Moses v Ratner

1. [1]

   HIS HONOUR: Sometime around the middle of 2016, Michael Moses on the one hand, and Gabriella Ratner and John Ratner on the other hand, agreed to enter into a joint venture to purchase land at 8 Blake Street, Rose Bay and on it to construct a dual occupancy dwelling consisting of double storey houses with garages and swimming pools. The property was purchased as tenants-in-common for $3,240,000. The transaction was completed on 28 July 2016.

2. [2]

   At the risk of oversimplification, the object and purpose of the joint venture was to have been the acquisition and development of the property for profit, with finance being provided as a combination of funds supplied by Mr Moses, funds supplied by Mr Ratner, including building costs, and a loan facility with the National Australia Bank. It was agreed that, on completion of the development, an adjustment would be made so that each party’s contribution to the final project, including borrowing and other costs, would be the same. However, that relatively uncomplicated aspiration was never achieved.

3. [3]

   In about December 2018, and following completion of the construction that same month, the properties were subdivided into two strata lots and partitioned. Mr Moses became the sole owner of 8A Blake Street, Rose Bay. Mr Ratner became the sole owner of 8B Blake Street, Rose Bay. Subject only to an agreed adjustment of $200,000 in favour of Mr Ratner to reflect the higher value of 8A, Mr Moses says that Mr Ratner remains indebted to him for a sum representing the amount by which Mr Moses’ contribution exceeds his one half share of the acquisition and development costs. Mr Ratner maintains that nothing is owing by him and in fact maintains that Mr Moses owes him money.

4. [4]

   The major dispute between the parties centres around the price for which Mr Ratner, as the builder, agreed to construct the houses. Despite the somewhat excruciating nature of the several versions of the statement of claim, it is clear enough that Mr Moses contends it was a term of the joint venture that Mr Ratner would build the houses for $1,600,000, or possibly $1,650,000 (inclusive of GST), later varied to $1,850,000. Mr Ratner disputes this and instead maintains that the agreement was that he would build the houses at a rate calculated at somewhere between $5,000 and $6,000 per square metre of internal floor space. On his case, the actual cost of construction would be a joint venture expense, not limited or restricted to a fixed price as Mr Moses claims.

5. [5]

   Adjudication of this contest is regrettably complicated by the fact that the joint venture agreement was never reduced to writing.

Introductory comment

1. [6]

   In addition to his evidence concerning the alleged terms of the joint venture agreement, the very helpful and extensive joint court book also includes voluminous material detailing the amount that Mr Moses claims. His affidavits also deal with these dollar amounts at length. In the nature of things, it is not practical exhaustively to articulate or establish a relatively complicated money claim of this nature simply by relying on what has been included in affidavits, or by reference to documents when the characterisation of the expended sums is put in issue. Indeed, the amount of the claim made by Mr Moses has varied over time, even as late as the last days of submissions. Also quite late, Mr Ratner has particularised a cross-claim for money said to be owing to him on the final taking of accounts that has also been subject to change. Ultimately, my findings concerning the terms upon which the parties agreed to contract will, or at least ought to, inform a determination of what, if anything, is owed by either party to the other. At the very least, those findings ought to provide or suggest the mechanism by which the parties, or their accounting advisers, can calculate a binding reconciliation.

2. [7]

   In these circumstances, I propose to assess the parties’ competing versions about the terms of the joint venture agreement, and thereafter revert to them in order to ascertain whether the dispute might then be resolved among them, or in the absence of agreement, whether it might efficiently be referred to a neutral accounting expert for final calculation.

The evidence

1. [8]

   Mr Moses read affidavits that referred to his prior dealings with Mr Ratner, including with respect to a development at Botany, in order to throw light upon what Mr Moses contends are the terms of the joint venture. His affidavit sworn on 3 September 2021 included the following:

2. [9]

   Mr Moses said that after Mr Ratner’s building company sought to drawdown the 5th progress claim, he became concerned about the cost of the Blake Street Project and asked John Ratner for a copy of the building contract. They exchanged emails, which included his request for the contract. The building contract was never sent to him.

3. [10]

   Mr Moses’ affidavit does not contain any other conversations between him and Mr Ratner in an admissible form that purport specifically to relate the disputed terms of the joint venture agreement. However, Mr Moses refers in some detail to documents that were generated by the joint venture upon which he relies to establish by inference the contract for which he contends. Those documents are described in what follows.

4. [11]

   At page 823 of the Court Book is a document that was prepared by Mr Ratner. Mr Ratner gave Mr Moses access to this document by a link in what is called a Dropbox by email dated 23 July 2016, presumably in anticipation of the joint venture. A version of a schedule accessible by use of this link as at 31 January 2019 describes the “total paid to date” as $1,733,516.62. Mr Gruzman submitted that the document is a summary of the costs of the building as expended by Mr Ratner, including costs of project and site management totalling $100,000. Mr Gruzman submitted that reference to the sum of $1.733M is, having regard to the date of the document, confirmation of or support for what he says was the agreed contract price, being a consolidated and updated analysis supported by the documents that follow the schedule which specify the dates of the payments, commencing on 4 August 2017.

5. [12]

   On 17 January 2019, Mr Ratner completed two Builder Project Completion Advices in cognate terms, one for each residence at 8 and 8A Blake Street, Rose Bay. By this document, Mr Ratner declared, as the builder of the project, that practical completion had been achieved. The date of practical completion was noted as 17 October 2018. The “Final Contract Amount (Incl. Variations)” for each house was stated to be “825K”. These declarations corresponded to the terms of a Certificate in Respect of Insurance originally issued for both properties on 4 August 2017. Mr Gruzman described these latter documents in submissions as “the declaration made to icare for the home owner’s warranty, the builder project completion advice declared by Mr Ratner, the final invoice under the builder declaration, the final invoice for moneys due under the building contract”.

6. [13]

   Between pages 800 and 809 of the Court Book are a series of five Progress Claims made by Mr Ratner. The first is dated 24 August 2017. The last is dated 18 July 2018. The amended contract sum inclusive of GST is described on each of the five documents as $1,650,000.

7. [14]

   On 3 March 2017 at 6.39am, Mr Ratner wrote to Mr Moses in these terms:

8. [15]

   The tender budget documents attached to that email dated 28 February 2017 described the contract sum exclusive of GST as $1,584,491.

9. [16]

   Later on 3 March 2017 at 5.36pm, Mr Ratner wrote to Mr Moses under the subject line “8 blake st, rose bay – lump sum offer inc gst”. The letter was as follows:

10. [17]

    A tender budget also dated 28 February 2017 was attached. It referred to the “contract sum” as $1,506,447 “ex gst” and $1,657,091 “inc gst”. The project management costs were included. General tender conditions included a condition that “formal acceptance and contract execution [was] required prior to commencement of works” as well as a condition that “this offer in its entirety will form part of our contract and any associated agreement”. As noted elsewhere, no written contract was ever issued or executed.

11. [18]

    On 13 April 2017, Mr Ratner sent an email to Mr Moses in these relevant terms:

12. [19]

    The attached trade break up, dated 28 February 2017, “to be read in conjunction with complete tender offer (ref noted above) inc all associated schedules, appendices and annexures” provided for a “subtotal ex gst” sum of $1,506,447.35. The tender reference is “blk/008/a”, the same reference as that which appears on the tender budget dated 28 February 2017.

13. [20]

    Mr Ratner responded to this in his affidavit sworn on 20 July 2020. Mr Ratner said this:

14. [21]

    Mr Ratner’s affidavit continued:

15. [22]

    Mr Ratner’s affidavit concluded relevantly as follows:

16. [23]

    Despite Mr Ratner's reference at paragraph 50 of his affidavit to charging "at usual rates for the build", he does not specify what those rates were to be. Mr Moses specifically denied the conversation in that paragraph. Mr Moses also denied the conversations at paragraphs 63 and 83 of Mr Ratner's affidavit. In answer to paragraph 99 of Mr Ratner’s affidavit, Mr Moses said that there was no agreement that he would contribute extra cash to the project to cover the build cost and other expenses. He does agree that he provided further funds when none was available from the NAB.

17. [24]

    Mr Ratner swore a further affidavit on 19 November 2020. The following extracts are taken from that affidavit:

18. [25]

    Mr Ratner’s evidence also contained the following:

19. [26]

    Mr Ratner’s references to the rate of $5,000 to $6,000 per square metre in this affidavit are the first references to that rate made by him in any affidavit sworn by him for use in these proceedings.

20. [27]

    On 11 June 2018, Mr Ratner wrote to Mr Moses in the following terms:

21. [28]

    Mr Moses contends that Mr Ratner's reference to a building cost of "$1.85" inclusive of GST is an admission by him that the amount that Mr Ratner could bring to account and claim as his contribution for building work in the final joint venture reconciliation was limited to that sum, even if Mr Ratner spent more than $1.85M on the build. Costs exceeding that amount were, according to Mr Moses, to the account of Mr Ratner: they were not a joint venture expense. Mr Moses refers to this email in his 3 September 2021 affidavit at paragraph 64 but he neither comments upon it nor does he seek to explain it in the context of the joint venture at that time. Mr Moses submitted that the email can be read as a concession or acknowledgement by Mr Ratner that the reference to a $1.992M assessment by the quantity surveyor as "$400k above my amount" is a reference to the sum of approximately $1.650M before amendment.

22. [29]

    Mr Ratner referred to his 11 June 2018 email in his 20 July 2020 affidavit in these terms:

23. [30]

    It becomes very difficult to know what to make of Mr Ratner's email. According to Mr Moses' affidavit at paragraph 65, by 31 July 2018 Mr Ratner's building company had been paid $1,511,839 in a series of five progress payments as follows:

24. [31]

    The amount drawn from the NAB facility at that time was $3,674,672 and there were no further significant funds available from that source. Mr Moses relies upon this as inferential support for his version of the contractual arrangement, in the sense that the progress claims are in line with the $1.85M sum that he says was the limit of his joint venture exposure. However, somewhat curiously in that context, Mr Moses says this at paragraph 67 of his affidavit:

25. [32]

    It has not been explained in the evidence why Mr Moses should have become concerned about the build cost, having regard to the way in which he frames his case, unless his concern was related to Mr Ratner's financial situation and his ability to complete the works from his own resources after the NAB facility had been fully drawn. On Mr Moses’ case, increases in the build cost were the responsibility of Mr Ratner.

26. [33]

    Sometime after the houses had been completed, Mr Ratner wrote to Mr Moses with respect to what is referred to as Mr Moses' request for additional information, as follows:

27. [34]

    The amount of $2.234,000 is referred to in the document that accompanied the email. It is described as the "QS report revision 1 including gst, excluding cost 'excusions' [sic, exclusions] as detailed in QS report". The amount of $1.992,448 is also referred to in the document that accompanied the email. It is described as the "QS report revision 2 including gst, excluding cost 'excusions' [sic, exclusions] as detailed in QS report". The QS report revision 1 is dated 14 August 2017. The "construction cost/rates per sqm" are listed as "Internal/NSA 387 $5,148.44" and "GFA 505 $3,945.44".

28. [35]

    On 28 January 2021, Mr Moses' solicitor sent a notice to admit facts to Mr Ratner's solicitor. One of the facts required to be admitted was that the amount of money expended by or on behalf of Mr Ratner in respect of the building cost of the Blake Street project "was not more than $1,750,000". That fact was disputed by a notice dated 11 February 2021. On 3 August 2021, the parties filed short minutes of orders to be made by consent, which included an order that the amount of $1,750,000 in the original notice to admit facts was to be varied to $1,850,000. Mr Moses contends that the consent variation operated so as to amount, in effect, to a fresh notice to admit facts to which it seems there was no further notice disputing the amended sum. Mr Moses contends that Mr Ratner must be taken to have admitted the sum of $1,850,000 in the absence of a notice disputing the fact after 3 August 2021.

29. [36]

    The short minutes of order provided specifically that Mr Moses' notice to admit facts dated 28 January 2021 "is deemed varied ab initio". Presumably that was intended to mean that the notice would be treated as if the substituted sum of $1,850,000 had been in the original notice. It seems to me that in those circumstances Mr Ratner's denials of the amount referred to in paragraph 1 of the notice would continue to operate upon and apply to the amount deemed by the consent orders to have been varied. If I were wrong about that I consider, having regard to the way in which these proceedings have been conducted, that Mr Ratner should have leave to withdraw the admission. Any other approach would in my opinion, in the particular circumstances of this case, amount to an unfortunate triumph of form over substance and an unnecessary distraction from the overriding purpose or the real issues in dispute.

30. [37]

    Mr Ratner swore another affidavit on 23 September 2021 in response to Mr Moses’ affidavit of 3 September 2021. It included the following:

31. [38]

    It becomes unnecessary to refer to Mr Moses’ affidavit of 18 October 2021, which serves only to emphasise the gap between the parties about the contested terms of the joint venture agreement.

Consideration

1. [39]

   It was submitted by Mr Webb QC, who appears for Mr Ratner, that “[i]n this matter in which the parties did not prepare written agreements it is the reliability and honesty of [Mr Moses] and [Mr Ratner] which are paramount.” Mr Gruzman does not suggest otherwise but relies, in addition to the terms of the documents discussed earlier, upon three further matters. First, Ms Ratner was never called as a witness to corroborate her husband and Mr Gruzman maintains that I should draw an inference that nothing said by her would assist Mr Ratner as a credible and reliable witness. Ms Ratner was an active participant in the business with Mr Ratner and her significance cannot be diluted by reference to offensive and outdated notions that she was merely the compliant extension of her husband.

2. [40]

   The oft cited passage from Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63] should be noted:

3. [41]

   It is also instructive to note McDougall J’s observations in LKT v Chun [2004] NSWSC 820 at [39]:

4. [42]

   In the present case, Ms Ratner is a party. She was one of the joint venturers. She had previous development experience. Mr Ratner said this about her in his 23 September 2021 affidavit at paragraph 79:

5. [43]

   Ms Ratner was present in a room at Mr Conolly’s office when Mr Ratner gave his evidence by AVL and available to give evidence if required. She did not provide an affidavit and otherwise took no active part in the proceedings. I am satisfied that nothing that Ms Ratner could have said would have assisted her case or Mr Ratner’s case.

6. [44]

   Secondly, Mr Ratner’s contention that he agreed to construct the houses on what amounted to a do-and-charge basis at the rate of between $5,000 and $6,000 per square metre was neither even suggested in his affidavit evidence until 13 March 2020 nor reflected in his defence to Mr Moses’ claim until late in the proceedings. Mr Moses maintains that it is a recent invention. Mr Gruzman emphasised that even though Mr Webb adverted during the course of the proceedings to the fact that these omissions were probably referable to an oversight by his predecessor, there was no evidence of that fact: Mr Conolly had been Mr Ratner’s solicitor throughout the proceedings and neither he nor previous counsel was called to explain why the rate per square metre defence did not figure prominently as part of Mr Ratner’s pleaded case. Mr Gruzman maintained that a term as fundamental as that upon which the joint venture is said to have proceeded would be expected to appear in the defence to Mr Moses’ claim, settled by counsel, from the outset. Mr Webb conceded in terms that Mr Conolly’s instructions “always involved the notion of square meterage”.

7. [45]

   Thirdly, Mr Gruzman drew attention to the fact that whatever may be said about the competing versions of conversations between Mr Moses and Mr Ratner, in particular the fact that Mr Ratner does not depose to any such conversations until 13 March 2020, the rate per square metre issue is never recorded in any document that has been produced, despite Mr Ratner’s evidence that such documents existed and were available. Mr Gruzman maintains in these circumstances that no such documents ever existed and that Mr Ratner’s evidence that they do should not be accepted. He relied in this respect upon Mr Ratner’s evidence when cross-examined as follows:

8. [46]

   These documents did not ever find their way into evidence. In Chant v Curcuruto; Chant v Curcuruto [2021] NSWSC 751, Hallen J noted the following at [80]:

9. [47]

   By way of contrast, Mr Moses is able to point to a series of documents of which Mr Ratner is the author that contain references to a contract sum, of or in the vicinity of $1,650,000 as later amended to $1,850,000. Mr Moses contends that if Mr Ratner miscalculated the build cost or the amount of money that he would have to expend to bring his expertise to the joint venture, the risk that he might miscalculate those amounts was all his: it was never a joint venture cost. Mr Moses contends in effect that he had a guarantee from Mr Ratner, in the form of an agreed contractual term, that Mr Moses would only have to contribute one half of $1.85 million to Mr Ratner’s building costs. He disputed any alternative proposition of the type promoted by Mr Ratner, as the following extract from the transcript reveals:

10. [48]

    Mr Ratner’s evidence about this was as follows:

11. [49]

    At the heart of Mr Ratner’s evidence in this respect is the suggestion that when the project was first under consideration and when the terms of the joint venture were being proposed, he was without any objective empirical material such as plans or specifications upon the basis of which he could have made any informed calculation of the costs of building the Blake Street houses. The final design was not available before 30 November 2017. He explained his concerns in the course of his cross-examination as follows:

12. [50]

    It is important that that last answer be properly understood. The burden of the question was directed to the absence of any reference in Mr Ratner’s first affidavit to rates per square metre as the basis of the joint venture arrangement. However, the answer given by Mr Ratner does not actually address that absence but instead attempts to explain why he was not at that time able to offer a price for the build. Having regard to the dispute about the terms of the joint venture, Mr Ratner’s answer is relevantly unresponsive.

13. [51]

    It will be recalled that in his affidavit, quoted in part above at [8], Mr Moses said that if Mr Ratner had said anything to him to the effect that the building cost was to be calculated at a square metreage rate together with ‘extras’, ‘additional costs’ and ‘additional charges’ as well as development management costs and building management costs or that there was to be some other manner of determining the costs of the Blake Street Project, he would not have entered into the joint venture with Mr Ratner. Mr Moses was not cross-examined on that evidence.

14. [52]

    I am unable by reference to my observations of Mr Moses and Mr Ratner in the witness box to draw or form any conclusions about whether either man was truthful or reliable. Demeanour is a frail basis for supporting views about who to believe in all but the most unusual and exceptional cases: this is not such a case. Mr Moses and Mr Ratner give inconsistent accounts of conversations that they had when discussing the terms upon which they might consider jointly developing the Blake Street property. I am reminded of the sage comments of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319 as follows:

15. [53]

    I also consider that the attention given to the assessment of competing recollections in Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599; [1999] HCA 15 is particularly relevant, citing at [15] what was said by Tamberlin J at first instance:

16. [54]

    In the present case, there appear to be two possible competing commercial realities. On the one hand, Mr Gruzman contends that no one as commercially experienced as Mr Moses would enter into an undocumented joint venture with a contractor to construct two townhouses without agreement as to the cost of the build. On the other hand, Mr Webb contends that Mr Ratner was in no position to provide any informed estimate of that cost in the absence of drawings, plans and other necessary technical specifications upon and by reference to which he could do so: a schedule of rates in the range of from $5,000 to $6,000 per square metre of internal floor space was his only commercially realistic method of assessing the cost.

17. [55]

    In the circumstances, it seems to me that the only safe course is to take account of the objective factual surrounding material, consisting in the several references in the documents upon which Mr Gruzman relied as evidence of an agreed contract price. In my view, the inherent commercial probabilities are that Mr Ratner was keen to enter into a joint venture with Mr Moses and was prepared, even in the absence of all of the empirical data that he would have preferred to have, to take the risk that he had sufficient information for his purposes upon which to contract. I consider, in this respect, that the following evidence given by Mr Ratner is pertinent:

18. [56]

    Paragraph 22 of Mr Ratner’s amended defence filed on 8 July 2021 reflects this theme in these terms:

19. [57]

    Paragraph 5C of the second further amended statement of claim to which that paragraph responds is in these terms:

20. [58]

    It will be apparent that Mr Ratner accepts that he made a written reference to a contract sum of $1,650,000 but that he did so only at Mr Moses’ request and only as a conditional and preliminary estimate. The difficulty with that proposition is that the sum of $1,650,000 or amounts in that range are consistently referred to by Mr Ratner in other contexts. The icare documents and the five progress claims are two examples of this. Mr Ratner’s 28 February 2017 tender budget figure also comes in at $1,657,091. Mr Ratner’s 11 June 2018 email to Mr Moses refers to “Build cost inc GST $1.85”, taking account of the amended agreement. If Mr Ratner’s assertion that he only provided the sum of $1,650,000 at Mr Moses’ request in order to withstand scrutiny with NAB is to be accepted, it does not explain why the same or a similar sum appears in several other documented locations that were unrelated to Mr Moses’ dealings with the bank.

21. [59]

    In these circumstances, I am satisfied on the balance of probabilities that Mr Ratner agreed that, for the purposes of the joint venture, he would construct the townhouses at Blake Street, Rose Bay for the amended sum of $1,850,000.

Cross-claim

1. [60]

   By his cross-claim, Mr Ratner alleges, contrary to my conclusions, that he is entitled to be paid what is described as the fair value of the building works carried out by him amounting to $2,680,529. Apart from the fact that that claim is not satisfactorily supported by evidence before me, my conclusions upon the terms of the joint venture obviate the need to consider the claim further.

Resolution

1. [61]

   In the events that occurred, Mr Moses effectively asks for the taking of accounts as between him and the Ratners, having regard to my conclusion about the cost of the construction of the Blake Street townhouses. My conclusion means that Mr Moses is liable for no more than one half of the sum of $1,850,000. There is no dispute that Mr Moses is required to give credit to the Ratners in the amount of $200,000 to account for the difference in the value of the properties. If the accounting exercise required to determine what is owed and by whom cannot be performed by agreement, then I will hear the parties on why it should not be referred to an appropriate referee with accounting and construction expertise to finalise the matter. The current state of the evidence, and the cumbersome and unsatisfactory litigious options that are available for resolving any dispute that still exists, make such a referral the only economical solution, having regard to the modest sums in issue.

2. [62]

   I will hear the parties on a date convenient to them and to the Court to be arranged in consultation with my Associate.