and the emails to Ms Alexandrova which indicate that Mr Zaatini lied to her about matters such as arranging Mr Saaib to sign documents.
Mr Saaib argues that, viewed objectively, the emails between Mr Zaatini and Ms Alexandrova, Mr Saaib's signing of the Eligibility Application and the evidence of the phone calls and text messages in mid-October 2010 could not satisfy the Court that Mr Saaib authorised Mr Zaatini to enter into the 4 October Contract. He submits that his evidence is consistent with the Eligibility Application being for the purpose of obtaining eligibility for "big jobs" in the future, an enquiry about what documents were needed for the application and the Marrickville project not having been mentioned.
Mr Saaib submits that even if Ms Alexandrova's evidence is accepted, the authority provided to her by Mr Saaib was limited to lodging the Eligibility and Home Warranty Applications and did not extend to Mr Saaib having authorised Mr Zaatini to enter into the 4 October Contract on Mr Saaib's behalf. He also submits that the alleged authority that was put to Mr Saaib in cross-examination, that he authorised Mr Zaatini to "sign any required building contract" and "sign any building contract on [his] behalf" (T291:20, T302:2), is inherently improbable given it was an authority unconstrained by price or subject matter as to what Mr Saaib would have to build.

[46]

Ms Alexandrova's submissions

It is appropriate to record that Ms Alexandrova submitted that Mr Saaib authorised her to upgrade his eligibility and apply for a home warranty certificate for the Marrickville project, and that she understood that the upgrade of his eligibility was required specifically for the Marrickville project.

[47]

Consideration and determination

The Owners Corporation bears the onus of proving, on the balance of probabilities, that Mr Saaib authorised Mr Zaatini to enter into the 4 October Contract on his behalf.
This means that the Court must "feel an actual persuasion" of the occurrence or existence of the fact before it can be found, which cannot be reached by a "mere mechanical comparison of probabilities [independent] of the belief in its reality": Briginshaw v Briginshaw (1938) 60 CLR 336 at 361; [1938] HCA 34. Actual persuasion is achieved where the allegation is made out to the reasonable satisfaction of the court taking into account the seriousness of the allegation made, the inherent unlikelihood of the occurrence and the gravity of the consequences flowing from the particular finding: Evidence Act, s 140(2); Warner v Hung, In the matter of Bellpac Pty Limited (Receivers and Managers appointed) (In Liq) No 2 (2011) 297 ALR 56; [2011] FCA 1123 at [48]; Atanaskovic v Birketu Pty Ltd [2019] NSWSC 1006 at [366].
In this case, the Owners Corporation contends that Mr Zaatini (as agent) had implied actual authority to enter into the 4 October Contract on behalf of Mr Saaib (the principal) and relies, in large part, on inferences that it says arise from the evidence.
There was no dispute as to the applicable principles when determining whether a principal and agent relationship exists. The essential elements of such a relationship are the consent (or assent) of the principal and agent and the authority conferred on the agent to act: Tonna v Mendonca [2019] NSWSC 1849 (Tonna v Mendonca) at [377]. Both elements of consent and authority may be implied from the circumstances of a particular case.
Consent to agency may be implied where a principal places another in a situation that a reasonable person would understand the other to have the principal's authority to act on their behalf, or where the principal's words or conduct are such as to lead to a reasonable inference that they are authorising the agent to act for them: Tonna v Mendonca at [379], citing Pola v Commonwealth Bank of Australia (Federal Court, Sundberg J, 19 December 1997, unrep) at 12.
The question of whether authority has been given and, if so, its scope, are questions of fact to be determined by evidence. Actual authority may arise from the principal and agent so conducting themselves that agency should be inferred, including by reference to the parties' prior habits, course of dealing, words used, circumstances or acquiescence in a course of behaviour. Evidence that a person is purporting to do acts on behalf of a principal in circumstances from which it may be inferred that the principal knew and approved of those acts is evidence that the principal authorised that person to act in the particular capacity: Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 at 150; Tonna v Mendonca at [383], [387]; Vukmirica v Betyounan [2008] NSWCA 16 at [50]; Junker v Hepburn [2010] NSWSC 88 at [43]-[44].

[48]

Conclusion

For the above reasons, I am not satisfied that the Owners Corporation have established, on the balance of probabilities, that Mr Saaib authorised Mr Zaatini to enter into the 4 October Contract on his behalf. It follows that the Owners Corporation has not established that Mr Saaib entered into and is a party to the 4 October Contract and its case against him fails.
On the conclusion I have reached, the other issues raised in the Saaib proceedings do not arise. However, as they were the subject of debate and in case I am wrong, I set out below my factual findings relevant to those other issues and respond to some of the submissions made.

[49]

Did Transformer Group assent to the 4 October Contract?

The Owners Corporation accepts that it must establish that both parties assented to the 4 October Contract in order for it to be legally binding.
The Owners Corporation submitted that the Court should conclude that Transformer Group assented to the 4 October Contract and understood and agreed that it would be the contract under which the building work would be done for the following reasons. First, the First and Second Contracts had not come into effect and were conditional on home warranty insurance being obtained. Second, home warranty insurance was obtained under the 4 October Contract and the premium was paid for by Transformer Group. Third, Transformer Group was provided with the certificates of home warranty insurance that related to building work under the 4 October Contract which it in turn provided to the certifying authority to obtain the Construction Certificate and, via its agent, to ANZ in order access construction finance. Fourth, it can be inferred that Mr Zaatini was dealing with Ms Alexandrova on behalf of and with the consent of Transformer Group when he provided her with the 4 October Contract and the council rates notice for the Marrickville property and asked for an estimate for the all risk insurance given that insurance was a condition precedent to the ANZ offer of finance.
Mr Saaib submitted that there was insufficient evidence from which to conclude that Transformer Group assented to the 4 October Contract. He said there was no reason why a third contract was created, no evidence it had been given to Transformer Group, the company's assent to the First and Second Contract was reason not to find that it has assented to the 4 October Contract, and the payment of the insurance premium was of no consequence given it would have been the same amount under the Second Contract and paid well after the 4 October Contract was created.
The matters relied on by the Owners Corporation lead me to conclude that Transformer Group had knowledge of the 4 October Contract and agreed to it being used for the purposes of obtaining home warranty insurance so as to permit building work to be done. It seems fanciful that the 4 October Contract would have been created without Transformer Group's consent given its role as developer, the borrower of construction finance from ANZ and the party who ultimately seems to have been involved in undertaking and managing much of the building works.

[50]

Did Mr Saaib undertake building work in relation to the Marrickville property?

The Owners Corporation pleads that Mr Saaib undertook the building work leading to the construction of the Marrickville property, an allegation he denies.
The issues raised by the Owners Corporation's and Mr Saaib's submissions are whether the Owners Corporation has to prove that fact, and also whether Mr Saaib did in fact undertake the works.
The Owners Corporation contended that it did not need to prove that Mr Saaib had carried out the building works, arguing that all it had to establish was that Mr Saaib entered into the 4 October Contract as builder and that the works were carried out under that contract. It submitted that, as a matter of statutory construction, the relevant provisions of the HBA do not require proof that the builder undertook the work, consistent with the HBA's intended function as a consumer protection regime. It also submitted that, so long as there was proof of the facts necessary as a matter of law to its cause of action, it did not matter if all of the pleaded facts were not proved.
The Owners Corporation also submitted that, if it is necessary for it to prove that Mr Saaib did the building work, the Court can infer from other aspects of the evidence, such as the regular contact between Mr Saaib and Mr Zaatini, that Mr Zaatini did the building work under Mr Saaib's supervision (T510:33-511:29).
Mr Saaib took the position that the Owners Corporation should be held to its pleaded case because of the nature of the case sued on, namely a breach of the statutory warranties for defective work, and because it had taken upon itself to prove the fact that Mr Saaib did the building work, referring to the Seven Network Ltd v News Ltd [2007] FCA 1062 at [2709].
He raised three scenarios which he contended illustrated that the issue of whether it had to establish that Mr Saaib undertook the building work was one of substance and not simply a pleading point, referring me to Carr v Miller [2018] NSWSC 1424, a case involving a sham building contract, and Chapman v Taylor; Vero Insurance Ltd v Taylor [2004] NSWCA 456, a case in which the court considered whether the statutory warranties continued to apply upon termination or frustration of a building contract. Mr Saaib's submission was, in essence, that pleading and proving that he did or did not do the Work was a necessary pre-condition to the Owners Corporation succeeding with its claim for breach of statutory warranties and also relevant to whether or not the Court might conclude that the 4 October Contract was a sham transaction.

[51]

DEFECTS AND QUANTUM

I deal with the defects and quantum issues here as they are relevant to the damages claimed in both the Saaib and the Alexandrova proceedings, although in different ways.
In the Saaib proceedings, the defects formed the basis of the Owners Corporation's claim for damages from Mr Saaib for alleged breaches of the statutory warranties implied by s 18B of the HBA. The Owners Corporation relies on s 18D(1) of the HBA as a "successor in title" to the developer, Transformer Group, and seeks to recover the estimated costs of rectifying a large number of common property defects and non-complying works which have not yet been rectified and other related costs.
In the Alexandrova proceedings, the Owners Corporation claimed to be entitled to recover the common property defect rectification costs and other related costs from Ms Alexandrova as damages under s 236 of the ACL and/or s 68 of the FTA.
As noted above, the Owners Corporation's defects and quantum evidence was not challenged. Ms Alexandrova left the running of the defects and quantum issues to Mr Saaib's legal team and supported his submission in relation to one of the issues that remained in dispute.

[52]

Overview of evidence and issues in dispute

The Owners Corporation relied on evidence from seven experts, each of whom deal with a separate defect category: acoustics (Renzo Tonin), waterproofing (Darryl Pickering, BWR), electrical services (Dean Eislers, Norman Disney & Young), external walls (Peter Karsai), hydraulic services (Mr Simon Ingegneri, Norman Disney & Young), mechanical services (Richard Duggan) and structural and building (Daniel Cully, Triaxial). Each expert provided a detailed report (two in the case of Mr Karsai) describing the nature of the various defects and explaining why the relevant work was not done with due care and skill, in accordance with plans and specifications that formed part of the contract or in accordance with laws.
The Owners Corporation also relied on an expert report from David Madden, quantity surveyor, dated 12 October 2018. Mr Madden's report quantified the total rectification costs as around $3.7 million, made up of $2,094,438 of trade costs relating to 100 defect and non-complying work items and $1,583,053 of on‑costs (preliminaries, contractor margin, fees and costs). [6] He further quantified $270,190 of consequential costs for accommodation of the Marrickville property residents and the associated removal, reinstatement and storage costs for their personal belongings. [7]
Discussions during the course of the hearing led to the Owners Corporation revising its trade costs claim down from $2,094,438 to $1,719,908, [8] of which only $149,120 was identified as being in dispute by the time of closing submissions. [9]
By the end of closing submissions, only four defects remained in dispute: a hydraulics defect, two waterproofing defects and one general building defect with a total rectification cost of $117,247. In addition, Mr Saaib and Ms Alexandrova disputed the Owners Corporation's claim for a 10% contingency and risk allowance.
I deal with each of the four disputed defects and other challenges below. I then set out, by reference to each defect category and cost claim, a summary of the claim reflecting my findings in relation to each of the disputed items and how much I allow for the Owners Corporation's defect claims.

[53]

Lot vs common property

The four remaining disputes raised the issue of whether the defects relate to common property or lot property. The Owners Corporation accepted that it does not have title to sue for defects relating to lot property.
At the time the Strata Plan was registered, the Strata Schemes (Freehold Development) Act 1973 (NSW) (Strata Schemes Act) was in force.
Section 5(1) of the Strata Schemes Act includes the following relevant definitions: common property means so much of a parcel as from time to time is not comprised in any lot. lot means one or more cubic spaces forming part of the parcel to which a strata scheme relates, the base of each such cubic space being designated as one lot or part of one lot on the floor plan forming part of the strata plan, a strata plan of subdivision or a strata plan of consolidation to which that strata scheme relates, being in each case cubic space the base of whose vertical boundaries is as delineated on a sheet of that floor plan and which has horizontal boundaries as ascertained under subsection (2), but does not include any structural cubic space unless that structural cubic space has boundaries described as prescribed and is described in that floor plan as part of a lot. floor plan means a plan consisting of one or more sheets which: (a) defines by lines … the base of each vertical boundary of every cubic space forming the whole of a proposed lot … ; and (b) shows: (i) the floor area of any such cubic space; … structural cubic space means (a) cubic space occupied by a vertical structural member, not being a wall, of a building, (b) any pipes, wires, cables or ducts that are not for the exclusive enjoyment of one lot and: (i) are in a building in relation to which a plan for registration as a strata plan was lodged with the Registrar-General before the day appointed and notified under section 2 (3) of the Strata Titles (Development Schemes) Amendment Act 1985, or (ii) in any other case - are in a building or in a part of a parcel that is not a building, (c) any cubic space enclosed by a structure enclosing any such pipes, wires, cables or ducts.
Section 5(2)(a) of the Strata Schemes Act provides that the boundaries of any cubic space referred to in paragraph (a) of the definition of floor plan in subsection (1): (a) except as provided in paragraph (b): (i) are, in the case of a vertical boundary, where the base of any wall corresponds substantially with any line referred to in paragraph (a) of that definition - the inner surface of that wall, and (ii) are, in the case of a horizontal boundary, where any floor or ceiling joins a vertical boundary of that cubic space - the upper surface of that floor and the under surface of that ceiling, …

[54]

Hydraulics defect: Item H-14

The hydraulics defect relates to the rainwater distribution systems that service each of the 11 units. The defect is described in Mr Ingegneri's report as a failure to comply with AS3500 and manufacturer requirements due to a lack of additional marking and signage identifying pipework and outlets as "rainwater" and the omission of first flush diverters, strainers and filters. [11] The cost of rectifying the defect is estimated by Mr Madden to be $6,340. [12]
The Owners Corporation submits that the rainwater distribution systems defect is a common property defect because the systems are not located inside each lot. It also submits that it is a common property defect on the basis that the rainwater distribution systems comprise pipes, wires and ducts that are not for the exclusive enjoyment of one lot and thus fall within the definition of "structural cubic space". As was put by the Owners Corporation, the rainwater distribution systems are not for the exclusive enjoyment of one lot because if they are defective, the whole building gets covered in water and, as such, they are pipes that have an impact on the whole of the building. [13] At the hearing, I was not taken to any evidence that indicated that the pipes of the various rainwater distribution systems are connected.
Mr Saaib submits, and I accept, that the rainwater distribution systems are located inside the lots. Mr Ingegneri's report states that the "location of alleged defect" (namely the defects to each of the rainwater distribution systems) is "in all units". The photos in his report also show the systems to be located in what looks to be an outdoor or wet area, possibly a patio or internal laundry based on the tiling and outdoor power points. [14]
I am also not persuaded by the Owners Corporation's submission that the rainwater distribution systems fall within the definition of "structural cubic space" because they comprise pipes that are not for the exclusive enjoyment of one lot such that they are excluded from the definition of "lot" and are common property.
Mr Ingegneri's report indicates that the pipework and outlet of each rainwater distribution system are supplied from a "rainwater tank" and that each unit is serviced by its own rainwater tank. [15] I would infer from this that the pipes that comprise the rainwater distribution system for a particular unit are connected to the rainwater tank that services that unit, rather than being connected with the system of each unit. On that basis, I would also infer that the pipes relating to a rainwater distribution system for a lot are used for the exclusive enjoyment of that lot and do not form part of the structural cubic space excluded from the lot.

[55]

Waterproofing defect: First floor balconies leaking: Item S.4

The waterproofing defect item S.4 is described as "first floor balconies leaking". [16] Mr Pickering's evidence is that the first-floor balconies are the subject of multiple defects for which Mr Madden estimates the total cost of rectification to be $149,330.84. [17]
At the hearing, most of this defect was agreed. The remaining issue relates to that part of the defect described by Mr Pickering as "cavity flashing and weep holes omitted" on the walls between the inside of the unit and the balcony and the alcove masonry walls at the west or east end of the unit balconies. [18] According to Mr Pickering, by failing to install any cavity flashing or weep holes to the external walls of the habitable spaces abutting the balconies, the work was not performed in a proper and workmanlike manner and failed to comply with AS3700-2011. [19] The cost of rectifying the defect is estimated by Mr Madden to be $18,055, being the per unit cost of cavity flashing work quantified in his report (items 18-28) multiplied by ten for each affected unit. [20]
The issue to be determined is whether the external facing walls, on which the cavity flashings and weep holes should have been installed, are to be treated as common property, as the Owners Corporation submits, or as lot property, as Mr Saaib contends.
Both parties rely on the presence of the vinculum. Mr Saaib argues that, as the vinculum indicates that the balcony forms part of the unit (and thus the lot), the walls are not to be treated as external walls but as internal walls that form part of the internal space within the boundary of the lot. [21] I disagree and accept the Owners Corporation's submission that the defect is a common property defect.
The vinculum on the floor plans identify that the first-floor balconies form part of the lot. They also convey that the intervening boundaries, namely the external facing walls adjacent to the balconies, are not to be treated as part of the lot but as common property. This is because it is appropriate to regard the cubic spaces on either side of the walls as different "parts" of the one lot so that the boundary of each part becomes the inner surface of the wall between them with the wall becoming common property, or as one single composite cubic space subdivided by a common property wall: Symes at [39]-[40]; Neville Moses, Ross Tzannes and Diane Skapinker, Strata Titles NSW (2017, Thomson Reuters) at [SSDA.6.20].

[56]

Waterproofing defect: Bedroom 1 plasterboard setting: Item 6.2

This defect is described in Mr Pickering's report as "poor setting of plasterboard joints in the bedroom 1 wall" of Unit 6 which he observed on the wall lining that surrounds the re-entrant corner of the north elevation balcony. [22] He opines that the defect is in the setting and sanding of the sheeting as a result of work undertaken by the builder that has not been performed in a proper and workmanlike manner and is not in accordance with AS2589-2007. [23] Mr Madden estimates the cost of rectifying this defect as $1,176.03. [24]
The Owners Corporation submits that this is a common property defect because it relates to the wall that coincides with the boundary between the internal and outside areas of Unit 6. Mr Saaib submits that the defect is a lot property defect because it appears on the inner side of an internal wall to the lot.
In my view, the Owners Corporation's submission should be accepted. The defect relates to the poor setting of joints "in" the lining to a wall that comprises part of the boundary between the balcony and the internal areas of the lot, which boundary wall is marked by a vinculum. As such, the defect does not relate to the inner surface of the wall that forms part of the cubic space of the lot boundary but relates to that part of the wall which is to be treated as common property: s 5(2)(a) Strata Schemes Act; Symes at [39]-[40].
Accordingly, item 6.2 is recoverable by the Owners Corporation as a common property defect and I allow $1,167.03 for the cost of rectification.

[57]

General building defects relating to the tiling of the en-suite and bathroom walls: Item 6.1.19.7

This defect relates to the tiling of all four walls in the en-suite to Unit 1 and bathrooms in Units 2 to 11. Mr Cully's report describes the defect as involving significant issues with the alignment of the tile finishes (vertical and horizontal), cracking to tiles and joint grouting, cracks between tiles, the ceiling and cornices, and drummy areas on tiled surfaces. He opines that the work is non-complaint with AS3958.1. [25] Mr Madden's report estimates the cost of rectifying the defect to be $366,702.60. [26]
The Owners Corporation accepts that three of the en-suite and bathroom walls are lot property and only one wall, an intertenancy wall, is common property, and limits its claim to $91,675.50, being approximately one quarter of Mr Madden's estimate.
There was no challenge to the Owners Corporation's claim that the tiling is defective and should be replaced on the one common property wall in each bathroom and the en-suite. The dispute relates to the Owners Corporation's method of calculating the cost of rectification.
Mr Saaib submits that it is not appropriate to simply take one quarter of the total cost of rectification because it is unknown what the outcome of a process of costing the replacement of one wall would be. By way of example, he points to the inclusion in Mr Madden's estimate of large costs items for replacing fixtures to contend that it is unknown what the actual process of costing would be if only one wall is replaced.
I am not persuaded by Mr Saaib's submission. The Court is entitled to adopt a methodology for calculating damages provided it is rational and not "fatally flawed". Where there is an absence of evidence permitting damages to be calculated with certainty, the court may make its own estimation: Commonwealth v Amann (1991) 174 CLR 64 at 83; [1991] HCA 54; Sydney Jacobs, Commercial Damages (Westlaw AU online) at [41.30].
Whether a proposed method of rectification is reasonable or necessary in a particular case is a question of fact: Bellgrove v Eldridge (1954) 90 CLR 613 at 619; [1954] HCA 36. A method will only be unreasonable in "fairly exceptional circumstances": Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) (2009) 236 CLR 272; [2009] HCA 8 at [17]; Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 at [81] (Macfarlan JA). An example of this is where the cost of proposed rectification is "out of all proportion to the benefit to be obtained": Philip Bambagiotti, Building Disputes & The Home Building Act 1989 (NSW) (2012, Thomson Reuters) at [HBA.48O.30].

[58]

Uplift for contingency and risk

The remaining issue relates to the Owners Corporation's claim for a 10% contingency and risk uplift. It relies on Mr Madden's report in which he opines that a contingency for the contract risks should be allowed based on several factors: the possibility that some defect items have not been identified or a number of unforeseen items will be discovered on opening the work during the demolition phase; the possibility that the scope of rectification works might not be complete; the possibility for a number of contract and other claims arising as a result of working across different units owned by different people who will not be fully prepared to accept the noise, mess and disruptions, causing programme changes; the potential existence of latent conditions; and the inherent difficulty in estimating the cost of rectifying defects.
Mr Madden opines that the industry accepted contingency and uplift factor is between 5% to 15% for work of this nature and considers that, given the volume of defect items captured and the rectification methodology in the experts' reports, an allowance of 10% is reasonable.
Mr Saaib submits that the uplift factor claimed is not justified because it is based on defects and works beyond that which the Owners Corporation has proved and, to the extent that certain matters referred to by Mr Madden might be legitimate, such as latent defects, it is not possible to decipher how much of the 10%, if any, is attributable to them.
Ms Alexandrova submits that a 10% contingency uplift should not be applied because contingency fees in Australia can only be charged by a bank and not by an Owners Corporation
In my view, a 10% contingency and risk factor should be applied in this case. Mr Madden's evidence that a 5% to 15% contingency and risk factor was industry practice was not challenged and a fair reading of his evidence is that the selection of 10% was made because many of the defect items have been captured and the rectification methodology identified.
Mr Madden's evidence involves some estimation of the costs involved and it is, in my view, to be expected that the builder (or builders) who would ultimately be retained to do the works would include a contingency and risk factor in fixing the price for the work they do, particularly if the price is based on a fixed price contract. It also seems to me to be appropriate and reasonable to give a 10% contingency and risk allowance in circumstances where Mr Madden has excluded escalation costs beyond October 2018. [27]

[59]

Conclusion on defects and quantum

The following sets out my decision in relation to the Owners Corporation's claim for rectification trade costs in respect of each of the seven categories of defects and its claim for on-costs and consequential costs, noting where the evidence or claim is not challenged and my findings on the disputed issues above
Acoustics: Mr Renzo Tonin's report dated 1 May 2018 identifies that air noise reduction in the main bedroom of Unit 2 does not comply with Australian Standards, recommended additional investigation to ascertain whether the defect is systematic throughout the Marrickville Property and proposed certain rectification works if such defects were to be found. [28] Mr Madden assessed the cost of those works to be $40,352.55. [29] Given that the additional investigation recommended by Mr Tonin has not been undertaken, the Owners Corporation's claim is limited to the cost of rectifying the acoustic defect in the main bedroom of Unit 2 of $2,822.11. This is calculated as one-tenth of Mr Madden's estimate of the rectification cost for this defect in Units 2 through to 11 of $28,221.10. [30] The evidence in relation to this defect and the quantum was not challenged by Mr Saaib or Ms Alexandrova and I allow the amount claimed of $2,822.11.
Waterproofing: Mr Darryl Pickering's report dated 16 May 2018 identifies five systemic defects, five common property defects in common areas and 29 common property defects in individual units relating to water leakage and penetration which he opines are non-compliant with Australian Standards, the Building Code of Australia or the NSW Guide to Standards and Tolerances, or are otherwise the result of work not completed in a proper and workmanlike manner. [31] Mr Madden assessed the total cost of rectification to be $206,082.17. [32] The Owners Corporation claims $206,082, of which $186,851 was not challenged by Mr Saaib or Ms Alexandrova. [33] Given my findings that defect items S.4 and 6.2 are common property defects at ([398]-[406]), I allow the total amount claimed by the Owners Corporation of $206,082 for waterproofing defects.
Electrical services: Mr Dean Eislers' report dated 9 April 2018 identifies 12 defects relating to switchboards, cabling, socket outlets, security systems and lighting which are either improperly installed, non-compliant with Australian Standards or not fit for purpose. [34] Mr Madden's report assessed the cost of rectifying these defects to be $108,401.27. [35] The Owners Corporation's claim, as ultimately pressed [36] was limited to defect items E-01, E-02, E-03, E-07, E‑10, E-11, E-12 and parts of E-09 [37] with a rectification cost of $56,806, which was not challenged by Mr Saaib or Ms Alexandrova. I allow the total amount claimed by the Owners Corporation of $56,806.

[60]

ALEXANDROVA PROCEEDINGS

The Owners Corporation's claim against Ms Alexandrova is that she engaged in misleading and deceptive conduct by seeking and obtaining home warranty insurance purportedly on behalf of Mr Saaib, which conduct is alleged to have caused loss to the Owners Corporation.

[61]

The pleadings issue

Before dealing with the substantive issues, it is appropriate to say something about the pleadings.
In its technology and construction list statement filed on 30 July 2019 (List Statement), the Owners Corporation pleaded that Ms Alexandrova's conduct was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and that the Owners Corporation suffered loss and was entitled to recover damages under s 236 of the ACL: List Statement at [33] and [34].
During closing submissions, the Owners Corporation sought leave to file an amended summons and an amended technology and construction list statement (Amended List Statement) to plead that Ms Alexandrova's conduct was also, or in the alternative, in contravention of s 42 of the FTA and to seek damages under section 68 of the FTA. The amendment was sought because there is a question as to whether ss 18 and 236 of the ACL, which commenced on 1 January 2011, or ss 42 and 68 of the FTA as in force before the commencement of the ACL, or both, apply to Ms Alexandrova's conduct given her conduct spans the period 6 October 2010 to 17 January 2011. The Owners Corporation submitted that the amendments were for the avoidance of any doubt and are only needed to the extent that ss 42 and 68 of the FTA apply to any part of Ms Alexandrova's conduct complained of.
At the hearing, I granted the Owners Corporation leave to amend over Ms Alexandrova's objection. While accepting Ms Alexandrova's submission that the Owners Corporation had delayed in seeking leave to amend, I was satisfied that granting leave to do so was in accordance with the dictates of justice, having regard to ss 56 and 57 of the Civil Procedure Act 2005 (NSW).
The amendments did not raise any new factual matters or change the nature of the case against Ms Alexandrova and would not have necessitated any additional evidence or hearing time. The amendments simply refer to the relevant provisions of a statute in force at the relevant time that are in substantially identical terms to those that had already been pleaded. To the extent there are differences, they are inconsequential. Further, Ms Alexandrova had been put on notice of the proposed amendments in the Owners Corporation's written submissions served prior to closing submissions.

[62]

The Owners Corporation's claim

The Owners Corporation's claim is based on the more unusual case of reliance on misleading and deceptive conduct by a third party, which is said to have led to other events and caused the Owners Corporation loss and damage. It is, therefore, important to set out in some detail how the claim is advanced.
The Owners Corporation's allegation of misleading and deceptive conduct is based on Ms Alexandrova's conduct during the period 6 October 2010 to 17 January 2011 of: 1. submitting an application to OAMPS on behalf of Mr Saaib as Builder for home warranty insurance in relation to the construction of the Marrickville property (Application): Amended List Statement at [30(a)]; and 2. in connection with that Application, providing to OAMPS a copy of the 4 October Contract, the Builder's letter, an application for home warranty insurance in relation to the construction of the Marrickville property and the Appointment letter (Related Documents), all purportedly signed by Mr Saaib: Amended List Statement at [30(c)].
While not identified as such in the List Statement, I understand the QBE Application to be the Application and the Home Warranty Application to be one of the Related Documents on the basis that the QBE Application was signed in Mr Zaatini's name on behalf of Mr Saaib and the Home Warranty Application was purportedly signed by Mr Saaib but, in fact, was not.
The Owners Corporation pleads that, by submitting the Application and Related Documents, Ms Alexandrova impliedly represented that she was authorised to do so by Mr Saaib as Builder (Authorisation Representations): Amended List Statement at [30(b)] and [30(d)].
The Owners Corporation alleges that, if Mr Saaib's contentions in the Saaib proceedings are correct, Ms Alexandrova's conduct (or alternatively the conduct of Shima in which Ms Alexandrova was involved) in making the Authorisation Representations and submitting the Related Documents purportedly signed by Mr Saaib was misleading or deceptive in contravention of s 18 of the ACL and/or s 42 of the FTA because: 1. Ms Alexandrova was not authorised by Mr Saaib to submit the Application and Related Documents, contrary to the Authorisation Representations: Amended List Statement at [33(a)(i)]; and 2. each of the Related Documents contained forged signatures of Mr Saaib: Amended List Statement at [33(a)(ii)].

[63]

Ms Alexandrova's response

As noted above, Ms Alexandrova has not filed a list response but denies the allegations. Based on her written and oral submissions, the matters raised by Ms Alexandrova by way of defence to the claim can be summarised as follows.
First, she says that the claim against her personally is not valid as, in 2010, she was trading through Shima and she has limited liability as the director (T496:4-7). By this submission, I understand Ms Alexandrova to be contending that, even if the Court concludes that the submission of the Applications and Related Documents involved misleading and deceptive conduct, she provided those documents in her capacity as a director of Shima only, not in her personal capacity, and so cannot be found to have engaged in the alleged misleading and deceptive conduct and be personally liable.
Second, Ms Alexandrova says she believed she was authorised by Mr Saaib to send the Application and Related Documents to OAMPS. She also says that she did not have to provide a letter of appointment because she had previously been authorised and appointed as Mr Saaib's broker (T500:34-41). Essentially, this submission seeks to raise, by way of defence, that Ms Alexandrova acted honestly and did not know that Mr Saaib was not going to be the builder.
Third, Ms Alexandrova submits that she is not a handwriting expert, as an insurance broker she had no duty of care to review or verify the authenticity of Mr Saaib's signatures on the Related Documents, and all applications are accepted by way of facsimile or email (Ms Alexandrova's Outline of Submissions at [12]). She also submits that she relied on Mr Zaatini to get Mr Saaib to sign the applications and had no knowledge that the signatures were fraudulent and that her role was limited to attracting business for OAMPS (T497:30-38; T500:20-25). By this submission, I understand Ms Alexandrova to be contending that she was acting as a "mere conduit" of the information, had no knowledge that she was passing on documents that included falsified signatures and, as such, she cannot be personally liable.
Fourth, Ms Alexandrova submits that there are others who should have checked the signatures on the 4 October Contract and Payment Sheet, such as ANZ, others who the Owners Corporation could have sued, such as the Department of Fair Trading, the officer who issued Mr Saaib's builder's licence and the assessor at QBE who approved his eligibility for multi-unit projects on 15 December 2010, and that she is the victim of fraud and has been duped as well (Ms Alexandrova's Outline of Submissions at [10]; T498:30-31, T501:15-23). By this submission, I understand Ms Alexandrova seeks to argue that one or more third parties have caused the Owners Corporation loss and should be liable and that her liability, to the extent she has any, should be limited or relieved of entirely along the lines of a concurrent wrongdoer defence.

[64]

Issues for determination

Based on the above, the key issues for determination are as follows 1. Did Ms Alexandrova engage in the conduct alleged and make the Authorisation Representations? 2. Was Ms Alexandrova's conduct misleading and deceptive? 3. Has the Owners Corporation suffered loss or damage by or because of Ms Alexandrova's conduct and, if so, what is the quantum of that loss?

[65]

Did Ms Alexandrova engage in the conduct alleged and make the Authorisation Representations?

The Owners Corporation's pleaded case is that Ms Alexandrova engaged in misleading and deceptive conduct by submitting the Application and Related Documents to OAMPS and making the Authorisation Representations and that she is primarily liable. Alternatively, its case is that Ms Alexandrova was involved in Shima's conduct for which she is liable as an accessory.
The facts make clear that Ms Alexandrova sent the Application and Related Documents to OAMPS in the period 6 October 2010 to 17 January 2011 (at [91], [142] and [154]).
Both the FTA and ACL prohibit misleading or deceptive conduct by any "person" in trade or commerce: FTA, s 42; ACL, s 18.
A director of a corporation who engages in conduct in the course of and for the purposes of the corporation's business may engage in conduct for which he or she can be primarily liable under the FTA and ACL. The liability is a product of their own conduct which they engaged in as a director. There is no need to find "separate conduct", being conduct engaged in other than in the capacity as a director, to conclude that a director who engages in conduct for a company can also attract primary and personal liability for that conduct: CH Real Estate Pty Ltd v Jainran Pty Ltd; Boyana Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37; 14 BPR 27,361 at [101]-[105]; Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119; ATPR 42-005 at [13]; Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59 at [44]-[46].
In this case, Ms Alexandrova was the "embodiment" of Shima. She was the director of Shima and described it as "her company". I would infer that she operated it as a one-person business. There is nothing to suggest that Shima had other staff.
The evidence demonstrates that Ms Alexandrova was the only person receiving documents from Mr Zaatini and, during the period 6 October 2010 to 17 January 2011, was the only person dealing with OAMPS in relation to the application for home warranty insurance for the Marrickville project. She sent emails to OAMPS from an "Irenaalex" email address and sent the Application and Related Documents by fax from "Irena". The "Referral Agreement with OAMPS" is not in evidence so it is unclear whether it was in Ms Alexandrova's name or that of Shima.

[66]

Was Ms Alexandrova's conduct misleading and deceptive?

Conduct will be misleading or deceptive if it has a tendency to lead a person into error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 (ACCC v TPG) at [39], [49].
In characterising conduct as misleading or deceptive or likely to mislead or deceive, it is also necessary to look at the conduct complained of as a whole, up to the time of the relevant transaction: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [25]; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [109].
Ms Alexandrova's conduct is alleged by the Owners Corporation to be misleading and deceptive if Mr Saaib's contentions are correct.
In the Saaib proceedings, I was not satisfied that Mr Saaib entered into and was a party to the 4 October Contract or authorised Ms Alexandrova (directly or via Mr Zaatini as his agent) to lodge with the insurer the 4 October Contract, the QBE and Home Warranty Applications, and the Appointment Letter. I was also satisfied that Mr Saaib had not signed the Related Documents.
The effect of my conclusions in the Saaib proceedings is that his contentions that he did not enter into the 4 October Contract, did not authorise Ms Alexandrova to obtain home warranty insurance in relation to the 4 October Contract, and did not sign or authorise others to sign on his behalf the Related Documents have not been shown to be incorrect.
In those circumstances, I accept the Owners Corporation's submission that Ms Alexandrova's conduct in making the Authorisation Representations was misleading and deceptive within the meaning of s 42 of the FTA and s 18 of the ACL. Having regard to the nature of the parties and the character of the documents submitted, the Authorisation Representations conveyed by Ms Alexandrova was likely to lead OAMPS into erroneously thinking that the QBE and Home Warranty Applications were made in relation to the 4 October Contract naming Mr Saaib as Builder with his authority, which has not been shown to be true, and that Mr Saaib had signed the Related Documents when he had, in fact, not signed them.
As to Ms Alexandrova's submission that she had no duty to check signatures, there is no allegation in this case that Ms Alexandrova represented that she had verified the contents and signatures on the Application and Related Documents or that they were accurate. Nor is it pleaded that, by submitting the Related Documents, Ms Alexandrova impliedly represented that Mr Saaib had, in fact, signed them. It is simply asserted that her conduct as a whole, which included the submission of documents containing falsified signatures and the making of the Authorisation Representations, would mislead OAMPS which, for the reasons set out above, I am satisfied that it would.

[67]

Did the Owners Corporation suffer loss by or because of Ms Alexandrova's misleading and deceptive conduct?

To recover compensation from Ms Alexandrova, the Owners Corporation must establish that it has suffered loss or damage "by" (in the case of s 68 of the FTA) or "because of" (in the case of s 236 of the ACL) Ms Alexandrova's misleading or deceptive conduct. The different phrases make no practical difference to the test to be applied.
What is required is a causal connection between the Owners Corporation's claimed loss or damage and the contravening conduct: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 at [95]; Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 (Henville v Walker) at [130]. This is to be understood as taking up the common law practical or commonsense approach to causation discussed in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 at 515; [1991] HCA 12 (March v Stramare): Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525; [1992] HCA 55
There will be a sufficient causal connection between loss and contravening conduct where that conduct materially contributes to the loss or damage suffered. The contravening conduct does not have to be the sole cause of the loss; it merely has to be a sufficient cause: Henville v Walker at [14] (Gleeson CJ), [61] (Gaudron J), [106] (McHugh J).
It is not necessary for the Owners Corporation to establish that it relied on the contravening conduct in order to satisfy the concept of causation. It may recover loss or damage it suffers as a result of a third party's reliance on Ms Alexandrova's contravening conduct: Re HIH Insurance Ltd (In Liq) [2016] NSWSC 482; 335 ALR 320 at [42]-[44], citing Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 (Janssen-Cilag v Pfizer) at 532.
The causation inquiry on the basis of third party reliance requires a determination of whether the loss or damage is a "real or direct or effective cause of the applicant's loss". The loss must have been "brought about by virtue of" the conduct which is in contravention of s 18 of the ACL or s 42 of the FTA: ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 at [73]-[76], citing Janssen-Cilag v Pfizer at 530-531.
There must be a "sufficient and direct link" or a "requisite element of proximity" between the loss and the contravening conduct: Downer EDI Rail Pty Ltd v John Holland Pty Ltd (No 4) [2018] NSWSC 326 at [542]-[543]; Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177 at [31].

[68]

COSTS AND ORDERS

The usual order as to costs is that they follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.
I see no reason not to make orders in accordance with that rule and will therefore order the Owners Corporation to pay Mr Saaib costs of the Saaib proceedings and make a similar order in the Alexandrova proceedings. The parties are at liberty to approach my associate if they wish to seek a different or special costs order.
The Owners Corporation also seeks an order for interest pursuant to s 100 of the Civil Procedure Act up to the date of judgment from 18 November 2018. This is claimed on the basis that the experts have costed the rectification works having regard to the costs of labour and materials as at that date. I am not persuaded that pre-judgment interest should be awarded in this case in circumstances where the claim has succeeded against Ms Alexandrova. In addition to the proceedings against her being commenced in mid-2019, the defects claim that I have allowed includes a 10% contingency and risk amount which should go some way to addressing the risk of escalation costs.
For these reasons, I make the following orders: In proceeding 2016/382268: 1. The Plaintiff's summons filed 20 December 2016 be dismissed. 2. The Plaintiff pay the First Defendant's costs of the proceedings as agreed or assessed. In proceeding 2019/235463: 1. There be judgment in favour of the Plaintiff against the Defendant in the sum of $3,425,583.54. 2. The Defendant pay the Plaintiff's costs of the proceedings as agreed or assessed.

[69]

Endnotes

The transcript does not record part of Ms Alexandrova's response (T324:29-44) but my notes of 7 February 2020 record that Ms Alexandrova did not wish to cross-examine any of the expert witnesses.
The 13 September letter was produced on subpoena by ANZ.
One of the statutory declarations dated 3 August 2012 which is witnessed by Mr Dona does not correspond with a Newton Fisher report date and so may not have been used for recommending drawdowns. Thus, while there are 16 falsified staturoy declarations in evidence, only 15 were likely used in connection with the drawdowns.
Mr Valtas was not provided with the statutory declarations purportedly witnessed by him dated 5 April 2011, 13 July 2011, 10 October 2011, 2 December 2011.
52 calls were made from Award Build's 703 number to Mr Saaib's number during the period from 1 July 2010 to 14 January 2011 and 80 calls and text messages made from Mr Saaib to Mr Zaatini's 545 number.
CB994.
CB995.
Owners Corporation's Outline of Closing Submissions, Table of Defects.
MFI-16, Table 1.
CB2311A-2311D.
CB214-5.
CB1105.
T432:13-28.
CB214.
CB215 and the stormwater sketch at CB230.
CB290.
CB290, 1016.
CB348 at [383], [384].
CB353.
CB1023.
T434:28-50; T436:1-15.
CB490 at [1804], [1806].
CB491-2 at [1822]-[1826].
CB1017.
CB829 at [6.1.19.7.1]
CB1121.
CB988.
CB272 at [80], 278 at [99], [102], [103].
CB1009.
T325:20, Outline of submissions for the defendant at [19]; CB1009, MBM 1.04.
CB288-306.
CB1017.
The Owners Corporation's claim in respect of this and subsequent categories of defects is rounded to the nearest dollar, an approach that I have also adopted.
CB141.
CB1070.
The Owners Corporation did not press items E‑04, E-05, E-06, E-08 and certain components of E-09. The reference by the Owners Corporation's Senior Counsel at T431:21-22 to $21,615 as the amount agreed for those parts of item E-09 regarding common property seems to be an error as the parts of E-09 agreed to be common property defects (items 1, 3, 4, 5 and 6) add up to $19,789.

[70]

Amendments 01 March 2021 - Para 230: first sentence has full stop after Ms Alexandrova. Second sentence, now reads: "My findings of fact relating to the alleged conversations are set out later in these reasons." Para 347: second sentence, the word "fact" should be "facts". Para 348: second sentence, the words "he emails" should be "the emails". Para 354: the words "(the police repprt)" should be "(the police report)". Para 356: the word "aganst" should be "against". DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 March 2021

The Owners - Strata Plan No 87265 v Saaib; The Owners - Strata Plan No 87265 v Alexandrova

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