Younan v Herberton Enterprises Pty Ltd

1. [1]

   The parties are in dispute in relation to a loan agreement and two joint venture agreements.

2. [2]

   Various facts are not in dispute.

3. [3]

   On 21 June 2017, the plaintiff, Charbel Younan, loaned $150,000 to the first defendant, Herberton Enterprises Pty Ltd (Herberton). The loan was repayable on 21 June 2018, together with interest of $120,000.

4. [4]

   Herberton owned property at Hunters Hill, which was the family home of the Bechara siblings (Giselle, Licha and Maria), who are the witnesses for the first defendant. The loan was secured by that Hunters Hill property. On about 25 September 2017, Mr Younan registered a caveat on the title of that property, referencing the unpaid loan.

5. [5]

   The second defendant, Giselle Bechara, was the sole director of Herberton and guaranteed its obligations under the loan. The loan and guarantee are recorded in two deeds, referred to as the Company Deed and the Director Deed.

6. [6]

   Also on 21 June 2017, the first cross-defendant, Lexform Holdings Pty Ltd (Lexform), of which Mr Younan is the sole director and shareholder, entered into a joint venture with Ms Giselle Bechara “to purchase and develop” land at The Avenue, Riverstone (Avenue joint venture). The joint venture is recorded in a document entitled “joint venture agreement”, which was executed as a deed.

7. [7]

   The important clauses of the Avenue joint venture are set out below at [94], but essentially, Lexform was responsible for funding the purchase and holding costs of the property, and Giselle Bechara was responsible for improving and selling the property. The net profit was agreed to be split 50:50.

8. [8]

   On 3 August 2017, Lexform entered a joint venture with the third cross-claimant, Licha Bechara, concerning land at Victoria Street, Riverstone (Victoria joint venture). This joint venture is in the same form as the Avenue joint venture, with the same structure, rights and obligations.

9. [9]

   Maria Bechara negotiated the loan and joint ventures for her siblings, and was their “agent” for the purposes of performing the joint venture obligations. Maria Bechara had met Mr Younan in about 2015 and had been involved in other transactions with him. At the time of entry into the various agreements, Mr Younan had never met either Licha or Giselle Bechara.

10. [10]

    After the loan was due to be repaid and from August 2018, Mr Younan exchanged emails with Maria Bechara seeking the repayment of the loan. In effect, Mr Younan was agitating for repayment of the loan, and the sale of the Avenue and Victoria properties, as contemplated in the joint venture agreements. Maria Bechara provided Mr Younan with email updates on the potential rezoning of the properties, the attempts to sell them and her siblings’ attempts to repay the loan, including seeking to sell Herberton’s Hunters Hill property. It may be that the Becharas intended to repay the loan from the hoped-for profit from the joint ventures, however, that was never agreed in writing by Mr Younan.

11. [11]

    On 17 October 2021, Licha and Giselle Bechara each provided to Mr Younan a signed “agreement”, executed as a deed, terminating the joint ventures, in identical terms:

12. [12]

    The loan has not been repaid. However, the Hunters Hill property has been sold and the sum of $310,000 is held in trust, pending the outcome of these proceedings. Mr Younan seeks an order that he holds a charge over the money held in trust, and that the defendants are liable to pay him the sum of $270,000, plus interest and costs.

13. [13]

    Herberton and Giselle Bechara do not dispute that on its face the loan is repayable and Mr Younan is entitled to repayment. However, their defence to their liability to repay the loan is that Lexform, through Mr Younan, agreed to compromise the loan in return for the termination of the joint ventures.

14. [14]

    Further, Herberton, Giselle and Licha Bechara cross-claim that Lexform, through Mr Younan, breached its “fiduciary duties” owed to its co joint-venturers, by sourcing a buyer for the Avenue and Victoria Street properties and failing to disclose that opportunity to them before they agreed to terminate the joint ventures in return for the compromise of the loan. They claim that Lexform is liable to account or pay equitable damages to them in relation to the purchase price received for those properties. Relief is also sought against Mr Younan personally, on the basis that he procured or induced Lexform to breach its fiduciary obligations.

15. [15]

    Should an account be ordered or equitable compensation be payable, then a subsidiary issue is how such relief ought to be quantified, in circumstances where Lexform’s evidence is that the purchase price for the properties was paid partly in AUD and partly in an alternative currency known as “trade dollars”.

16. [16]

    Giselle and Licha Bechara seek to set off the sum payable pursuant to the loan through an account, or damages from the obligation to repay the loan.

17. [17]

    The defendants/cross-claimants did not advance a case based on misleading and deceptive conduct, any other vitiating factor or rectification.

18. [18]

    I note that despite at the pretrial directions the Court requesting that the parties give careful consideration to the size of the court book and avoiding wasted material where facts could be agreed, a court book of almost 2000 pages was prepared and no facts were agreed. Most of the court book contained contracts, that were not in dispute and neither party took me to those contracts. Had the parties agreed on facts, an unnecessarily voluminous court book would not have been produced at the parties’ expense.

Issues to be determined

1. [19]

   The parties agree that the issues to be determined are:

   1. (1)

      Did Mr Younan agree to forgive the loan in return for the termination of the joint venture agreements?

   2. (2)

      Did Lexform owe its joint venturers any fiduciary obligation?

   3. (3)

      If so, did Lexform breach that fiduciary obligation by negotiating with a purchaser, and ultimately selling the joint venture properties to it or its related entity?

   4. (4)

      If a breach is established, is Mr Younan personally liable for inducing or procuring that breach of fiduciary duty?

   5. (5)

      If a breach is established, what is the appropriate form of relief, taking into account the purchase price for the properties was paid partly in AUD and partly in “trade dollars”, despite the contract for the sale of the joint venture properties bearing a price in AUD only?

Was the loan compromised for termination of the joint venture agreements?

1. [20]

   Herberton and Giselle Bechara submit that Mr Younan agreed to compromise the obligation to repay the loan in return for the termination of the joint venture agreements.

2. [21]

   There is no such documented agreement. Instead, the alleged “contract of compromise” is particularised in the cross claim:

3. [22]

   The principles concerning the formation of agreements are well known, and include:

   1. (1)

      The party claiming a contract was formed has the onus of proving that contention on the balance of probabilities, based on an objective assessment of the parties’ intentions derived from their words and behaviour.

   2. (2)

      Where a conversation is relied upon to prove the formation of a contract, the Court must feel an actual persuasion that any consensus reached was capable of forming a binding contract. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see eg Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 (Dixon J); Helton v Allen (1940) 63 CLR 691 at 712 (Dixon, Evatt and McTiernan JJ); Rejfek v McElroy (1965) 112 CLR 517 at 521 (Barwick CJ, Kitto, Taylor, Menzies and Windeyer JJ); Watson v Foxman (1995) 49 NSWLR 315 at 319 (McLelland CJ in Eq).

   3. (3)

      When determining the terms of an oral contract, the Court may consider factors such as the history of the relationship between the parties and their conduct prior to and at the time the alleged contract was entered: See eg Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 348 (Mason J, Stephen J agreeing); Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [24] (Heydon JA, Mason P agreeing). See also JD Heydon, Heydon on Contract (Thomson Reuters, 2022).

   4. (4)

      Post-contractual conduct may also be used to prove that a contract was formed. However, where there is a written agreement the question of contractual formation is a matter of construction, and the regard which ought to be had to evidence of post-contractual conduct is more limited than when determining the factual question of the existence of an oral contract: Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [84] (Beazley P)and at [124] (Basten JA, Gleeson JA agreeing). See also Lawrence v Ciantar [2020] NSWCA 89 at [114] (Bathurst CJ, Meagher and Gleeson JJA agreeing).

4. [23]

   As noted above, the only written component of the contract of compromise relied upon by the Becharas are the joint venture termination deeds. Those deeds are silent concerning the loan, including any compromise of the loan.

5. [24]

   In determining the oral evidence and whether Mr Younan orally agreed to the contract of compromise, it is helpful to understand the circumstances of the alleged conversations, and, in particular, the other communications occurring between the parties, which were mostly in the form of emails and some text messages.

6. [25]

   Overwhelmingly, Mr Younan’s emails distinguished between the joint venture agreements and the loan liability. He also on numerous occasions asserted that the Becharas had repudiated the joint ventures and they needed to be terminated, and that he expected a loss and would be seeking contribution from them for such loss.

7. [26]

   Some of the emails and text messages are reproduced below.

8. [27]

   On 8 May 2019, Mr Younan emailed Maria Bechara including:

9. [28]

   Later in 2019, Maria Bechara promised Mr Younan he would be paid “a minimum of $150,000.00” on settlement of the sale of the Hunters Hill property, which was due on 30 November 2019.

10. [29]

    During late 2019 and early 2020, Maria Bechara did seek Mr Younan’s agreement to the forgiveness of the loan liability in return for the termination of the joint ventures. For example, on 19 December 2019, Maria Bechara emailed Mr Younan including:

11. [30]

    On the same day, Mr Younan responded including:

12. [31]

    On 21 January 2020, Mr Younan in an email rejected a proposal from Maria Bechara to transfer the joint venture interests in consideration for the payment of the loan, including:

13. [32]

    On 7 February 2020, Mr Younan obtained a real estate agency agreement estimating the value of the Avenue property at $900,000-$990,000, and the Victoria property at $180,000-$198,000. On 13 February 2020, Mr Younan signed those agency agreements.

14. [33]

    On 11 May 2020, Mr Younan emailed Giselle about the loan including:

15. [34]

    On 19 May 2020, Mr Younan emailed “Giselle AKA Maria” including:

16. [35]

    On 27 May 2020, Mr Younan emailed “Giselle Bechara (aka Maria) and Licha Bechara” setting out an agenda for a proposed meeting, including:

17. [36]

    There is a lacuna in the email evidence from July 2020 to April 2021.

18. [37]

    On 30 April 2021, Mr Younan emailed Maria Bechara including:

19. [38]

    On 18 August 2021, Mr Younan emailed Maria Bechara including:

20. [39]

    On 20 August 2021, Mr Younan emailed Maria Bechara including:

21. [40]

    On 23 August 2021, Mr Younan emailed Maria Bechara including:

22. [41]

    On 25 August 2021, Mr Younan sent Licha Bechara a text message including:

23. [42]

    Licha Bechara responded several hours later agreeing that the Victoria joint venture property should be auctioned. Mr Younan required Licha Bechara to provide a written witnessed authorisation and also included in his text message:

24. [43]

    On 29 August 2021, Maria Bechara sent Mr Younan an email in response to the “text message to Licha last week”. Her email included a request that Mr Younan “continue to work with us to resolve all issues”.

25. [44]

    On 30 August 2021, Mr Younan responded to that email including:

26. [45]

    By 31 August 2021, Mr Younan had not received what he had sought and he sent another text message to Licha Bechara including:

27. [46]

    By 2 September 2021, Mr Younan was in discussions with real estate agents about selling the joint venture properties and a draft contract for sale of the Avenue property was prepared.

28. [47]

    On 6 September 2021, Mr Younan sent Giselle Bechara a demand for the repayment of the loan including:

29. [48]

    On 7 September 2021, Mr Younan sought an update from the real estate agents and the provision of a contract for the sale of the Victoria joint venture property.

30. [49]

    On 24 September 2021, Maria Bechara sent Mr Younan an email:

31. [50]

    On 5 October 2021, Maria emailed Mr Younan, including:

32. [51]

    While Mr Younan had asserted that he would seek contribution for losses on the sale of the properties from the Becharas, and Maria Bechara asserted that the joint venture agreements did not provide for such liability, there is no further debate in the email correspondence. The termination deed finally executed specifies that the Becharas would not be liable for any losses.

33. [52]

    On 6 and 7 October 2021, Mr Younan sought updates from the real estate agents concerning interest in the Avenue joint venture property and indicated “I may have to remove the property from market and entirely”.

34. [53]

    On 8 October 2021, Mr Younan sent a text message to Maria Bechara including:

35. [54]

    Maria Bechara responded: “Charlie please talk to mr [sic]. I told you they agree to sign” and also “My mother died this morning”.

36. [55]

    On that same day, Maria Bechara also emailed Mr Younan including:

37. [56]

    From around that time, Mr Younan engaged his brother Ray Younan to try and source a buyer for the joint venture properties. It appears that Ray Younan was a customer of an alternative currency system, called “Trade dollars”, and he had access to investors, who might be interested in purchasing the properties.

38. [57]

    On 17 and 18 October 2021, Licha and Giselle Bechara signed and provided Mr Younan with the termination deeds. On 2 November 2021, Mr Younan provided Maria Bechara with his executed version of those deeds.

39. [58]

    As the above indicates, apart from Maria Bechara’s attempt in 2020 to have Mr Younan agree to the forgiveness of the loan liability in return for the termination of the joint ventures, at no point in time did she ever assert there was such an agreement.

40. [59]

    Even when Giselle Bechara and Herberton sought to have Mr Younan’s caveat protecting the loan removed, their lawyers did not assert that the loan had been forgiven through the termination of the joint ventures. Instead, the lawyers sent a letter to Mr Younan on 21 January 2022, including:

41. [60]

    Maria Bechara deposes to a conversation, in which she agreed to Giselle giving Mr Younan security over the Hunters Hill property “in the short term and then she can use the Avenue property as security”. Even if that conversation took place, she did not depose to Mr Younan agreeing to that proposal, and there was never any documented agreement varying the security provided in the Director Deed. I do not consider any such agreement was reached.

42. [61]

    This is consistent with Mr Younan’s email on 21 January 2020 set out above, rejecting his agreement to remove the caveat after the settlement of the purchase of the Avenue by the joint venture.

43. [62]

    There is very little by way of evidence from Maria Bechara of the “discussions” particularised to support the pleaded contract of compromise.

44. [63]

    In her affidavit dated 7 November 2023, Maria Bechara deposes to a conversation with Mr Younan “in the months leading up to” the October 2021 termination agreements:

45. [64]

    This conversation was not specifically put to Mr Younan during the course of cross-examination. However, Mr Younan was asked about the email exchange dated 20 August 2021, referred to at paragraph [39] above, in relation to his request put to Maria Bechara that Giselle and Licha Bechara's interests in the joint venture properties be transferred to him. His response in cross-examination was as follows:

46. [65]

    Later, when asked whether he resisted Maria Bechara's idea that she could "trade Hunters Hill for the joint ventures and you made it clear to her?", Mr Younan answered "yes". He was not challenged further.

47. [66]

    Maria Bechara further deposes to a conversation in the month before the October termination agreements, when her mother was terminally ill:

48. [67]

    In cross-examination, Mr Younan denied that he offered to remove the caveat from the Hunters Hill property in return for the termination of the joint ventures.

49. [68]

    On these conversations, I prefer Mr Younan’s evidence to that of Maria Bechara. His evidence is consistent with his repeated insistence in the email correspondence that the issues of the loan and the joint ventures were separate. Further, Maria Bechara’s emails around that time did not refer to any such offer or agreement or even proposal by the Becharas. Even if the conversations did take place as Maria Bechara alleged, no documentation to their effect was prepared afterwards and the termination deeds did not refer to such an agreement.

50. [69]

    In her affidavit, Maria Bechara refers to a text message on 8 October 2021 set out above, and her evidence is that after she received that text message:

51. [70]

    While the text message is not particularised as part of the substance of the alleged contract of compromise, even if it is taken into account, I do not consider that it, or even alleged conversations, in the context of all the documentary evidence, is sufficient to persuade me that the parties formed an agreement compromising the loan.

52. [71]

    However, even though I prefer Mr Younan’s evidence about the conversations, I do not accept that generally Maria Bechara gave false evidence. On one matter, her veracity was challenged in cross-examination on a false basis. She denied she had prepared the legal documents, upon which Mr Younan relies. Mr Hopkins, counsel for the plaintiff/cross-defendants, suggested she was not telling the truth in relation to the joint venture agreements and loan. However, Mr Younan’s affidavit evidence was that his own solicitor prepared those documents. The challenge in cross-examination ought not have been made. There was no reasonable basis for Mr Hopkins to allege the witness was not telling the truth; instead, there was a positive reason not to make such a challenge.

53. [72]

    Mr Hopkins also challenged Maria Bechara’s evidence that she did not prepare the termination deeds:

54. [73]

    I accept Maria Bechara’s evidence. It is consistent with contemporaneous email correspondence. For example, on 5 October 2023, Maria Bechara emailed Mr Younan querying part of “the document that your solicitor sent to be signed”, which from the context of the email was a reference to the termination deed. There is no evidence from Mr Younan that she was incorrect. I have no doubt that Maria Bechara did not prepare any of the legal documents.

55. [74]

    In circumstances where Mr Younan had always required written agreements with the formality of being executed as “deeds”, had the parties intended to be bound to the contract of compromise, then it could be expected that it would have been evidenced in writing.

56. [75]

    For the reasons above, I do not accept the parties entered into the contract of compromise as alleged.

Pre-judgment interest

1. [76]

   The defendants accept that if no contract of compromise is found, then the loan is repayable. The total principal sum sought is $270,000. Further, pre-judgment interest is sought at Court rates from the date the loan and contractual interest were repayable on 18 June 2018 until judgment.

2. [77]

   No Court rule or other basis for pre-judgment interest was invoked in the statement of claim or submissions. Without that indication, it is assumed the plaintiff relies on s 100 of the Civil Procedure Act 2005 (NSW) (CPA). Gleeson JA (with White JA and Emmett AJA agreeing) summarised the basic approach taken to pre-judgment interest in Spotlight Pty Ltd v Fatseas Investments Pty Ltd [2020] NSWCA 132 at [103]-[104], citations omitted:

3. [78]

   Mr Shephard’s only submission against such interest being ordered was:

4. [79]

   I do not accept that, merely because the loan did not specify an ongoing annual interest rate, that is a reason to refuse pre-judgment interest. The loan agreement was a commercial contract and Mr Younan has been held out of the loaned funds longer than agreed. In these circumstances and where no waiver or other defence has been raised in relation to interest, I consider it is appropriate to order the defendants pay pre-judgment interest in accordance with Practice Note SC GEN 16.

Indemnity costs from Giselle Bechara

1. [80]

   Against Giselle Bechara, Mr Younan seeks indemnity costs of enforcement of the loan repayment, relying on clause 9 of the Company Deed, which provides:

2. [81]

   Even in circumstances where the parties have contemplated the question of costs in a written agreement, the Court maintains its discretion to award costs. The weight of authority suggests that in such a circumstance the Court ought to give effect to the contractual right as agreed between the parties: GE Dal Pont, Law of Costs (LexisNexis Butterworths, 5th ed, 2021) at 555 [15.40].

3. [82]

   However, as explained in Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 at [12]-[13] by Beazley JA, with whom Hodgson and Ipp JJA agreed, the “contractual right” must first be construed:

4. [83]

   In construing clause 9, I consider the language is sufficiently clear to justify an award of indemnity costs, including because it stipulates that Giselle Bechara will be liable for “any cost or loss whatsoever arising as a result of the default by the Borrower [can be recovered by the Lender]”.

Did Lexform owe its joint venture counterparties fiduciary obligations?

1. [84]

   The cross-claimants plead that Lexform owed them fiduciary duties, said to “arise by operation of law out of the relationship between the parties… as joint venturers”.

2. [85]

   The Becharas alleged Lexform breached its fiduciary obligations by failing to disclose the existence of an opportunity to sell the joint venture properties for the benefit of the joint venturers before the Becharas signed the termination deeds, and then Lexform taking advantage of that opportunity to obtain profit.

3. [86]

   In written submissions, the defendants/cross-claimants rely on United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1 (United Dominions) to establish the existence of a fiduciary relationship between Lexform and Giselle Bechara pursuant to the Avenue joint venture, and between Lexform and Licha Bechara pursuant to the Victoria joint venture. Mr Shephard submitted orally:

4. [87]

   There is no presumption that a fiduciary relationship exists between parties to a joint venture. In United Dominions, the Court found that the relationship between the parties was akin to a partnership, which therefore attracted fiduciary obligations. This conclusion was drawn with reference to “the form which the particular joint venture [took]" and “upon the content of the obligations which the parties to it have undertaken” (at 11 per Mason, Brennan and Deane JJ). Relevantly, the Court found that (at 11):

5. [88]

   As explained in United Dominions, there are two bases on which fiduciary obligations can bind parties to a joint venture agreement: first, by concluding that the parties were in partnership with one another; or second, with reference to the obligations in the contract. However, the Court ought not to superimpose fiduciary obligations on top of a commercial agreement, unless the relationship between the parties meets the requisite standard of loyalty that is expected of fiduciaries. This can be determined with reference to the terms of the written agreement, and the economic freedom each party has to financially benefit from the relationship.

6. [89]

   In John Alexander's Clubs Pty Ltd v White City Tennis Club Limited (2010) 241 CLR 1, the High Court made reference to the dissenting judgment of Mason J in Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 and endorsed his Honour's view as to the principles relevant to the existence of a fiduciary relationship outside of established categories. Relevantly, the Court accepted that a contractual relationship can be fiduciary in nature, to the extent it does not change the operation of the rights and obligations of the parties, as expressed in the written agreement. At [36], the Court noted (citations omitted):

7. [90]

   No fiduciary relationship was found because the Court concluded (at [83]) that "the only vulnerability … was that which any contracting party has to breach by another. The only reliance was that which any contracting party has on performance by another".

8. [91]

   In resisting that any fiduciary relationship ought to be found, Lexform and Mr Younan rely on the decision in Adventure Golf Systems Australia Pty Ltd v Belgravia Health & Leisure Group Pty Ltd (2017) VR 625 (Adventure Golf). In that case, at [123]-[124] Santamaria JA (with whom Kaye and Ashley JJA agreed) stated:

9. [92]

   During the course of oral argument, Mr Hopkins emphasised the alleged want of vulnerability of Giselle and Licha Bechara, for example:

10. [93]

    Whilst I accept that there might be no special vulnerability established in this case, that alone does not preclude me from finding that the nature of the relationship between the parties was that of fiduciaries; instead, it is a question of whether there are sufficient indicia of a fiduciary relationship, and in particular whether the joint ventures imposed an obligation of loyalty.

11. [94]

    The joint venture agreements contain the following clauses relevant to the question of whether the parties owed each other fiduciary obligations:

12. [95]

    Obviously, there are express terms in the joint venture agreements that use language reminiscent of fiduciary obligations. For example:

    1. (1)

       Clause 7(a)(ii) requires the parties to act “in the best interests of the joint venture and in good faith”, and clause 7(a)(iii) prohibits a joint venture party competing.

    2. (2)

       Clause 7(c) confers mandatory obligations on the parties which resemble fiduciary duties. The clause makes reference to a "duty of trust", requires the parties to the joint venture to "inform the others of any conflict of interest" and expressly restricts any profits being obtained "separately from the joint venture" which, pursuant to clause 6(c), are to be distributed 50/50.

    3. (3)

       Clause 7(d) requires all undertakings of responsibility to be “mutual”.

    4. (4)

       Clause 8 stipulates that the management of the joint venture is a matter for joint decision. On its proper construction, this clause precludes either party from making decisions in relation to the development and sale of the joint venture property without consultation. This clause operates to restrict the freedom of either venturer to operate alone, and requires loyalty to each other.

    5. (5)

       Further, clause 11(vi) provides that a venturer is in default if “it breaches any of its fiduciary duties…”.

13. [96]

    While clause 7(b) provides that “nothing in this agreement constitutes the parties as partners”, that does not preclude the parties owing each other fiduciary duties: Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130, at 1137 (Lord Pearson, Lords Reid, Morris of Borth-y-gest, Pearce and Wilberforce agreeing); see also JD Heydon, MJ Leeming, PG Turner, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies (5th ed, 2015, LexisNexis) at [5-010]. I note that while in several emails set out above Mr Younan refers to Giselle and Licha Bechara as his “partners”, that cannot assist with the construction process. Further, the reference to “fiduciary duties” in clause 11(vi) does not require a finding that the parties in fact owed each other fiduciary duties.

14. [97]

    Nevertheless, I consider the better view is that the relationship that existed between the parties to the joint ventures was only contractual in nature.

15. [98]

    The primary obligations of the parties were simply for Lexform to fund, and the Becharas to source buyers for the properties. This was not a situation where either party was required to source business opportunities for the joint venture, which could be diverted for their personal interests.

16. [99]

    As Lexform was the sole registered proprietor and did not hold the properties on trust for the joint venturers, it was not vulnerable to the Becharas selling the properties to others. Further, the Becharas were not vulnerable to Lexform, other than as a contracting party. If Lexform breached the agreement by not complying with its express obligations, such as making a decision or selling the properties, or not distributing profits equally, then the Becharas would have a claim for breach of contract. That would not be a situation of Lexform having a conflict of interest or profiting from an opportunity it was bound to obtain for the benefit of the Becharas as beneficiaries.

17. [100]

    This case is far removed from situations where one party has the obligation of finding opportunities and can divert them for personal gain and therefore be considered a fiduciary: see eg Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373.

18. [101]

    Here, by October 2021, the Becharas had been in breach of their obligations to find purchasers for years and had decided to terminate the joint ventures. Lexform was looking for other opportunities for its properties, where the Becharas, in effect as selling agents, had failed to find it purchasers.

19. [102]

    Further, I am not persuaded that even if I ought to have found Lexform owed the Becharas fiduciary obligations, that it breached them for the reasons below.

Did Lexform breach its fiduciary obligations?

1. [103]

   On the basis that Lexform owed its joint venture partners a fiduciary obligation, it would be necessary to determine whether Lexform breached that duty in the way pleaded. As noted above, the Becharas allege the breach of fiduciary duty is found in Lexform’s failure to inform them of the “opportunity” to sell the properties before they signed the termination deeds on 17 and 18 October 2021, that it took that opportunity for itself, instead of the joint venturers, and obtained an unauthorised profit.

2. [104]

   To decide that matter requires a determination of subsidiary questions:

   1. (1)

      Did Lexform breach its fiduciary duties by investigating business opportunities (namely, the possible sale of joint venture properties) and not disclosing those investigations before the Becharas signed the termination deeds?

   2. (2)

      When were the joint ventures and fiduciary relationships terminated?

   3. (3)

      Did Lexform take advantage of any opportunity that had been obtained in breach of its duty while the fiduciary relationship was still on foot?

3. [105]

   I note that the cross-claimants did not claim any breach of clauses 7 or 8 of the joint venture agreements.

4. [106]

   From the email correspondence and unchallenged evidence of Mr Younan, I make the following findings.

5. [107]

   From August 2021, Mr Younan was in discussions with his brother, Ray Younan, about trying to sell the joint venture properties. Ray promised to make enquiries with his “property group and Trade Organisation”. Shortly thereafter, according to Mr Younan, Ray suggested:

6. [108]

   Mr Younan expressed interest in such an arrangement, if he could obtain a net sale of AUD1,100,000.00, without paying any tax on any balance. He also told Ray:

7. [109]

   It therefore appears that Mr Younan was conscious of the obligations under the joint ventures.

8. [110]

   On 2 September 2021, Mr Younan directed the real estate agents, who had been attempting to sell the joint venture properties, to deal only with him. It appears he was thinking of refinancing those properties if they could not be sold. No allegation is made by the Becharas that this conduct by Mr Younan was wrongful.

9. [111]

   A valuation report of the properties in evidence is dated 7 September 2021 and provides a cumulative value for the joint venture properties as $2,760,000. It indicates that instructions were received to complete the valuation on 6 September 2021 and includes Mr Younan and Lexform as “clients”. During cross-examination, Mr Younan said he did not organise for a valuation to occur. I accept his evidence that he did not seek, nor know about, the valuation as at its date.

10. [112]

    On 8 October 2021, after Maria Bechara emailed Mr Younan confirming Giselle and Licha Bechara would sign the joint venture termination deeds, Mr Younan asked Ray to progress negotiating the potential sale opportunity. On that day, Ray provided an indicative sale price he expected to be able to obtain:

11. [113]

    On or about 28 or 29 October 2021, Ray informed Mr Younan of a purchaser, who would record a sale price of $2,700,000 with around $1,100,000 in AUD and $1,600,000 in trade dollars.

12. [114]

    On 2 November 2021, Mr Younan informed his bank manager of a potential sale of the joint venture properties. On the same day, Mr Younan received the front page of contract for the sale of land from Ray which was dated 15 October 2021 and signed by the purchaser.

13. [115]

    On that same day, Mr Younan provided his signed termination deeds to Maria Bechara.

14. [116]

    On 8 November 2021, Mr Younan signed the contracts for the sale of land he had received from the purchaser on 2 November 2021.

15. [117]

    On 25 November 2021, the sale of the joint venture properties completed.

16. [118]

    The cross-claimants submit that the Court ought to find that the contract for sale of land was binding on the date it bore on its face, being 15 October 2021, rather than when it was actually executed by Mr Younan and exchanged, which was 8 November 2021.

17. [119]

    I do not accept that submission. It is a question of fact as to when the parties were in fact bound, rather than the date on which they represented to each other that they were bound. I consider that Lexform was bound to sell the properties when the contracts were exchanged on 8 November 2021.

18. [120]

    The documents terminating the joint ventures are entitled “Agreement” but are “Executed as a deed”. I accept that the documents are deeds, and therefore they became operable when the requirements for deeds were finalised on 2 November 2021.

19. [121]

    I do not accept that the earlier communications between the parties amounted to a binding contract falling within category 1 or 2 of Masters v Cameron (1954) 91 CLR 353, such that the formal documentation was a formality that was not necessary for the parties to be bound. The parties had always dealt with each other formally; for example, all of Mr Younan’s documentation was in the form of a deed, and his correspondence is littered with demands that the Becharas provide written and witnessed documentation. I do not consider the parties intended to be bound unless and until formal documentation was finalised: see eg Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 at [134] (Beazley P, Bathurst CJ and Meagher JA agreeing).

20. [122]

    In written submissions, Mr Shepherd submits that Lexform breached its fiduciary duties by failing to disclose to Giselle and Licha Bechara of the opportunity to sell the joint venture properties and that there were likely purchasers of the properties in the amount of $2.6 million. This was developed orally:

21. [123]

    In light of the findings made above, it cannot be said that Lexform derived a benefit in the form of an “unauthorised profit” whilst either joint venture arrangement was still on foot. The joint ventures were terminated on 2 November 2021. Any fiduciary relationship arising pursuant to a written agreement ends upon its termination: see Attorney General v Blake [1998] Ch 439 at 453-55 (Lord Woolf); Vanguard Financial Planners Pty Ltd v Ale (2018) 354 ALR 711 at [168] (Black J); Blyth v Northwood (2005) 63 NSWLR 531 at [195] (Mason P, Giles and Bryson JJA agreeing). Lexform, through Mr Younan, did not sign the contracts for sale of land until 8 November 2021.

22. [124]

    However, it is well accepted that in addition to the rule against making unauthorised profits, a fiduciary can breach her duty if an arrangement is entered into, where a personal interest conflicts, or possibly may conflict, with the interests of the beneficiary: Aberdeen Railway Co. v Blaikie Brothers (1854) 1 Macq 461 at 471 (Lord Cranworth LC). As explained in the authorities, where a fiduciary becomes aware of an opportunity whilst acting in a fiduciary capacity, any benefit derived from the diverted opportunity could be subject to remedy for breach of the no conflicts rule: see eg Warman International Ltd v Dwyer (1995) 182 CLR 544 at [556]-559] (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

23. [125]

    In Gunasegaram v Blue Visions Management Pty Ltd; Same v Chidiac (2018) 129 ACSR 265 at [58]-[61], [64]-[65], Meagher JA summarised the authorities concerning the breach of conflict rule in this way:

24. [126]

    As Payne JA stated in Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524; [2016] NSWCA 37 at [105] (citations omitted):

25. [127]

    It is therefore important to determine the precise scope of Lexform’s fiduciary duties to the Becharas. As Mason J in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 at 102 stated, they are to be “moulded according to the nature of the relationship and the facts of the case”: see also Howard v Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 at [34]; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 at [179] per Finn, Stone and Perram JJ.

26. [128]

    As noted above, Lexform’s role was to fund the purchaser and holding of the properties, and jointly make decisions with its joint venture partners. It did not have the obligation to source purchasers, because that was the express obligation of the Becharas. Therefore, it is difficult to see how Lexform could be in conflict of its duties to the Becharas by looking for purchasers for the properties.

27. [129]

    In any event, there is a question about what is alleged to have given rise to a breach. Not all investigations will amount to a breach of fiduciary duty. For example, in the employment context, an employee does not breach fiduciary duties by taking preliminary steps to compete with the employer after the employee’s employment comes to an end: see Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1; [2011] FCAFC 24 at [102] per Besanko J (Finkelstein and Jacobson JJ agreeing); Manildra Laboratories Pty Ltd v Campbell [2009] NSWSC 987 at [77] per McDougall J.

28. [130]

    Similarly here, Mr Younan was seeking the assistance of his brother to find purchasers, should the Becharas agree to terminate the joint ventures. I consider it critical here that it was the Becharas who were obliged to find purchasers for the properties, not Lexform. The joint venturers needed to make decisions about the joint venture unanimously pursuant to clause 8; however, that duty only existed where the joint venture was on foot.

29. [131]

    While unnecessary in light of the above, for completeness, I consider:

    1. (1)

       Whether Lexform, through Mr Younan, was in a “real sensible possibility of conflict” with any fiduciary duties prior to 17 October 2021, such that it ought to have disclosed the potential opportunity to sell the joint venture properties, or to disclose that it was investigating the prospects of selling.

    2. (2)

       Whether the Becharas consented to Lexform independently dealing with the joint venture properties, without their further consultation.

30. [132]

    In Boardman v Phipps [1967] 2 AC 46, Lord Upjohn (dissenting on the facts) concluded that a conflict is assessed by whether “…the reasonable man looking at the relevant facts…would think that there was a real sensible possibility of conflict” (at 124); cited with approval, for example, in Queensland Mines Ltd v Hudson (1978) 18 ALR 1 at 3 (per Lord Scarman). See also Hospital Products at 103 (per Mason J); Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1 at [425] (Spigelman CJ, Sheller and Stein JJA).

31. [133]

    Whether a “real sensible possibility of conflict” arises is an objective question of fact: Boardman v Phipps at 124. It requires an assessment of the circumstances surrounding the alleged conflict. It is only once this threshold has been reached that that a fiduciary ought to disclose the conflict, if it is seeking to benefit from the arrangement.

32. [134]

    For example, in Canadian Aero Services Ltd v O’Malley [1974] SCR 592, the defendant directors had pursued a contract for work on behalf of the company for a number of years. Once the defendants learned that the project would proceed, they resigned and established a new company which subsequently bid for, and was awarded, the contract. On the topic of whether an opportunity has the potential to place a fiduciary in a position of conflict, Laskin J commented at [48]:

33. [135]

    See also Streeter v Western Areas Exploration Pty Ltd (No 2) (2011) 278 ALR 291 at [409] – [440] (Murphy JA, Buss JA agreeing).

34. [136]

    Here, Mr Younan did not agitate for the termination of the joint ventures because of the opportunity to sell the properties to any particular purchaser. Instead, his correspondence indicates that for years he desired to terminate the joint ventures, because the Becharas had failed to find any purchaser and he was considering refinancing the properties until he could sell them. On multiple occasions he had asked the Becharas to purchase the properties from him, or agree to terminate the joint ventures and hand over the properties to Lexform. Mr Younan had sent the termination deeds in early October 2021, and Giselle and Licha Bechara had agreed to execute them by 8 October 2021, and provided executed versions to Mr Younan on 17 October 2021.

35. [137]

    I do not accept that in investigating possible sales while the joint venture remained on foot was in breach of Lexform’s fiduciary duty to the Becharas, particularly where it was the Becharas’ obligation to find purchasers.

36. [138]

    Further, if it was relevant, I consider that no real and sensible possibility of conflict could arise until an offer capable of acceptance had crystalised on 2 November 2021, when Mr Younan received the signed contract for sale of land. The earlier emails from his brother were indicative only.

37. [139]

    Ought I to have found that a conflict did in fact arise, I consider that there is sufficient evidence to conclude that Giselle and Licha Bechara had renounced their obligations in joint venture properties, with the effect that they assented to Lexform dealing with the properties at his own risk and expense, for its own benefit.

38. [140]

    In the well-known case of Queensland Mines Ltd v Hudson (1978) 18 ALR 1, the House of Lords (Viscount Dilhorne and Lords Hailsham, Simon, Edmund-Davies and Scarman) considered whether the managing director of Queensland Mines, Mr Hudson, had breached his duty to the company by entering a mining exploration licence in his own name, entitling him to royalties, after previously pursuing the licence on behalf of the company. In that case, Mr Korman, the co-director of Queensland Mines, was responsible for financing the company. When the company began experiencing cash flow issues, the directors mutually agreed to retain the corporate structure, but inactive, to mitigate the financial risk associated with the company’s various mining projects. The Court commented (at 7):

39. [141]

    It was after this that Mr Hudson personally pursued the licence, an opportunity known to all directors of Queensland Mines prior to the decision to “mothball” the company. The Court concluded (at 9):

40. [142]

    On the facts, the Court held that no breach of fiduciary duty could be found in the circumstances.

41. [143]

    Whilst one of the factors raised by the Court in Queensland Mines was that all relevant facts of the opportunity were known to the company prior to Mr Hudson pursuing it, I consider it analogous to the joint venturers’ situation where:

    1. (1)

       Giselle and Licha Bechara had failed to find a purchaser for years;

    2. (2)

       The parties were exposing themselves to considerable financial risk by continuing to hold the properties;

    3. (3)

       Licha and Giselle Bechara agreed to terminate the joint ventures on the express basis that they would be relieved of any liability for any losses arising from the later sale of the properties.

42. [144]

    The Becharas’ agreement amounted to consent to Lexform alone dealing with the properties as it saw fit, bearing the risks of selling, and conversely, retain any profit in fact derived.

43. [145]

    This is sufficient for me to conclude that there can be no breach of fiduciary obligation, if one existed.

Did Mr Younan “induce and procure” Lexform’s breach of fiduciary duty?

1. [146]

   Because of the reasons above, it is not necessary to decide whether Mr Younan could be personally liable for “inducing or procuring” Lexform’s breach of duty.

2. [147]

   However, I note that for a third party to be liable for inducing or procuring a breach of trust or fiduciary duty requires the satisfaction of two elements according to Leeming JA in Pittmore Pty Ltd v Chan; Chan v Tan (2020) 104 NSWLR 62; [2020] NSWCA 344 at [186] (Bell P and Brereton JA agreeing):

3. [148]

   The cross-claim does not plead the second element at all, and the first element is only vaguely referenced. There is a complete failure to plead Mr Younan’s knowledge that he was causing Lexform to take steps to breach its fiduciary duties. There was no cross-examination on this issue. Had it been necessary to decide, I consider the failure to plead and prove Mr Younan’s knowledge means the claim must fail.

4. [149]

   For completeness, I do not accept Mr Hopkins’ submission that Pittmore assists Mr Younan, on the basis that it decides a director cannot be liable for inducing or procuring his company’s breach of fiduciary duty, when merely acting as director. That submission goes too far. In Pittmore, Leeming JA discussed the authorities and academic commentary about accessorial liability for breaches of fiduciary duties. His Honour provided obiter to the effect that he was not persuaded that a director of a company can be found to have induced or procured the company’s breach of fiduciary duty, just as a director cannot be liable for the tort of inducing breach of contract by the company, where the director is merely acting as a director: at [163]-[166]. However, his Honour did “see an argument in principle favouring a distinction between the two forms of ancillary liability in equity and at common law”: at [169]. Had it been necessary to decide, his Honour indicates that he would have invited submissions as to whether liability can extend to a director for acts undertaking merely in their capacity as such: at [170].

Account or equitable damages

1. [150]

   If, instead of the above, I ought to have found that Giselle and Licha Bechara are entitled to a remedy for a breach of fiduciary duty by Lexform and/or Mr Younan, then it is necessary to determine whether an account or equitable damages would be the appropriate remedy and how such remedy ought to be determined, including as to quantum.

2. [151]

   It is not in dispute that the usual remedy for breach of fiduciary duty where there has been a misuse of an opportunity by the fiduciary that belonged to the beneficiary, is an account of profits: see Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1.

3. [152]

   In Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd (No 2) [2021] NSWSC 1374 at [571], Ward CJ in Eq explained the procedure for taking of accounts:

4. [153]

   The evidence demonstrates that Lexform received some of the purchase price of the joint venture properties in Trade dollars.

5. [154]

   The cross-claimants sought an account or equitable damages on the basis that the joint venture properties were sold for AUD2,765,000, which is the price listed on the front page of the contract.

6. [155]

   Mr Younan resisted such a conclusion on the basis that an account ought to involve a determination of exactly what was received by the party liable to account, and that he received “Trade dollars” instead of AUD1,510,000 of the total purchase price listed on the contract.

7. [156]

   Mr Younan submits the Court cannot conclude that the Trade dollar value is equivalent to AUD and order an account on that basis. He submits that the cross-claimants ought to have proved the value of Trade dollars through expert evidence and they have not. In particular, Mr Younan relied on a decision of Black J in In the matter of Waterfront Investments Group Pty Limited (in liquidation) [2015] NSWSC 18. That case concerned the breach of contract by a purchaser, who failed to pay the purchase price. One issue was the quantum of damages, where on the proper construction of the contract, the purchaser had agreed to pay some of the price in “BBX dollars”. Black J concluded on this issue at [45]:

8. [157]

   I do not accept that Waterfront Investments is analogous here for the following reasons.

9. [158]

   Here, there was evidence before the Court as to the value of Trade dollars. Mr Devon, who is the CEO of the company providing the trading platform for Trade dollars, and was called by the cross-defendants to give evidence, provided oral evidence in cross-examination about the value of Trade dollars:

10. [159]

    It was open to Lexform to provide evidence of the value of Trade dollars that contradicted this evidence of their witness, that they are each worth AUD1. Lexform received a tax deduction to the value of AUD1 for each of the Trade dollars it donated to a charity. Therefore, Lexform also valued the Trade dollars at the amount of AUD1.

11. [160]

    Had it been necessary to decide, then I would order an accounting process be referred to consider the value of the profit obtained by reason of any breach of fiduciary duty, valuing trade dollars at AUD1.

12. [161]

    I note that an issue also arose in relation to Mr Devon giving evidence remotely. Despite assurances from counsel when leave was granted for that remote evidence, Mr Devon could not readily access the electronic court book, had not been provided with a physical court book and gave evidence in the presence of a third person. There was an unfortunate waste of Court time as a result.

13. [162]

    The claim for equitable damages was not developed by either party in submissions. Mr Shephard’s only submission was that the value of equitable damages was equivalent to the profits obtained. His submission orally was:

14. [163]

    Mr Shephard did not elaborate further. It may be that reliance was being placed, for example, on paragraph [341] in Agricultural Land Management, where Edelman J notes that there is no real difference between an account of profits and equitable compensation, where the focus is on the objective value of the property (or opportunity) lost. His Honour quoted Lord Millett in Libertarian Investments Ltd v Hall FACV Nos 14 and 16 of 2012, Court of Final Appeal, Hong Kong, 6 November 2013, [167] - [169]:

15. [164]

    I accept that here, both an account of profits, or “restitutionary” equitable compensation would be the same and have the same effect here.

Conclusion

1. [165]

   For the reasons above, it is appropriate to make the following orders:

   1. (1)

      Judgment in the sum of $270,000 against the first and second defendant;

   2. (2)

      First and second defendant to pay pre-judgment interest on the sum of $270,000 in accordance with s 100 Civil Procedure Act 2005 (NSW);

   3. (3)

      First defendant to pay the plaintiff’s costs on the ordinary basis, as agreed or assessed;

   4. (4)

      Second defendant to pay the plaintiff’s costs on the indemnity basis as agreed or assessed;

   5. (5)

      Direct HWL Ebsworth Lawyers to release the sum of $310,000 held on trust to the plaintiff, in satisfaction or part-satisfaction of the amounts payable by the defendants;

   6. (6)

      Dismiss the cross-claim with costs.