Olbourne v Excell Building Corp Pty Limited [2009] NSWSC 349 (1 May 2009)
Last Updated: 6 May 2009
NEW SOUTH WALES SUPREME COURT
CITATION:
Olbourne v Excell Building Corp Pty Limited [2009] NSWSC 349
JURISDICTION:
Equity Division
Technology & Construction List
FILE NUMBER(S):
55112/08
HEARING DATE(S):
4 to 6 February, 8 April 2009
JUDGMENT DATE:
1 May 2009
PARTIES:
Norman Adrian Olbourne (Plaintiff)
Excell Building Corp Pty Limited (First defendant)
Ian Hillman (Second defendant)
JUDGMENT OF:
Rein J
LOWER COURT JURISDICTION:
Not Applicable
LOWER COURT FILE NUMBER(S):
Not Applicable
LOWER COURT JUDICIAL OFFICER:
Not Applicable
COUNSEL:
Mr F Corsaro SC (Plaintiff)
Mr F Hicks (First defendant)
SOLICITORS:
Holding Redlich (Plaintiff)
Kriesson Legal (First defendant)
CATCHWORDS:
CONTRACTS – building, engineering and related contracts – other matters – grounds upon which an adjudication determination can be reviewed – the existence of a construction contract under s 4 of the Building and Construction Industry Security of Payment Act 1999 is a basic and essential element of the Act – meaning of ‘arrangement’ in s 4 – facts and circumstances giving rise to an ‘arrangement’
LEGISLATION CITED:
Building and Construction Industry Security of Payment Act 1999
CATEGORY:
Principal judgment
CASES CITED:
Beckhaus Civil Pty Ltd v Council of the Shire of Brewarrina Council [2002] NSWSC 960
Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2004] NSWCA 394 ; (2004) 61 NSWLR 421
Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd [2005] NSWCA 49 , (2005) 62 NSWLR 385
Fifty Properties Investments Pty Ltd v Barry J O’Mara [2006] NSWSC 428 ; (2007) 23 BCL 35
Lumbers v W Cook Builders Pty Ltd (in liq) (“Lumbers”) [2008] HCA 27 ; (2008) 232 CLR 635
Multipower Corp Pty Ltd v S & H Electrics Pty Ltd [2006] NSWSC 757
Okaroo Pty Ltd v Vos Construction & Joinery Pty Ltd [2005] NSWSC 45
Re British Basic Slag Ltd's Agreements [1963] 1 WLRS 727
Transgrid v Siemens Limited [2004] NSWCA 395 ; (2004) 61 NSWLR 521
Shorten v Davis Hurst Constructions Pty Ltd [2008] NSWCA 134
Walton Construction (Qld) Pty Ltd v Salce [2008] QSC 235
Watson v Foxman (1995) 49 NSWLR 315
TEXTS CITED:
DECISION:
Summons dismissed.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY & CONSTRUCTION LIST
Rein J
Date of Hearing: 4 to 6 February, 8 April 2009
Date of Judgment: 1 May 2009
55112/08 NORMAN ADRIAN OLBOURNE V EXCELL BUILDING CORP
PTY LIMITED AND ANOR
JUDGMENT
1. REIN J: The second defendant (“ the Adjudicator ”) issued an Adjudication Determination on 2 December 2008 in favour of the first defendant (“ Excell ”) under the Building and Construction Industry Security of Payment Act 1999 (“ the Act ”) and against the plaintiff (“ Dr Olbourne ”). As a result of that determination Dr Olbourne has been made liable to pay $270,119.19.
2. Dr Olbourne challenges the validity of the adjudication on three bases:
(1) that there existed no “construction contract” within the meaning of s 4 of the Act between himself and Excell;
(2) that if there was a construction contract the contract was excluded from operation of the Act by s 7(3)(c) of the Act; and
(3) that the second defendant failed to adjudicate the disputed claim fairly and in accordance with the principles of natural justice in various specified respects.
Background
3. Mr Karl (also known as Karam) Diskoros and Mrs Diskoros (“ the Diskoroses ”) own a property at Ethel Street, Seaforth and were in the process of developing the site for residential units. They had obtained finance from Investec Bank (Australia) Limited (“ Investec ”) but needed additional finance.
4. Dr Olbourne, a reconstructive surgeon by profession, is director, shareholder and secretary of Meccashore Pty Ltd (“ Meccashore ”). He is also a trustee (with his wife Janet Dorothy Olbourne (“ Mrs Olbourne ”)) of the Olbourne Superannuation Fund No 2 (“ the Superannuation Fund ”).
5. Meccashore agreed to lend $1.3 million to the project and on 16 December 2005 a Joint Venture Agreement (“the JVA”) was entered into by which Meccashore and the Diskoroses agreed that Meccashore would participate in the management of the construction project with profits to be split 25% to Meccashore and 75% to Diskoroses. A Non-Recourse Loan Agreement was entered into between the Diskoroses, Meccashore and Dr Olbourne whereby Meccashore lent $1.3 million to the Diskoroses and the Diskoroses gave a mortgage over the Ethel Street property in favour of Meccashore and Dr Olbourne.
6. The JVA provided that Karl Diskoros would be the Development Manager and Duncan Olbourne (“ Duncan ”), who is Dr Olbourne’s son, would be the Building Manager of the project and that their services would be provided through a separate entity. Duncan’s involvement was made a condition of investment by Meccashore by Dr Olbourne: see Dr Olbourne’s affidavit sworn 22 December 2008 (“ Dr Olbourne’s first affidavit ”) at para 13. The Diskoroses also granted Dr Olbourne a put and call option in relation to three units in the project. A company, Seacrest Developments Pty Ltd (“ Seacrest ”) was formed, the shares in which were held by Duncan and the directors of which were initially Mr Diskoros and Duncan.
7. The Diskoroses entered into a building contract with Excell on 30 May 2006, whereby Excell would build the units for $6 million dollars plus GST.
8. The Diskoroses could not meet payments to Excell and Excell stopped work in early or mid-June 2007.
9. There is no dispute that the Diskoroses, Dr Olbourne and Meccashore entered into an agreement in the form of Heads of Agreement (“ HoA ”) on 27 July 2007, and subsequently that Dr Olbourne and his wife Mrs Olbourne, as trustees of the Superannuation Fund as lender, the Diskoroses as borrowers and Dr Olbourne as guarantor of the loan entered into a Loan Agreement on 8 August 2007, and that on or about 27 July 2007, the Diskoroses, Dr Olbourne, Meccashore and Seacrest entered into a Project Management Deed.
10. There is a significant dispute as to what was said by Dr Olbourne to Mr Joseph Chebaia (“ Mr Chebaia ”), the Managing Director of Excell. Excell claims that as a result of what was said and done (which I shall set out in more detail below), Dr Olbourne became a party to a “construction contract” within the meaning of the Act. The Adjudicator found that Dr Olbourne had become a party to a “construction contract” within the meaning of the Act.
11. There is a further matter which is the whether issues (1) and (2) in [2] above, having been determined by the Adjudicator in the Adjudication Determination, can be revisited – i.e. whether, even if error on the part of the Adjudicator could be shown, this would render the determination void.
12. Mr F Hicks of counsel, who appeared for Excell, objected to evidence tendered by Dr Olbourne (for whom Mr F Corsaro SC appeared) in relation to the question of whether Dr Olbourne had entered into a construction contract because of Excell’s contention that it is not open to revisit the question of whether a construction contract existed. It was agreed that it was preferable that I receive the evidence subject to objection and rule upon the admissibility of the evidence later.
13. I received very detailed and helpful written and oral submissions from both Mr Corsaro and Mr Hicks.
14. The Act has been the subject of much consideration by this Court, including by the Court of Appeal: see Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2004] NSWCA 394 ; (2004) 61 NSWLR 421 (“ Brodyn ”), Transgrid v Siemens Limited [2004] NSWCA 395 ; (2004) 61 NSWLR 521 (“ Transgrid ”) and Shorten v Davis Hurst Constructions Pty Ltd [2008] NSWCA 134. These cases provide guidance as to how many of the sections operate and the question of what grounds can be advanced by a disaffected party following an adverse adjudication have been extensively and authoritatively expounded upon.
15. S 7(1) of the Act is in the following terms:
7 Application of the Act
(1) Subject to this section, this Act applies to any construction contract, whether written or oral, or partly written and partly oral, and so applies even if the contract is expressed to be governed by the law of a jurisdiction other than New South Wales.
16. S 7(3)(c) of the Act is in the following terms:
(3) This Act does not apply to a construction contract to the extent to which it contains:
......
(c) provisions under which a party undertakes:
(i) to lend money or to repay money lent, or
(ii) to guarantee payment of money owing or repayment of money lent, or
(iii) to provide an indemnity with respect to construction work carried out, or related goods and services supplied, under the construction contract.”
17. The definition of “construction contract” in s 4 is as follows:
“a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party.”
18. A useful starting point in the case law is the summary of the approach taken by the Court of Appeal in Brodyn and Transgrid provided by McDougall J in Multipower Corp Pty Ltd v S & H Electrics Pty Ltd [2006] NSWSC 757 , in which case his Honour said at [33]:
“The grounds upon which an adjudicator’s determinations may be reviewed were dealt with by the Court of Appeal in [ Brodyn] . In that case Hodgson JA, with whom Mason P and Giles JA agreed, identified four grounds of review, from pp 441 [52] to 443 [60]. I paraphrase what his Honour said, giving paragraph citations:
(1) The first ground of review arises where an adjudicator does not satisfy the conditions laid down by the Act essential for there to be a valid determination ([52]).
(2) The second ground of review arises if the adjudicator does not try in good faith to exercise the relevant power relating to the subject matter of the legislation in a way that is reasonably capable of reference to the power ([55]).
(3) The third ground of review arises where an adjudicator denies a party such measure of natural justice as the legislative scheme requires to be afforded ([57]).
(4) The fourth ground of review arises if there is fraud in which the adjudicator is complicit ([60]).”
19. In Brodyn , Hodgson JA (with whom Mason P and Giles JA agreed) limited the basic and essential elements of the Act as being those requirements that enliven the adjudicator’s power to perform the functions under the Act: see at [55]. Hodgson JA listed those provisions that he thought were basic and essential requirements as including:
“The existence of a construction contract between the claimant and the respondent, to which the Act applies (s 7 and s 8).”
20. In Fifty Properties Investments Pty Ltd v Barry J O’Mara [2006] NSWSC 428 ; (2007) 23 BCL 35, Brereton J held at [17] – [22] (omitting the citations of authority therein referred) that:
“[17] The basic and essential requirements which are preconditions to a valid adjudicator's determination include “the existence of a construction contract between the claimant and the respondent, to which the Act applies (s 7 and s 8)" [ Brodyn , [53]]. Brodyn thus establishes that it is an essential precondition of an adjudication that there be a construction contract between the claimant and respondent; here, between Impero and FPI. In other words, the jurisdiction of an adjudicator to make a determination is dependent upon the existence of a relevant construction contract.
[18] Where jurisdiction depends on the existence of a state of facts, a decision maker's finding that the necessary facts to found jurisdiction exist can be reviewed by a court, notwithstanding that judicial review does not ordinarily extend to errors of fact, as there is an exception in the case of the "jurisdictional fact" doctrine, under which an erroneous finding of fact, the existence of which is an essential precondition upon which jurisdiction depends, is jurisdictional error, notwithstanding its factual character. Thus the inherent jurisdiction of superior courts to review decisions on the ground of jurisdictional error includes the power to consider whether there was an absence of jurisdiction because the decision maker made a wrong finding as to the existence of such an essential precondition. While a decision maker has to decide whether or not facts which are essential preconditions of jurisdiction exist, he or she can not give himself or herself additional jurisdiction by making a wrong decision on the collateral question as to the existence of such facts.
[19] Although there is a rule that, in the case of inferior courts, references to facts are not taken to be jurisdictional "unless the intention is clearly expressed", no such rule of construction applies to statutory decision makers.
[20] Brodyn establishes that absence of the essential and basic preconditions results in an adjudication being void. It follows that whether or not there was a construction contract is a "jurisdictional fact", and the adjudicator's finding that there was such a contract is open to review in this Court.
[21] Where the existence of an essential preliminary precondition to jurisdiction is a question of objective fact (as distinct from where it depends on the tribunal having a state of satisfaction or opinion), it is for the reviewing court to determine, on the evidence before it, whether or not the fact exists, and evidence of the existence or non-existence of the fact is admissible in the reviewing court, although courts exercise some restraint in interfering with findings with respect to the jurisdictional fact and do so only if satisfied that the decision maker's finding of the jurisdictional fact is wrong.
[22] The extent to which the reviewing court gives weight to the view of the facts taken by the decision maker in determining whether a jurisdictional fact exists varies with the circumstances, relevant factors including the field in which the tribunal operates, the criteria for appointment of its members, the materials upon which it acts in the exercise of its functions, and the extent to which its decisions are supported by disclosed processes of reasoning. The principle that weight may be given to the tribunal's view of the relevant jurisdictional fact applies more where the tribunal's expertise especially equips it to provide an answer, and less where the jurisdictional fact is an expression which is a matter of ordinary usage.”
21. I am not persuaded that there is any error in Brereton J’s approach in Fifty Properties . Mr Hicks argued that the approach is not consistent with Brodyn . I disagree. The passage at [55] of Brodyn to which I have earlier referred in [19] above supports the conclusion that the existence of a construction contract is a fundamental matter, an error in respect of which would support the conclusion that the determination is void: see also Transgrid at [29] per Hodgson JA with whom Mason P and Giles JA agreed.
22. I do not accept that there is any distinction to be drawn for this purpose between an arrangement and a contract since both are within the definition of ‘construction contract’. Some support for this conclusion can be obtained from Walton Construction (Qld) Pty Ltd v Salce [2008] QSC 235.
23. It may be unfortunate that a party dissatisfied with an adjudication can precipitate a further examination of the issue of whether there was a construction contract and hence preclude the speedy outcome that the Act had been designed to achieve, but it follows from the Fifty Properties approach to Brodyn , which I adopt, that Dr Olbourne is entitled to challenge the conclusion of the Adjudicator that there was a construction contract within the meaning on the Act, between himself and Excell. It follows too, that the evidence to which objection was taken is admissible.
24. It was agreed that should I come to the conclusion that the decision on whether a construction contract existed could be challenged, I need not consider whether the determination of the Adjudicator was void or voidable for another reason, it having been asserted by Dr Olbourne that the Adjudicator did not accord natural justice to Dr Olbourne.
‘Arrangement’
25. I proceed then to consider afresh the question of whether there was in existence a construction contract between Dr Olbourne and Excell. Technically the onus is upon the plaintiff, as the moving party, to establish that there was not, but helpfully, Excell provided particulars of the bases upon which it asserts that there was an arrangement in a document dated 13 February 2009 entitled “Defendant’s Statement as to the facts, matters and circumstances giving rise to a construction contract for the purposes of section 4 of the Act”.
26. The question of what is required to constitute an ‘arrangement’ was considered by Nicholas J in Okaroo Pty Ltd v Vos Construction & Joinery Pty Ltd [2005] NSWSC 45 (“ Okaroo ”). His Honour referred to various authorities from other areas which he found of assistance. I summarise the points found in his Honour’s analysis at [39] – [42] (omitting citations) as:
(1) ‘arrangement’ is apt to describe something less than a building contract or agreement;
(2) an expectation that a party will act in a certain way is not sufficient;
(3) ‘arrangement’ is a wide term which includes transactions or relationships which are not legally enforceable;
(4) there is no requirement imported by the legislation other than that the arrangement be one under which one party undertakes to carry out construction work, or to supply related goods and services, for another party.
27. My attention was drawn to the statement of Wilmer J in Re British Basic Slag Ltd's Agreements [1963] 1 WLRS 727 at 746 that the statute there under consideration by using ‘arrangement’
“clearly contemplates that there may be arrangements which are not enforceable by legal proceedings but which create only moral obligations or obligations binding in honour... for, when each of two or more parties intentionally arouse in the others an expectation that he will act in a certain way, it seems to me that incurs at least a moral obligation to do so. An arrangement as so defined is therefore something “whereby the parties accept mutual rights and obligations.””
28. Excell relies on the following matters (with references to the parties names altered to conform with the definitions in this judgment) to establish an arrangement:
(1) The meeting and discussions on or about 15 June 2007 between, inter alia, Mr Chebaia for and on behalf of Excell and Dr Olbourne.
(2) The suspension of works on or about 12 July 2007.
(3) The Heads of Agreement document provided to Excell dated 27 July 2007.
(4) The payment of monies to Excell on or about 17 and 21 August 2007.
(5) The statement made by Duncan 0lbourne for and on behalf of Dr Olbourne to Mr Chebaia for and on behalf of Excell on or about 20 August 2007.
(6) The directions Excell to submit invoices for payment for the works to Seacrest as agent for the Ethel Street Project as and from 20 August 2007.
(7) The submission of invoices for payment for the works to Seacrest as agent for the Ethel Street Project as and from 20 August 2007.
(8) The payment of invoices for the works performed by Excell as issued to Seacrest as agent for the Ethel Street Project as and from 20 August 2007.
(9) The resumption and performance of works as and from 20 August 2007.
Further, the existence of a construction contract for the purposes of section 4 of the Building & Construction Industry Security of Payment Act 1999 (NSW) as and from 20 August 2007 is established on the evidence by, inter alia,
(a) The communications and directions to Excell in respect of the performance of the works by Duncan and Dr Olbourne as and from 20 August 2007;
(b) The communications and directions to Mr Brincat in respect of the performance of the works and the administration of the contract by Duncan and Dr Olbourne as and from 20 August 2007;
(c) The arrangements made for, by or on behalf of Dr Olbourne so that, as and from 20 August 2007, the Diskoroses did not receive nor pay for the supply of goods and services under the building contract dated 19 May 2006 for the purposes of the taxation obligations;
(d) The communications and negotiations between Mr Chebaia for and on behalf of Excell and Dr Olbourne as to a variation of the terms of the contract for the provision of security in respect of the obligations of Excell to rectify alleged defects;
(e) The admissions made by Dr Olbourne, including by email dated 7 September 2008.
The Credibility of Witnesses
29. A significant attack was launched on the credit of Mr Chebaia, it being asserted on behalf of Dr Olbourne that:
(1) Mr Chebaia had “colluded” with his brother Johnny Chebaia (“ Johnny ”) in the preparation of their statutory declarations which formed the essence of their affidavits in the proceedings: see T191.30 – 191.35.
(2) His evidence of recollection was an attempted recitation of the content of his affidavit: see T194 – 195.
(3) He had admitted to creating and signing false documents to secure work under the building contract with the Diskoroses: see T171.36 – 171.46, T180.25 – 180.28.
(4) His evidence that he had no knowledge that the project was being financed by Investec and he would not have entered into the sham agreement was inconsistent with his signing a paper that stated the funds were coming from Investec: see Exhibit A1 at p 202.
(5) The purpose of the sham agreement was to alleviate the Diskoroses’ tax problems and his evidence that the purpose of the agreement was to bolster Karl Diskoros’ CV was, itself, false: see T177.48 – 178.33.
30. It was put that his admitted collusion, his failure to concede matters where appropriate, inconsistencies in his evidence and his past willingness to enter into false agreements to gain economic advantage should lead to his evidence being rejected or given no weight.
31. It was submitted that Johnny’s evidence was also unreliable because of the “collusion” to which I have earlier referred. No other attack on Johnny’s credibility was made.
32. A focused attack on the contents of the site diary for 15 June 2007 (and less significantly, other dates) was made: see Annexure A at paras 31 – 38 of the written submissions on behalf of the plaintiff. There was the further aspect that Dr Olbourne had a diary of appointments for 15 June 2007 that tended to rule out the meeting having taken place on site at the time that Mr Chebaia said it had occurred.
33. The date of the alleged conversation was not, of itself, critical. It became critical since Mr Chebaia and Johnny claimed that the note was made by Johnny on the day Mr Chebaia and Johnny met on site with Dr Olbourne and hence was a more or less contemporaneous note. Dr Olbourne accepted that he did meet with Mr Chebaia around that time but could not say when exactly it was that they met. He, himself, had no note of the conversation and nor did Duncan.
34. So far as the “collusion” is concerned, Mr Chebaia did admit to having consulted with Johnny, and there is uniformity to the statutory declarations. When witnesses discuss their evidence, it undermines the authenticity of their recollection, and reduces the credibility of their evidence.
35. I accept that Mr Chebaia’s admission concerning the sham agreement was damaging to his credibility and I do not accept that he was candid about this – he offered an explanation which was inconsistent with his own evidence and improbable. I approach his evidence with caution and I have real doubts as to the authenticity of the diary note for the reasons advanced in the submissions of the plaintiff. It seemed bizarre that Mr Chebaia, who ran the Excell business, would leave it to Johnny to make a note of an important conversation and Johnny’s vagueness only reinforced that aspect. I do not place any significance on the precise position of the note on the page as an indicator of when the conversation is said to have occurred but it was Mr Chebaia’s evidence that the meeting with Dr Olbourne occurred in the early morning and Dr Olbourne’s evidence, supported to a degree by his patient schedule, would make it unlikely that the meeting occurred on 15 June 2007 in the early morning. I am therefore not persuaded that the diary note is authentic.
36. Duncan agreed that he had consulted with his father in the preparation of statutory declarations which became their affidavits: see T111.46 – 113. To the extent that it was suggested in re-examination that Duncan’s answers meant something different, I do not accept it – the cross-examination made it clear that Duncan was being asked about discussions with his father in the context of the preparation of a response to Excell’s claim. Dr Olbourne did not admit to having consulted with his son in the preparation of his affidavit: T92 – 93.
37. I am therefore left with competing versions of what was said by Dr Olbourne in a conversation in June 2007 that was not the subject of any reliable note or record by either side, in circumstances where Mr Chebaia’s credibility is significantly in doubt, Duncan’s recollection of events is very likely influenced by his father’s recollection and no one endeavoured to recall precisely what was said until approximately 18 months after the alleged conversation.
38. There are other facts and circumstances, which include written communications, that are relied on, and they have significance not only in themselves but also in respect of assessing whether Mr Chebaia or Dr Olbourne’s evidence (and Duncan’s evidence) should be accepted.
39. Mr Ted Brincat (“ Mr Brincat ”), of Auspro Pty Ltd (“ Auspro ”), was from September 2006 the superintendent under the building contract between Excell and the Diskoroses, and had been engaged by Seacrest until September 2008 when Mr Brincat issued a Notice of Practical Completion (he was then replaced by Seacrest pursuant to a power of attorney given by Mr Diskoros to a Reverend Father Mina Diskoros: see Exhibit A2 at pp 523-530). Mr Brincat is an independent witness who appeared to me to be entirely honest and straightforward. Indeed, Mr Corsaro, in his written submissions, submitted that Mr Brincat had no reason to prefer the interests of Dr Olbourne over Excell.
40. I accept Mr Brincat’s evidence but I bear in mind that he too is endeavouring to recall conversations that were held quite some time ago.
41. I think that Dr Olbourne’s reliability is in question for the following reasons, apart from the passage of time, the lack of any contemporaneous notes of the conversations and the documents to which I will refer:
(1) I have referred, above at [36], to his denial of consultation with his son about the contents of his evidence and Duncan’s evidence is inconsistent with that denial.
(2) Dr Olbourne’s explanation in paras 62 – 63 of his first affidavit as to the use of the phrase “Seacrest as agent of the Ethel Street Project” was less than fullsome and an explanation was only brought forward in oral examination-in-chief and cross-examination: see T77 – 78 and see T97.35 – 98.25.
(3) His first affidavit is silent on any discussions of his with Mr Brincat in June, July or August of 2007 and gives the impression that he first became actively involved in the project only in May 2008: see Dr Olbourne’s first affidavit at para 64. His assertion in para 8 of his affidavit sworn 30 January 2009 (“ Dr Olbourne’s second affidavit ”) that he had never said to Mr Brincat that he had taken over the project from Karl Diskoros is inconsistent with the evidence of Mr Brincat at para 11 of Mr Brincat’s affidavit (see below at [44(10)]), and also with the HoA.
(4) At para 46 of his second affidavit, Dr Olbourne said that he had said to Mr Brincat in August 2007:
“we have done the deal with Investec, thanks for your help. We have now taken over the excess funding and the management of the Project.”
Although the deal may have included obtaining acceptance from Investec, the deal he had done was principally with the Diskoroses. Given that Seacrest was already managing the project, the use of the word ‘we’ suggests a more active involvement by Dr Olbourne than had previously been the case, but to which he does not admit.
(5) He denied having provided a copy of the HoA to Mr Brincat, which Mr Brincat said he did.
42. So far as Duncan is concerned, I did not think that he was shown by cross-examination to be an unreliable witness (save in respect of the conversation in June 2007 to which I have already referred) but he is obviously close to his father (who organised for him to be involved in the project) and is certainly not an independent witness with no interest in the outcome of the case in the way that Mr Brincat is. In relation to the conversation set out below at [44(2)], I have noted there that Duncan gives no version of the conversation that he did have, and I accept Mr Brincat’s evidence in preference to Duncan’s. I also note that Duncan’s version, in his affidavit sworn 22 December 2008 (“ Duncan’s first affidavit ”) at paras 21 - 26, of the June 2007 meeting, involved him saying things that are not so far removed from Mr Chebaia’s version. In his affidavit sworn 30 January 2009 (“ Duncan’s second affidavit ”) at para 4, he disputed Mr Chebaia’s version. I note that in his email of 18 July 2007 to his father, set out at [44(6)] below, he suggested a course of dealing with the present crisis that required project participants to have made known to them that they would have no obligations to Karl Diskoros. This approach is consistent with the approach Dr Olbourne outlined to Karl Diskoros (see [44(6)]) and with the content of the HoA, but contrary to Dr Olbourne’s denial that he had told Mr Chebaia that he proposed to take over the project or, later, that he had.
43. I think the documentary material demonstrates a degree of involvement of Dr Olbourne that Duncan’s affidavits did not reveal. The email to his father on 18 July 2007, set out at [44(6)], is one such example. I note that Duncan says at para 5 of his second affidavit that he sent a copy of his email to Mr Chebaia of 20 August 2007 to his father as a matter of courtesy (see Exhibit A2 at p 612), which I do not accept as an explanation. Dr Olbourne was providing the funds, had been the person negotiating with the Diskoroses and liaising with Investec and had spoken to Mr Brincat about getting Excell back to work and the explanation of forwarding the document as a mere courtesy is improbable.
Was there an ‘arrangement’?
44. I referred earlier to the facts and circumstances relied on by Excell: see [28] above. I set out below, in more detail, those matters in chronological form (other than the disputed June 2007 conversation) together with further material, much of which is uncontroversial, which appears to me to be salient.
(1) On 14 June 2007, Excell sent to Mr Brincat and Mr Richard Cohen (“ Mr Cohen ”), a quantity surveyor retained by Investec, an invoice for $356,115.17. Mr Cohen would not process the claim because he had not been paid by the Diskoroses. An amount of $30,391 certified by Mr Brincat in Payment Certificate 10 for Excell’s work to the end of May 2007 had not been paid either: see Exhibit A2 at p 470.
(2) In June 2007, Mr Brincat says he had a conversation with Duncan in which Duncan said words to the following effect:
“Dad and I are taking over the job can you please help me discuss this with Kevin Hamman as I know you are on talking terms with him. Dad and I have tried to call Kevin but he has not taken our calls, can you please arrange a meeting as Dad has a proposal that he wants to put to Kevin to invest money and take over the job.” See affidavit of Mr Brincat dated 22 January 2009 (“ Mr Brincat’s affidavit ”) at para 9.
Duncan disputes that he said this but gives no version of the conversation he did have.
(3) On 7 July 2007, Excell sent a letter to the Diskoroses, Mr Brincat and Mr Cohen threatening to suspend work: see Exhibit A2 at p 496.
(4) On 12 July 2007 Excell suspended work for non-payment: Exhibit A2 at p 511.
(5) On 14 July 2007 the Diskoroses agreed in principal to a proposal of Dr Olbourne’s contained in a draft HoA.
(6) In an email on 24 July 2007, Dr Olbourne wrote to Karl Diskoros saying (emphasis added):
“in principle I would be prepared to assume obligations limited to the completion of the project from the date of this agreement and I undertake to attempt to maximise the return to us both.
For me to achieve this it is essential that you agree to relinquish all control over the project. Whilst you have any degree of control my ability to perform my duty is compromised .” See Exhibit 1 at p 2.
This may have been prompted by Duncan’s advice to his father on 18 July 2007 that
“[e]ssentially KD to have nil involvement in the project and it needs to be known that project participants have no obligations to him ”: see Exhibit 1 at p 1 (emphasis added).
(7) On 27 July 2007 the HoA was signed by the Diskoroses. The HoA was an agreement between the Diskoroses, Dr Olbourne (defined as NO) and Meccashore and was said to supersede the JVA. It stated (emphasis added):
1. KD [Karl Diskoros] will assign control of the undertaking of the Project to NO or nominee entity such that KD will agree to have no further day-to-day involvement in the carrying out or completion of the Project, or give direction to its conduct, the works or variations. Accordingly KD agrees not to:
a. attend the construction site without written permission of the superintendent or project manager.
b. contact the builder or superintendent without permission from NO or his delegated entity.
2. NO and related entities will assume control and undertake to manage the Project in a timely and efficient manner with the aim of maximising the return to the parties subject to the joint venture agreement.
3. KD and Duncan Olbourne will resign as directors of Seacrest Pty Ltd and will give no further directions to Auspro in its role of superintendent of the project.
4. KD will forego any further salary or consulting fees which may be due under the terms of the joint venture agreement.
5. KD will authorise NO or related entity to be his agent as client borrower in all dealings with Investec Bank.
6. NO or related entity will agree to provide secured mezzanine funding for the Project to fund shortfalls in the builder's progress claims made against the Investec Bank facility. NO or related entity will additionally provide secured mezzanine funding for all other relevant and necessary project related costs, including, but not limited to consultants, project manager, superintendent, and statutory authorities. Advances will be made by payment direct to the supplier. This funding is to attract interest at the rate of 20% per annum, calculated monthly and accruing until repaid in full.
7. KD will be responsible to pay for those items of expenditure and related costs unrelated to or predating the joint venture agreement or for which documentation can not ( sic ) be provided to establish a joint liability under the joint venture agreement. Those sums and related interest costs shall be paid by deduction from the profit share of KD on final disbursement of the profits in accordance with the joint venture agreement. Disputes in this regard will be subject to binding resolution by Auspro P/L as an independent contract negotiator. KD will be responsible to pay or repay all advances, interest, costs and other amounts owing or that become owing to Investec in respect of such sums.
8. KD will be responsible to pay for amounts claimed from Investec for reimbursement of GST advances. Those sums shall be paid by deduction from the profit share of KD on final disbursement of the profits in accordance with the joint venture agreement.
9. KD will be responsible for all costs relating to the suspension of works by Excell Building Company ( sic ) consequent upon his refusal to sign the builders ( sic ) progress claims to date, including, but not limited to holding charges, valid variation claims, interest and legal charges. KD will also be responsible for the legal costs involved in the documentation of this agreement. These sums shall be paid by deduction from the profit share of KD on final disbursement of the profits in accordance with the joint venture agreement.
10. KD undertakes to desist from all attempts to market and sell the development.
See Exhibit A2 at pp 531-534.
(8) On or about 8 August 2007, the Diskoroses, Dr Olbourne, Meccashore and Seacrest entered into a Project Management Deed.
(9) On 8 August 2007, Dr Olbourne and his wife Mrs Olbourne, as trustees of the Superannuation Fund, the Diskoroses and Dr Olbourne, as guarantor for the Diskoroses, entered into a Loan Agreement whereby up to $750,000 was made available to the Diskoroses to enable to project to be completed.
(10) In August 2007, Dr Olbourne rang Mr Brincat and had a conversation with him in which, on Mr Brincat’s evidence, Dr Olbourne said:
“We have done the deal with Investec, thanks for your help, I have now taken over the project, you are not to talk to Karl Diskoros on any terms you are only to talk to Duncan and me, can you please call Joe and get him back on site as quick as possible.” See Mr Brincat’s affidavit at para 11. (The reference to Joe is a reference to Mr Chebaia.)
(11) On 18 August 2007, Mr Brincat rang Mr Chebaia and said:
“Joe, following on from this morning’s email, you are to go back to work on the site as Norman Olbourne has stepped in and taken over from Karl and that he assured me that all payments will be made under the project both to you and I.” See Mr Brincat’s affidavit at para 13, see also T124.46 – 124.50.
Mr Chebaia made a diary note:
“To go back to work. Norm Olbourne has stepped in over Karl and will fund the project.”: see Exhibit A2 at p 607.
which is very close to para 13 of Mr Brincat’s affidavit, above, and which note was made on or about 18 August 2007. Given Mr Brincat’s evidence, I accept the note as evidence of what Mr Brincat told Mr Chebaia.
(12) Around that time Mr Brincat sent to Mr Chebaia a copy of HoA.
(13) On 20 August 2007 Mr Brincat received copies of the Project Management Deed and the Loan Agreement. He was concerned as to how the arrangements would impact upon his role: see Exhibit B and T146 – 147, and see also Exhibit A2 at pp 624-625 and 627. He did not pass the Project Management Deed or the Loan Agreement on to Excell, did not see any need to do so and was not asked to do so.
(14) According to Mr Chebaia, Duncan rang him on 20 August 2007 and said:
“My dad will be paying you through Seacrest. Can you provide me with your bank account details.” See Mr Chebaia’s affidavit sworn 21 January 2009 (“ Mr Chebaia’s affidavit ”) at para 26.
Duncan denied that he had said this but there is no dispute that Seacrest was the entity used to pay Excell money provided by the Superannuation Fund.
(15) On 21 August 2007 Mr Brincat queried Duncan:
“can Excell directly send progress claims to Seacrest or is the assumption of responsibility that is stated in the deed sufficient for Excell to now forward claims to Seacrest and not Karl Diskoros. I believe this has implications with regard to who can claim the GST.” See T147 – 148, see also Exhibit A2 at p 624.
A solicitor retained by Dr Olbourne, Mr Marks of Minter Ellison, told Duncan that:
“the Project Management Deed gives Seacrest full authority to manage all dealings with the builder.” See Exhibit A2 at p 624.
(16) On 6 September 2007 Duncan told Mr Chebaia that he should address the Excell invoices to “Seacrest Developments Pty Ltd as agent for the Ethel Street Project”: see Exhibit A3 at p 630.
(17) Excell followed that instruction and all subsequent invoices were so addressed and some earlier invoices were re-addressed: see Exhibit A1 at pp 317 ex seq. There is an invoice dated ‘July’ but it is likely to have been prepared in September following the email of 6 September 2007. Variations after that time did not name a client: see, for example, Exhibit A3 at pp 659 and 660, unlike the situation prior to that: see for example, Exhibit A2 at pp 441 and 516.
(18) Seacrest paid invoices or portions of invoices that were not paid by Investec. Details of amounts paid by Seacrest can be found at Exhibit A4 at p 1214.
(19) In May 2008 Dr Olbourne wrote to Mr Brincat asking Mr Brincat to “stay on Joe’s case” concerning completion of the works: see Exhibit 1 at pp 9, 11 and 18.
(20) On 13 June 2008 Mr Brincat issued a Notice of Practical Completion which described the principal as “Seacrest Development P/L on behalf of Karam and Mary Diskoros”: see Exhibit A4 at pp 974 – 975.
(21) On 8 July 2008 a meeting was held with Mr Brincat, Mr Chebaia, Dr Olbourne and Duncan at which Dr Olbourne said to Mr Brincat:
“Ted I want you to assess all the variations and the negative variations. I am not releasing any more money until this is done.” See Mr Brincat’s affidavit at para 15.
(22) By email of 29 August 2008 Dr Olbourne wrote to Mr Chebaia saying
“I am aware of your concerns about the progress of this matter. I too have some concerns.
I have been in discussions with appropriate advisors and may be in a position to propose a resolution of our worries early next week.
I expect to be able to ring you on Monday to arrange a meeting whereby we can progress the matter.” See Exhibit A4 at p 1157.
This email says very little but it is an indication that Dr Olbourne was personally involved and would be proposing a ‘resolution’ of matters between himself and Excell.
(23) On 5 September 2008 Dr Olbourne wrote to Excell in connection with Unit 5. He said a tiler was required to complete the restoration. He then said:
“If I do not hear from you by COB today advising that your tiler will attend, able to do the work first thing on Wednesday, we will make alternate arrangements for the tiling to be performed.” See Exhibit A4 at p 1160.
Unit 5 is not one of the three units which Dr Olbourne had arranged to buy under put and call options.
(24) On 7 September 2008 Dr Olbourne wrote the following email to Mr Chebaia (emphasis added):
“As we agreed when we [met] last Tuesday, the issue is not about whether you are entitled to the outstanding variations assessed by the QS and Ted Brincat. The issue is whether I, through Seacrest, am in a position to pay them .
It is true, as you state, that since the project completed, we have paid you promptly for extra works required to finalise sales. I give you my word that I will continue to do that.
The remaining issue is the comfort that I need to ensure your prompt performance of the defect rectification that you are obliged to do under the terms of the contract you entered into with Karl Diskoros. We agreed that you would provide a bankers ( sic ) guarantee for the sum usually involved in retention. That will give me the assurance I need. It puts you at no risk if you perform in accordance with that part of your contract.
The deed covering our respective rights and obligations under this deed will be ready early this week. I will forward it to you and then we should meet to execute the deed. We will exchange the Bank guarantee for payment of your outstanding claim and hopefully our commercial relationship will be retrieved. I suggest that if you perform the defect rectifications satisfactorily as you have repeatedly assured me you shall, then you are at no risk at all in providing me with the comfort of that guarantee.
In the meantime, I repeat my request to you about having the tiler available first thing on Wednesday to complete the rectification works in the living area. This would indeed be an indication to me that you wish to continue working with us in a cordial and harmonious relationship .”
See Exhibit A4 at p 1162.
(25) On 10 September 2008 Dr Olbourne wrote to Excell in the following terms:
“You and I, in a meeting one week ago, agreed that you would provide me with a bank guarantee to ensure that your obligations under the construction contract would be performed promptly and satisfactorily in respect of the defects that arise or are notified to you.
I have had prepared a deed that reflects our discussions and framed in the context of the original construction contract.
What is now required is for the parties to execute the deed and for Seacrest to receive your bank guarantee.
At the same time, I would be prepared to finance the remainder of your claim as assessed by the QS and Ted Brincat in Seacrest’s capacity as agent for the Ethel Street Project.
I suggest that this be done at the offices of Investec under the good offices of Kevin Hamman.
Please advise when you are able to meet.”
See Exhibit A4 at p 1164.
The email referred to Mr Chebaia having agreed to provide ‘me’ with a bank guarantee and the draft deed required the bank guarantee to be given to Seacrest, pointing to a close connection between Seacrest and Dr Olbourne.
45. The evidence reveals an unusual state of affairs but the essence of what transpired, leaving aside the contentious conversation on 15 June 2007 is as follows:
(1) The Diskoroses had a construction contract with Excell, the funding of which came in part, from Investec.
(2) Dr Olbourne had taken up either directly or through Meccashore, which he controlled, a significant financial interest in the project.
(3) Meccashore and the Diskoroses entered into the JVA on 16 December 2005 (see Exhibit A1 at pp 80-95) in respect of the project. Meccashore’s injection of funds enabled the project to proceed. Through his son’s involvement in Seacrest, Dr Olbourne, in effect, had a family member involved in the day-to-day management of the project and he regarded himself as having an interest in the project: see T92.45.
(4) By May 2007 the Diskoroses were in financial difficulty and could not complete the project. Investec were not prepared to provide additional funding. Excell would not continue to work until outstanding certified invoices were paid and arrangements made for further work to be paid.
(5) Dr Olbourne decided to provide or arrange additional funding, and funding was provided by the Superannuation Fund of which he and his wife were trustees.
(6) The Diskoroses contracted with Dr Olbourne that they would cease to have any involvement with the project, and Dr Olbourne or a nominated entity was to take over control of the project.
(7) The funding provided enabled Excell to be paid outstanding claims, which claims had not been paid by the Diskoroses in May 2007 or Investec in June or July 2007, and Excell resumed work on the project on 20 August 2007.
(8) Seacrest, which was incorporated after the building contract had been made and had been the project manager with both Karl Diskoros as a director and Duncan as a director, continued to act as project manager after Karl Diskoros resigned. The HoA stated that Duncan would also resign as a director of Seacrest, although he did not do so. From this point on it appears that Seacrest took instructions from Dr Olbourne and that at least from August 2007 Dr Olbourne regarded Seacrest as his agent. The instructions given to Excell by Duncan on behalf of Dr Olbourne concerning invoicing were designed to ensure that Karl Diskoros would not be treated as receiving or paying any money out and hence would not be entitled to GST credit imputations: see T78.40 – 78.45. Dr Olbourne did not say who had received the benefit of the GST imputations but it would appear to have been either himself or the Superannuation Fund since his Fund was paying the monies to Excell that were not paid by Investec, he sought the advice regarding the new arrangements and he later gave instructions to his accountant, Mr Rubner, for the Australian Taxation Office to be notified: see T78 – 79 and T99.16 – 99.23.
(9) Dr Olbourne retained the discretion not to pay for work even if it was certified by Mr Brincat: see T103.41 – 104.14.
46. There were a number of matters which Mr Corsaro argued would dissuade the Court from concluding that there was an arrangement between Dr Olbourne and Excell, i.e.:
(1) That the notices sent by Excell under the building contract on 7, 10 and 12 July 2007 named the Diskoroses as principal: see Exhibit A2 at pp 496, 501 and 511.
(2) That Excell’s notice of dispute of 4 July 2008 was addressed to Ted Brincat as superintendent and stated that a conference to resolve the dispute has been arranged by Seacrest Developments as agents for the Diskoroses.
(3) Excell, in October 2008, asserted that the Diskoroses had assigned the building contract to Dr Olbourne: see Exhibit A4 at p 1455.
(4) Some emails were not copied to Dr Olbourne: see Exhibit A4 at pp 1042, 1131, 1134 and 1140.
(5) In one email Excell stated that Seacrest has “no standing under the Contract”.
(6) Progress payment certificates issued by Mr Brincat named as principal “Seacrest Developments on behalf of Karam and Mary Diskoros”: see for example Exhibit A3 at p 634 (which was issued on 8 September 2007).
47. The contention that the Diskoroses assigned the building contract to Dr Olbourne or that there had been a novation was not pressed in these proceedings by Excell. That there was confusion as to how what had occurred should be characterised both in the minds of Excell’s lawyers and even more obviously, Mr Chebaia, is not surprising given the peculiar nature of what was attempted. Mr Brincat clearly had a problem in understanding what was the legal categorisation (see [44(13)] above and see Exhibit A2 at pp 624-628) and I think he perceived the fundamental inconsistency in what Dr Olbourne and his advisers had in mind because what Dr Olbourne wished to do was take over control of the project and issue instructions to the builders directly or through Seacrest and deny to the Diskoroses any right to claim a GST credit, without any assignment or novation of the building contract to him or his nominees. There was no entity called the Ethel Street Project. The notion that ‘A’ can be agent for a principal where the principal agrees not to give instructions to the agent is unusual. It may be that by the documents created, the Diskoroses did grant Seacrest an irrevocable power of attorney to act on their behalf but only the HoA was given to Mr Chebaia, and it could not be expected that Mr Chebaia would appreciate from the HoA what the precise effect of the arrangement was. Mr Brincat understood that the attempt to keep the building contract between the Diskoroses and Excell extant had to be complied with. The claims and notices sent by Excell before receipt of the HoA at the end of July could not be of any significance but, given that Dr Olbourne had sought to establish a regime that somehow kept the existing contract between the Diskoroses and Excell extant but without assignment, albeit with a new invoicing regime, I do not regard the form of the claims and notices sent after the HoA was received by Excell as detracting from Excell’s claim.
48. The instructions given to Excell as to how the invoices were to be addressed and the obvious input of accountants and lawyers advising Dr Olbourne in this process are relevant matters in determining whether Dr Olbourne was privy to an arrangement by which the remaining building work would be performed for him. I think it is clear that any arrangement between Dr Olbourne and Excell was not crystallised at the time when Dr Olbourne met with the Chebaias in June 2007, but rather, that it became so after suspension of the work, the provision of the HoA to Mr Brincat and both his communication of Dr Olbourne’s commitment to the project and his providing the HoA to Excell. In Mr Chebaia’s version of the June 2007 conversation he reports Dr Olbourne as saying that he has to obtain Karl Dirskoros’ agreement. Mr Corsaro sought to rely on the fact that Mr Brincat was not instructed to send the HoA to Excell. It is not suggested that Mr Brincat was instructed not to make the contents known to Excell. I think that it was clearly intended that Mr Brincat would provide the HoA to Mr Chebaia (or at least make known the essence of if) and I accept Mr Brincat’s evidence that he was asked by Duncan to do so (see T154.48 – 155.6) and, in any event, he was asked by Dr Olbourne to communicate with Excell, and did so. Mr Brincat, in his communications with Excell at that time, was, I infer, acting on the instructions of Dr Olbourne.
49. Mr Corsaro pointed out that, since the contract remained one between Excell and the Diskoroses, to find that there was an arrangement between Excell and Dr Olbourne created a disharmony. Disharmony of this kind can be a relevant matter and was discussed in Lumbers v W Cook Builders Pty Ltd (in liq) (“ Lumbers ”) [2008] HCA 27 ; (2008) 232 CLR 635 , but these facts are quite different to Lumbers . Here the builder had not been paid by the principal and was refusing to continue to work until it was paid and arrangements were put in place to enable it to be paid both for the past unpaid certified claims and in the future. More importantly, we are here dealing with a statutory scheme for interim payment: see Okaroo at [41] and [46], in which Nicholas J approved of the comments in Beckhaus Civil Pty Ltd v Council of the Shire of Brewarrina Council [2002] NSWSC 960 at [60] per Macready AsJ; and see Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd [2005] NSWCA 49 , (2005) 62 NSWLR 385 at [28] per Handley JA, Santow JA and Pearlman AJA agreeing. It was not suggested that an existing contract between A and B must preclude the possibility of an arrangement, within the meaning of s 4 of the Act, between A and C. Mr Hamman of Investec had suggested that Dr Olbourne could take over the building contract. It is clear that Dr Olbourne believed that inability of the Diskoroses to meet their obligations under the existing building contract required some new arrangement which, it was determined by Dr Olbourne, for reasons best known to him, would not bring the pre-existing contractual relationship between Excell and the Diskoroses to an end.
50. Mr Corsaro also pointed out that Excell never sent out a letter confirming the obviously important matters that had been discussed. Nor, it might be said, did Dr Olbourne and/or Duncan acting on his behalf, but Dr Olbourne had the HoA sent to Mr Brincat and Duncan asked Mr Brincat to send a copy to Excell. Mr Corsaro referred to the fact that Mr Chebaia made no enquires about Dr Olbourne’s ability to pay. I do not find that particularly surprising since Mr Chebaia knew that Dr Olbourne was a medical specialist who had agreed to buy three units in the project. Mr Corsaro drew attention to the fact that not all emails sent to Seacrest were copied to Dr Olbourne. I take this into account, but it seems that relations between Seacrest and Dr Olbourne were very close, not surprising given that Dr Olbourne’s son was the principal officer of that company. The arrangements were so unusual and confusing that I do not think any inference against Excell can be drawn from the actions of Excell in these respects.
51. Having regard to the material to which I have referred, the exact content of the conversation that Dr Olbourne had with Mr Chebaia becomes less significant. As McClelland CJ in Eq said in Watson v Foxman (1995) 49 NSWLR 315 at 318:
“... 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.”
and I think that all accounts, particularly that of Mr Chebaia, for the reasons mentioned, need to be approached with caution.
52. Mr Corsaro draws attention to the fact that Mr Brincat told Mr Chebaia the “true position” of the funding: see para 127 of the plaintiff’s written submissions. Mr Brincat not only says that Dr Olbourne gave him a copy of the HoA (as well as Duncan sending him a copy), but that Duncan asked Mr Brincat if he could give a copy of the HoA to Mr Chebaia and that he gave it to Mr Chebaia
“to give the builder assurance that Karl was no longer involved and that the job was taken over by someone else which was the Olbournes. It was to give him assurance.” See T154.12 – 154.14.
and
“because we were trying to get him back to work and there were specifically discussions about getting the builder back to work as soon as possible.” See T154.17 – 154.20.
53. At T154.38 Mr Brincat said that he did not go into the arrangement between Dr Olbourne and the Diskoroses in depth:
“All he wanted to know is was he going to get paid and I assured him that he was.”
The question and answer which follows at T154.41 – 154.47 are a result of Mr Brincat’s evidence at T147.25 – 147.45 that he thought additional funding had been provided by Dr Olbourne to Investec, which is clearly erroneous and Investec is not a party to the HoA or the other documents signed in July or August 2007. Mr Brincat gained the impression from what he was told that even though the Diskoroses would still be contractually bound under the building contract, Dr Olbourne would be taking over the project and would be financing it, and I find that he passed that understanding on to Mr Chebaia, as it was intended he do.
54. Whilst the phrase “Seacrest as agent for the Ethel Street Project” has no meaning at law, it reflects the fact that a significant change had occurred, namely that the Diskoroses would no longer have any input in the project and Karl Diskoros’ resignation precluded any indirect involvement through Seacrest. Since the HoA said Dr Olbourne or his “nominee entity”, it is possible to view Seacrest as the nominee referred to in the HoA. There are three reasons why I do not think that it is appropriate to do so. Firstly, if Seacrest was the nominee, it would not be necessary to have added the words “as agent for the Ethel Street Project”. Secondly, the money, although paid by Seacrest to Excell, was provided by the Superannuation Fund: T77.29 – 77.38 and T97 and Exhibit A4 at p 1214. Thirdly, since Dr Olbourne was not a director or shareholder of Seacrest and Duncan was involved in the building industry and owned and legally controlled Seacrest, there would be no reason for Dr Olbourne to be involved in any activity in August 2007 or thereafter prior to his being given possession of the three units which were the subject of the put and call options. Further, if Dr Olbourne had nominated an entity then it was incumbent on him to tell Excell who that entity was and he did not do so. In my view, what had transpired is that Seacrest was now taking instructions from someone other than the Diskoroses and there are only three possibilities as to who that was:
(1) Dr Olbourne;
(2) Dr Olbourne as one of the trustees of the Superannuation Fund; or
(3) Meccashore.
55. So far as (3) is concerned, there is nothing to indicate that Meccashore was the entity appointed as Dr Olbourne’s nominee under the HoA. Meccashore did not purport to do anything under the building contract and it did not pay any further money, whereas the Superannuation Fund did pay those monies. As it was conceded (see T267.20 – T267.30) that there is no impediment to Dr Olbourne being found to have been party to an arrangement as trustee of the Superannuation Fund even though Mrs Olbourne was not joined to the adjudication or to these proceedings, it is not necessary to determine which of (1) or (2) is the more apt description.
56. I am satisfied that Dr Olbourne told Mr Chebaia in the second half of June 2007 that it was his intention to take over effective control of the project and to organise funding so as to persuade Excell to return to finish the work, should he do so, and that the provision of the HoA to Excell was confirmation to Excell that Dr Olbourne had obtained the Diskoroses’ agreement to his doing so.
57. I think that Dr Olbourne intentionally created an expectation in Mr Chebaia that Dr Olbourne would take over and fund the project shortfall, direct the builder through Mr Brincat or Seacrest and be responsible for paying Excell, and hence, mutual rights and obligations were created in the context of the building works for the project, this constituting an ‘arrangement’ within the meaning of s 4 of the Act. Dr Olbourne’s reference to his willingness to assume obligations limited to completion of the project in his email of 24 July 2007 to Mr Diskoros: see [44(6)] above, is consistent with this conclusion.
The s 7(3)(c) Issue
58. The submissions filed on behalf of Dr Olbourne say nothing about this issue, other than in the context of an attack on the Adjudicator’s decision. The submissions filed on behalf of Excell do refer to the point. The arrangement which Excell asserts is not one whereby it is asserted Dr Olbourne agreed to lend money to Excell or guarantee the payment of money owing to Excell or repay money lent nor is it alleged that Dr Olbourne provided an indemnity with respect to construction work carried out. S 7(3)(c)(iii) would, therefore, seem to have no relevance to this matter.
Conclusion
59. It follows that, in my view, the summons should be dismissed. I will hear the parties on the precise form of orders and on the question of costs.
LAST UPDATED:
5 May 2009