In the High Court of Australia s1
IN THE HIGH COURT OF AUSTRALIA
SYDNEY REGISTRY
No S347/2006
BETWEEN:
FARAH CONSTRUCTIONS PTY LTD
First Appellant
FARAH ELIAS
Second Appellant
LESMINT PTY LTD
Third Appellant
MARGARET ELIAS
Fourth Appellant
SARAH ELIAS
Fifth Appellant
JADE ELIAS
Sixth Appellant
AND
SAY-DEE PTY LTD Respondent
APPELLANTS’ SUBMISSIONS
Part I Statement of the Issues
1. The issues in this appeal are whether the New South Wales Court of Appeal (NSW CA) erred by:
(1) overturning the factual findings of the trial judge concerning the disclosure by Farah Elias to Say-Dee of the communication from the Burwood Council in relation to the development of No 11 Deane Street, Burwood and the purchase of No 15 and No 13 Deane Street, Burwood;
(2) re-defining the scope of the fiduciary duty owed by Farah Elias;
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(3) holding that Mrs Elias and her daughters were knowing recipients within the first limb of Barnes v Addy;
(4) holding, in the alternative, that Mrs Elias and her daughters were subject to a claim in restitution based on unjust enrichment;
(5) holding that the causal link was established in this case by findings with respect to the scope of the relevant fiduciary duties;
(6) holding that s 42 of the Real Property Act 1900 (NSW) did not provide Lesmint, Farah Elias, Mrs Elias and her daughters with indefeasible title; and
(7) declaring that a constructive trust was the appropriate remedy.
Part II Notice under section 78B of the Judiciary Act 1903
2. The Appellants have considered and reached the opinion that no notice is required by s78B of the Judiciary Act 1903 (Cth).
Part III Citation of reasons
3. The first instance decision is cited as Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 469. The decision of the Court of Appeal of New South Wales is cited as Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309.
Part IV Material Facts
4. Say-Dee Pty Ltd (Respondent) is a company controlled by Ms Dalida Dagher and Ms Sadie Elias, which runs coffee shops and similar businesses. Farah Constructions Pty Ltd (First Appellant) is a company controlled by Mr Farah Elias (Second Appellant). Farah Elias is not related to Sadie Elias. Farah Elias operates as a real estate developer and Lesmint Pty Ltd (Third Appellant) is a company controlled by Farah Elias. Mrs Margaret Elias (Fourth Appellant) is Farah Elias’ wife. Sarah Elias (Fifth Appellant) and Jade Elias (Sixth Appellant) are the daughters of Farah Elias and Margaret Elias.
5. The dispute between Farah Elias and Say-Dee Pty Ltd (“Say-Dee”) concerns three properties in Burwood, NSW: No 11 Deane Street (No 11); No 13 Deane Street (No 13) and No 15 Deane Street, (No 15).[1] No 11 is adjoined on the left (facing the property from Deane Street) by No 13, which is adjoined by No 15. No 15 is a corner block that fronts Deane Street and Mary Street. A block of four units sits on each of these sites.[2] No 20 George Street (No 20) is at the rear of No 15 and is on the corner of Mary Street and George Street.
6. In 1998 Dalida Dagher and Sadie Elias, through Say-Dee, agreed to acquire and develop a block of units located at No 11 with Farah Elias through Farah Constructions (“Farah”). Dalida Dagher and Sadie Elias had been introduced to Farah Elias through a mutual friend and agreed with the proposal to purchase the block, refurbish and rent out the units while a development application was completed and approved by Burwood Council. No 11 was zoned Business Special 3(c2) under the Burwood Planning Scheme Ordinance, which was a deemed environmental planning instrument under the Environmental Planning and Assessment Act 1979. The Burwood Council proposed however to zone it Town Centre Commercial 3(t2) under a Town Centre Commercial Local Environmental Plan (draft LEP) and a draft Development Control Plan that was being prepared by the Burwood Council. Under these draft plans the maximum floor space ratio was to be 3:1 with a maximum height of four to five storeys.[3]
7. On 2 April 1998 Farah and Say-Dee as purchasers exchanged contracts for the purchase of No 11 as tenants in common. The terms of their joint venture agreement were set out in a letter from Say-Dee’s solicitors to Farah Elias’ solicitors dated 20 April 1998:
We understand that the parties to the purchase of the above property, wish to formalise their arrangement in a joint agreement. As we understand the situation:
1. Both parties are the purchasers in equal shares.
2. Say-Dee is to advance to the joint venture $225,000.00.
3. Balance of funds to be borrowed by the joint venture and secured by way of mortgage over the subject property.
4. Upon completion of the project the profits are to be allocated as follows:
a) 1st priority — repay Say-Dee $225,000.00.
b) 2nd priority — pay all agents commission and legal expenses.
c) 3rd priority — distribute balance 50/50 to joint ventures.
Please let us know if the above is in accordance with your clients instructions. Do you propose to prepare a Joint Venture agreement for our clients consideration?[4]
8. No formal agreement was drawn up and signed by the parties, but there is no dispute that both parties agreed to the terms set out in the letter dated 20 April 1998.[5] The parties also agreed that Farah Elias would take responsibility for managing the development application and the construction and sale of the development.[6] The purchase price was $630 000 and on 17 September 1998 the purchase was completed.[7] Say-Dee provided $230 000 of the purchase price and stamp duty of $31 500.[8] A loan from the National Australia Bank covered the balance of the purchase price.[9]
9. The four units at No 11 were refurbished and rented out. On 5 January 2000 Farah Elias lodged Development Application No. D3/00, which proposed an eight-storey mixed commercial and residential development.[10] This application proposed a floor space ratio that exceeded the maximum of 3:1 permitted under the draft LEP. On 26 April 2000 the Council Building and Development Committee (Building Committee) resolved that Development Application No. D3/00 be deferred to allow issues raised by Farah Elias and the Council to be addressed.[11] On 27 April 2000 Farah Elias submitted an amended application, which reduced the height of the proposed development by one storey.[12] On 20 June 2000 the Group Manager of Environmental and Community Services of the Burwood Council (Group Manager) presented a report on the development application to a meeting of the Building Committee, which Farah Elias attended.[13] The report recommended that the Council refuse the development application on the principal ground that the eight storey development exceeded the maximum floor space ratio permitted under the draft LEP.[14] Further, insufficient car parking spaces had been provided.[15]
10. The Building Committee met on 26 June 2000 and at this meeting Farah Elias made representations that these planning difficulties might be able to be resolved following discussions with the Department of Urban Affairs and Planning (DUAP). The Building Committee deferred consideration of the application so that Farah Elias could engage with the DUAP and confirmed this decision in a letter dated 28 June 2000.[16] Farah Elias then wrote to the chairman of the Building Committee and made further submissions why the development should receive approval in a letter dated 12 July 2000.[17]
11. By letter dated 8 March 2001 the DUAP informed the Council that that No 11 was too small to achieve its full development potential and needed to be amalgamated with adjacent sites.[18] On 3 April 2001 the General Manager provided a further report to the Building Committee, and noted that the original application had been forwarded to the DUAP on 21 July 2000. The General Manager’s report observed that “[t]he Urban Design Assessment suggests that the site is too small to achieve its full development potential …. The site needs to be amalgamated with adjacent sites to maximise its development potential”.[19]
12. Farah Elias addressed a meeting of the Building Committee held on 3 April 2001. At that meeting the Building Committee adopted the Group Manager’s recommendation that the application be refused. Farah Elias was notified of the decision by a Notice of Determination dated 4 April 2001 (“Notice of Determination”).[20] That notice provided six reasons for the refusal. The sixth was that: “[t]he subject site is considered too small to achieve its full development potential and return a positive urban design outcome.”
13. In May 2001 Farah Elias met with Dalida Dagher. There is a dispute on the evidence about what was said at that meeting, which is considered in the next section. Farah Elias claimed he told Dalida Dagher that he was negotiating to buy No 15 and No 20 and invited Say-Dee to participate and that she declined.[21] Dalida Dagher denied this claim. On 30 June 2001 Farah Elias, Margaret Elias, Sarah Elias and Jade Elias each entered into a contract for the purchase of one of four units in the building located at No 15 and one of the four units in the building located at No 20.[22] There were eight contracts and the total purchase price was $1 080 000 for No 15 and $980 000 for No 20, being $2 060 000 in total.[23] Tobias JA observed that although the vendor companies were different the contracts indicated that the companies were commonly controlled and that the properties were being offered for sale as a package.[24]
14. On 16 July 2001 Farah Elias wrote to Say-Dee to explain that Burwood Council had refused the development application. That letter was in the following terms:
Re Deane Development Trust Property: 11 Deane Street, Burwood
Over the past year or so we have regularly kept you informed of the current status of the property …The management of the trust has now required critical attention due to the culmination of the following events:
• After several months of submissions to the Burwood Council and the State Government, the Council has refused the current development application and we enclose copies of that correspondence. This process incurred a great deal of time and expense on our part with no foreseeable returns.
• … The situation is now more than urgent, we must come to some decision and arrangement in relation to the Trust and the property without any further delays.[25]
This letter was used by Farah Elias as an agenda for a meeting with Dalida Dagher and Sadie Elias in late August 2001[26] and it was not suggested that the “correspondence” enclosed with the letter did not include the Notice of Determination.[27]
15. On 7 December 2001 Farah Elias lodged a second development application for No 11, Development Application D387/01.[28] By a letter dated 12 March 2002 the Council’s town planner (Mr Michael Sue) informed Farah Elias that the application was deficient and that the site at No 11 was too narrow to maximize its development potential without its amalgamation with adjacent sites.[29]
16. In August 2002 Farah Elias met with Dalida Dagher. There is a further dispute on the evidence about what was said at that meeting. Farah Elias says that he informed her that No 13 was available for purchase and was a good proposition for redevelopment and that Dalida Dagher declined the invitation.[30] Dalida Dagher denied that this offer was made by Farah Elias. On 15 August 2002 Farah Elias, on behalf of Lesmint Pty Ltd, entered into a contract for the purchase of No 13 for $1 680 800.[31] By a letter to the Council dated 27 August 2002, Farah Elias withdrew the second development application.[32] In October 2002 Farah Elias, Dalida Dagher and Sadie Elias met and discussed the sale of No 11 and again there is a dispute on the evidence about what was said at this meeting. The purchase of No 13 was completed on 6 November 2002.[33]
Part V Appellants’ Argument
1 Factual Findings
17. It is a well-established principle in Australian law that an appellate court can only intervene in the factual findings of trial judge where those findings are “glaringly improbable” or “contrary to compelling inferences” in the case.[34] As Gleeson CJ, Gummow and Kirby JJ observed in Fox v Percy, this threshold is high because of limitations on an appellate court: “[t]hese limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of evaluation of witnesses’ credibility and of the “feeling” of a case which an appellate court, reading the transcript, cannot always fully share”.[35] Even though the NSW CA acknowledged in this case that the Fox v Percy hurdle is “extremely high”,[36] the NSW CA improperly interfered with the findings of the trial judge. Analysis of the trial judge’s reasons demonstrates that the trial judge presented clear and logical reasons, which to a large extent were based on the credibility of Farah Elias’ evidence and inconsistencies identified in the evidence of Dalida Dagher and Sadie Elias. As the trial judge, he had the opportunity of seeing the witnesses, and it is his impression of the key witnesses, including Farah Elias, which should influence the subsequent adjudication on appeal of the rights of the parties. It is therefore not possible to conclude that the findings of the trial judge were “glaringly improbable” or “contrary to compelling inferences”.