Supreme Court New South Wales Medium Neutral Citation: Moses v Ratner [2022] NSWSC 1234 Hearing dates: 7, 8 December 2021; 21 February; 22 March 2022 Date of orders: 20 September 2022 Decision date: 20 September 2022 Jurisdiction: Common Law Before: Harrison J Decision: See [61] and [62] Catchwords: CONTRACTS – terms – joint venture to acquire and develop property – where joint venture agreement never reduced to writing – where parties dispute the agreed cost of construction of dwellings on the property Cases Cited: Chant v Curcuruto; Chant v Curcuruto [2021] NSWSC 751 Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599; [1999] HCA 15 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 LKT v Chun [2004] NSWSC 820 Watson v Foxman (1995) 49 NSWLR 315 Category: Principal judgment Parties: Michael Isaac Moses (Plaintiff) Gabriella Ratner (First Defendant) John Ratner (Second Defendant) Representation: Counsel: A Gruzman (Plaintiff) P Webb QC (Defendants) Solicitors: Boskovitz & Associates (Plaintiff) A R Conolly & Company (Defendants) File Number(s): 2019/00354282 Publication restriction: Nil Judgment 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. 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. 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. 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. Adjudication of this contest is regrettably complicated by the fact that the joint venture agreement was never reduced to writing. Introductory comment 1. 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. 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. 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: "17. During my discussions with John Ratner regarding the Botany Project, I had the following conversation with him: JR: 'I want to be involved in your next project as a participant or have a share in it, not just as my company being the builder …' MM: 'Okay, we should both look out for a suitable site.' 18. Both John Ratner and I looked for a suitable property for to [sic] develop. 19 (a) In about late May 2016, I found a property for sale at 8 Blake Street, Rose Bay NSW…On about 1 June 2016 John Ratner and I inspected the Blake Street Property and we had the following conversation: JR: 'I think we can construct 2 duplexes here, similar to those in Botany.' MM: 'How much do you reckon the building would cost?' JR: 'My company could build these for no more than $300,000.00 more than your project at Botany, say $1,600,000.00 … I think when they are finished each property will be worth around $3,300,000.00-$3,400,000.00.' MM: 'On the basis that the property at Blake Street will probably [sic, not] sell for more than $3,300,000.00, a building cost of more than $1,600,000.00 would not make the project viable, taking into account stamp duty, ancillary costs such as architects and holding charges … Then we would not be making much of a profit for ourselves.' JR: 'Don't worry, the building costs are the same as for Botany, but we will use better fixtures and finishes for Rose Bay which is the reason for … the higher costs.' MM: 'We can each put up some money to purchase the property and the bank can fund the rest.' JR: 'As we are currently renting, we will live in one of the properties and the other can be yours.' MM: 'That's a good idea. My daughter or I can live in the other property.' … 20 There was never any mention between John Ratner and me that the Building Company and/or John Ratner was to be paid: (a) on the basis of the value of the build which was to be on the basis of a cost per square metreage rate, plus extras…; (b) as valued on a square metreage basis plus extras and additional costs and development management fees …; (c) based on a per square metreage basis plus additional charges and extras …; (d) calculated on a rate per square metre, plus extras together with building management costs…; (e) the value of the build as calculated on a rate per square metre, plus extras or some other basis (other than fixed agreed costs) such as quantum meruit and 'value of the build'…; or (f) the cost of the build as being on a square metreage basis… There was never any discussion or agreement between me and John Ratner that either of us would profit from the other in the joint-venture. I did not charge interest to the joint-venture or to John Ratner for the monies that I put in over and above the contribution that John Ratner made. Further, without detracting from the above, the following was also never discussed between John Ratner and me: (a) the rate per square metre that was contemplated; (b) what constituted 'extras', 'additional costs' and 'additional charges'; (c) the manner in which development management costs would be determined; and (d) the manner in which building management costs would be determined. If John Ratner had said to me anything 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, I would not have entered into the joint venture with him. My decision to enter the joint venture was based on what John Ratner said to me about the cost of the building works. I had no problem from him benefitting, in addition to the cost of the building works to be paid to his company, from 50% share of the profits from the project. 21. On the basis of the conversation set out in paragraph 19(a) above, my understanding of the arrangement between us was that, if we purchased the Blake Street Property, there would be a joint venture between John Ratner and me to develop the said property wherein: (a) we would arrange for the construction of a dual occupancy development (being two new 2 storey residential dwellings each with a garage and swimming pool); (b) we would provide equally the initial amounts required to purchase the said property with the balance to be financed through a financial institution; (c) we would arrange finance for the said development through a financial institution with me having the primary responsibility and resources to do so and, if any additional funds were required, it would be provided by John Ratner and me, with me having the primary responsibility and resources to do so in the event of any shortfall; (d) John Ratner would procure the Building Company (being Nagrommada Tech Pty Limited which company was involved the Botany Project) to carry out the building of the said development for the sum of $1,650,000.00, but otherwise on the same basis as the Botany Project; (e) upon completion of the development, the Blake Street Property would be subdivided into 2 lots and either: (i) sold, in which event, after repayment of: A. any amount due to the financial institution(s) that financed the purchase and development of the said property; and B. any additional funds provided by the parties, the balance of the proceeds (after selling costs) would be shared equally between John Ratner and me; or (ii) the 2 lots into which the Blake Street Property would be subdivided (with each of us becoming the owner of one of the lots) and the acquisition and development costs distributed between John Ratner and me equally. … 54 (a) On 3 March 2017 I received an email and attachment from John Ratner…I then had a conversation with John Ratner as follows: JR: 'In order that the bank lends us sufficient funds to cover the project costs, the bank's retention and its fees, I want to increase the tender amount which we show the bank.' MM: 'That's a good idea, what do you think it should be?' JR: 'I think I'll advise them of the additional $50,000 to cover contingencies.' MM: 'Okay, as long as between us the original built price doesn't change'." 1. 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. 2. 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. 3. 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. 4. 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". 5. 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. 6. On 3 March 2017 at 6.39am, Mr Ratner wrote to Mr Moses in these terms: "hi michael, See price attached CALL ME BEFORE FORWARDING thanking you for your assistance and please feel free to contact me anytime … cheers" 1. The tender budget documents attached to that email dated 28 February 2017 described the contract sum exclusive of GST as $1,584,491. 2. 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: "hi michael, please see attached rose bay lump sum offer inc gst…cheers please forward to lending institution and advise should you require anything else asap…cheers thanking you for your assistance and please feel free to contact me anytime…cheers" 1. 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. 2. On 13 April 2017, Mr Ratner sent an email to Mr Moses in these relevant terms: "Further to discussion, please see attached trade break up as requested. Please expedite valuation asap…" 1. 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. 2. Mr Ratner responded to this in his affidavit sworn on 20 July 2020. Mr Ratner said this: "Blake Street Venture Proposal 46 On 21 May 2017 Michael sent me an email with a link to a property for sale at 8 Blake Street, Rose Bay NSW. 47 We were in the start of the Botany Project at this stage and I was in regular communication with Michael and looking for an opportunity to develop another property with him. We spoke on the phone that day or the next. MM: 'What do you think of that property, what did the agent say?' JR: 'Looks good, we can meet the agent on site and have an inspection.' MM: 'Okay when.' JR: 'Next week.' MM: 'What can we do with that block?' JR: 'We can do a dual occ, the land is big enough, just like everyone is doing around here. Build cost will probably be about 1.8-2.00m, it'll have to be nicer than what you did in Botany, to suit this area but we won't go over the top with it. Each should sell for about $3.3-3.4m. Depending on what we get it for there should be a good margin in it for us.' 48 On about 1 June 2016, I met with Michael and the agent selling the property on site at the Blake Street Property, we looked at the property and its aspects and we liked the properties [sic] potential. It had good access and a good level block. It was clear on this occasion that one lot would be worth more than the other due to the surrounding buildings and the shadows they would throw. 49 We had a bit of a discussion of what a build might cost and how much we would be prepared to pay for the block. We spoke to the agent after we inspected the block: JR: 'Would you take an offer prior to auction?' A: 'No, the vendor probably won't take an offer at this late stage. The campaign has gone too far. It will go to auction and it is going to sell.' 50 After the onsite meeting, we had another meeting, either at my place or in Double Bay at the Café 21 or the Royal Oak. We had a conversation in the words of the following effect: JR: 'The auction is tomorrow, we have to work out a price if we're going to do this.' MM: 'Our limit should be $3.2.' JR: 'Okay that works, the final value of these lots will be $6.6-$6.8m, if the build costs say $2.0m and the land $3.2, that leaves a pretty solid margin of over $1m.' MM: 'We will go 50/50 equity in on this project. We both contribute to the developers costs and land purchase to get it started. We will have to drop in about 20% cash into the deal the [sic] get a facility to pay for the build and if there's any shortfall I will meet those costs and we can then sort it out at the end of the build when we refinance.' JR: 'Yeah no problem that's fine I can afford to do this 50/50 and put in the 20%. I don't have the extra cash to contribute on top of the 20%. I'll be stretched as it is, but I'll do the build and look after the project as developer, builder and project manager. It'll cost the same as a normal build but I'll look after everything, all the preliminaries and designs, I'll do everything and babysit this thing – I won't charge a cent for the preliminary work associated with lodging a DA and before we break ground and the build cost will just be a normal price, even though I'll do all the preliminary work with the plans and approvals. I'll look after it and just charge at usual rates for the build.' MM: 'Good, we'll put the property in both our names and split the loan.' JR: 'For our half we will put the property in Gabby's name and she and you will be the borrowers – and split it all like a usual development project.' MM: 'Great'. … 62 NAB required certain documentation to approve a development loan. In particular they required a building contract or similar. 63 Michael and I had a conversation concerning what figures to provided [sic] NAB: JR: 'Michael, we don't have a contract as we're doing this as a JV, what do you want to do?' MM: 'We can put one together for the bank, but we must carefully consider what price we use with the bank because they will only lend us a certain amount of the total development costs.' J: 'Well I can't prepare a detailed tender offer under 1.8 as this will not be believable. I can do either a contract with disclaimers or tender budget with disclaimers making it null and void if project requirements change, hence I will not be tied down to this. We will put a validity period on it and a certain date for expiry.' MM: 'We don't need to sign anything. I'll see if the bank will accept a fixed price tender, by my calculations we need to be around the $1.6m mark to get the loan we need.' J: 'That's okay I'll put whatever on the tender budget but the build price is still going to be around $2.0m like we originally discussed and I'm going to protect myself by including all the inclusions and it will expire after 30 days.' MM: 'That's fine, do your best we will sort the loan out.' 64 On 28 February 2017, some 3 weeks after development consent was granted. I drafted and submitted a 'tender budget' for $1,657,091.00 inclusive of GST. In accordance with our agreement, that document was never signed and expired after 30 days. 65 We knew that, by the time the project funding would be approved, the offer would have expired and the price was not binding. That's why it is labelled a 'tender budget' not even just a 'tender'." 1. Mr Ratner's affidavit continued: "76 With respect to the s 94 contribution, the higher the QS values the build work, the more you have to pay to Council. As a result, QS reports for s 94 contributions are notoriously undervalued. 77 Initially the QS returned a figure of $2,234,043.00. We requested these figures be revised down to lower the contribution and a figure of $1,992,488.00 was returned as the lowest believable price for the build. To justify the difference in build costs between the QS report from revision 1 to revision 2, the QS changed the included finishes description from 'good' to 'medium' in order to justify the reduced project cost amount. 78 When we got this revised down QS: JR: 'There's the QS report. I've got it reduced to lower our s 94 contribution.' MM: 'Okay good.' JR: 'We've revised down to 1,992,000 by putting in the lower quality finishes. I will still use the higher spec finishes but I will try to keep to this price.' MM: 'That's fine. Whatever you think is best for the build.' 79 In November 2017, after work had begun, Michael and I agreed to some amendments to the plans. As such the development consent needed to be amended. I made an s 96 application to this affect, which changed a number of aspects of the design and increased the internal areas of the build by approximately 24sqm. 80 After this point, the build progressed as expected and progress payments were sought from NAB and those payments made. 81 In June 2018 I spoke to my agent who advised me that we would get high three million for each lot if we upgraded the specifications of the build and finishes. 82 As the progress payments were coming to an end, I was concerned that Michael may not make any additional payments to the build costs as agreed. I was also concerned that we agreed on a base cost of the current design before we made further variations to the project specifications to reach the high-three-millions as the agent advised us was possible. I attempted to reach an agreement on a preliminary build price, so that I had some certainty as to what our respective contributions to the project would be. 83. On 11 June 2018 Michael and I met and had a discussion in words to the following effect: JR: 'Michael, with the changes to the plans made in the s 96, the facility is going to fall well short of the build costs. I'm stretched as it is and can't finance the end of the build myself. The balls [sic] in your court, you need to tip in the extra cash so let's settle on a price for the building works as they are currently.' MM: 'John, how much do you propose as a price?' JR: 'Not including any further variations, after the s 96 changes is going to cost $2.1-2.2m inclusive just amending the original price, if I had my ordinary margins on it and changed [sic] for the project management work I'm doing I estimate it would have cost closer to 2.4-2.5, but there's profit in this so let's just agree to something and move on, we also have to work out if you're going to take 8A and pay the $200,000 adjustment. If you don't want it I can take it for $200,000 because I think it is easily worth $200,000 more than the other lot after speaking to the Agent.' MM: 'John I don't think the amendments warrant an increase in price of $200,000. I still want the better block though and I'll pay the $200,000 adjustment there.' JR: 'Well, put $200,000 8A lot adjustments to one side. What if we say $1.85m for the build costs as it currently and work our figures for future variations off that amount. We can lock this price in for the build as it currently stands, because there are going to be variations that'll take this figure up if we're going to try and get high three's as the agent proposes.' MM: 'I don't know.' JR: 'There's plenty of equity, the agent is talking about $3.8m, the profits are going to solid were looking at well over $7m for the total project value, let's not much [sic] around just 1.85 for the base costs with the extra square metres and we take it from there. MM: 'I'll think about it.' [Emphasis added] 1. Mr Ratner's affidavit concluded relevantly as follows: "97 Eventually the build costs exceeded the amount available through the NAB Loan. This happened in about August 2018 and Michael and I applied to see if we could increase the value of the loan if we were able to obtain an increased valuation from NAB, having regard to the buoyant market and upgrades recently made in terms of the plans and schedule of finishes and upgraded fixtures. 98 We were unsuccessful with NAB who would not increase the facility. 99 As there was no further finance available, and as agreed at the beginning of the project, Michael contributed extra cash to the project to cover the build costs and other expenses. … Cash Contributions to the Project 102 Cash contributions to the project were made throughout the project. 103 The first contribution was made to the purchase price and preliminary expenses and this was paid more or less equally by Michael on one hand, and Gabby and myself on the other. 104 Throughout the build various expenses were met by both parties, although Michael met the majority of these costs, per our agreement that his contribution would be fiscal and ours would be the building works and management of this project in its entirety from planning to building to final sales of each dwelling and sourcing the highest possible price, which again I did for Michael and got him an offer $600-$700,000 higher than his previous offer of 3.2-3.3m that he received from his agent. 105 Michael lists his contributions in excess of the original development contribution of $575,000 as $1,040,557.52 in paragraph 65 of his affidavit. I dispute these figures as I believe some of these expenses were not project expenses." 1. 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. 2. Mr Ratner swore a further affidavit on 19 November 2020. The following extracts are taken from that affidavit: "17 A design and construct project is based on a budget set by the developer who will have calculated a project profit feasibility taking into account the land purchase price per metre, the build cost per metre and the expected sales price per metre. 18 Build rates per square metre for design and construct projects are dynamic in nature. 19 The alternative to a design and construct project is a fully documented design package issued for tender, covering every aspect of the trader. The builder will then provide a lump sum tender based on the design tender package issued at the tender stage, and if accepted the builder then signs a construction contract and builds the project in accordance with the design documents issued. Any amendments and addendums are treated as time and cost variations. 20 I have done both design and construct projects or construct only projects. 21 In this development with Michael Moses we worked off a market rate which was $5,000 to $6,000 per metre. This is in my opinion and would be considered by others in the industry a discount rate. Additionally however, to the build rate, were my other contributions as a developer manager and project manager directly involved in overall compliance and project delivery in a timely manner. 22 Usually the rate for an architectural home in the eastern suburbs is between $7500 and $8000 per square metre. 23 If I had tendered on the job at Blake Street as a builder on a construct only contract, with a standard builder's margin, this build would be no less than $2.9m." 1. Mr Ratner's evidence also contained the following: "29 When I looked at this house I said to Michael Moses 'Based on what we are going to get, this is 580 metres, plus an FSR' or Floor Space Ratio. 30 I said to Michael Moses 'The way to calculate your internal area, is your land area times your floor space ratio. Based on that, and based on other precedents in the area, the FSR is 0.5. So we can only build 290 internal. But we have had a lot of precedents where they have gone over that FSR. So we have gone over .65 to .7 which gives you an average, of say circa 382 roughly times $5,000 to $6,000 per metre. And so at the low end you are at $1.91 million at $5,000 a metre, and then at $2.29 million is at $6,000 a metre.' 31 I said to Michael Moses 'We may do the job and I can say "I can do it at $5,000 a metre." But then you may want different finishes and I may say "you're dreaming, I will have to do it for $6,000 an internal square metre" But if that starts to blow out, because of land slope or something else that arises, then we might pull back on the aesthetics. For example, we may do standard finishes not custom finishes, or the appliances may go down a notch in quality.' 32 With Michael Moses we were initially doing our FSR on the basis of a sale of $3.2m for each unit. That was calculated on what was being sold in the area. 33 Michael Moses and I talked about cost on a square metreage basis. In my conversations with Michael Moses on the cost of construction we talked in a common language in metreage. That was confirmed by the calculation by the QS. And when Michael Moses asked for additions and upgrades and improvements were made Michael acknowledged that he knew that that would increase the total cost." 1. 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. 2. On 11 June 2018, Mr Ratner wrote to Mr Moses in the following terms: "Michael, further to request, see email below and attached QS report excluding s 96 improvements/area increases and item 6 general 'exclusions', all of which are included in my final amount. As you will remember, I argued this amount for obvious reasons, however could only get the final amount just below $2m in total in the end, as any figure below this was unacceptable and/or unbelievable to the QS. In any event, being as experienced as you are, you will agree (for obvious reasons), QS reports are well below actual project costs and in this case it is still $400K above my amount !!! Moving forward, final amounts discussed during today's meeting are as follows; 1. Build cost inc GST $1.85 2. 8A dwelling title/ownership $200K 3. 8A Current offer $3.8m All project expenses to be split 50% between by both partners (tenants in common). Let's meet again tomorrow and finalise this asap as the purchaser wants to change various finishes that I need to make allowances for right now … cheers Thanking you for your assistance and please feel free to contact me anytime … cheers" [Emphasis added] 1. 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. 2. Mr Ratner referred to his 11 June 2018 email in his 20 July 2020 affidavit in these terms: "84 On 11 June 2018, following that meeting, I wrote to Michael containing the figures I was willing to agree to the current project costs and our relative contributions as soon as possible. I was motivated to accept a lower figure than what was fair value as the agreement would allow me to make arrangements to up-spec my half of the build, or else organise refinancing to settle my loans. I note the last line of my email: 'Let's meet again tomorrow and finalise this asap as the purchaser wants to change various finishes that I need to make allowance for right now…cheers' 85 At this stage, we still had no idea what the final price would [sic, be]. [W]e were still deciding finishing types and considering further inclusions to possible sell at an even higher price. We needed to settle a price for the existing plans immediately so I had a base to work of [sic, off] for the upcoming variations. I didn't want to lose any interested buyers. 86 Michael never responded to my 11 June 2018 email accepting the figures contained therein." 1. 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: (a) $198,339 on 20 September 2017; (b) $313,500 on 5 December 2017; (c) $360,000 on 28 March 2018; (d) $320,000 on 13 June 2018; and (e) $320,000 on 27 July 2018 (the 5th progress claim). 1. 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: "67. After the building company sought to drawdown the 5th progress claim, I became concerned about the cost of the Blake Street Project and requested from John Ratner, inter alia, the building contract for the ...project…The building contract…has never been sent to me." 1. 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. 2. 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: "Further to your request for additional information pertaining to 'extra/over' costs associated with 8 blake st, rose bay, Please see comments below and associated documents attached. As previously discussed, our initial QS report came in at $2.234m inc gst, excluding 'exclusions' as detailed in QS report dated 14.08.17. As you are well aware and clearly remember, I argued this amount with the QS in effort to reduce s 94 contribution fees. Further to our discussion, the QS agreed to lower his report to $1.992m inc gst and excluding any 'exclusions' noted in their report, furthermore excluding any additional costs associated with s 96, finish/fixtures upgrades, project contingencies, pm fees, external works, final structural construction type … etc, however refused to further lower his report as any figure below this would be deemed 'suspect' and warrant stringent investigation - see report for further details outlining precise exclusions and associated project cost for each item In any event, the revision 2 amount ($1.992) was the amount both you and I agreed to proceed with to CC stage with and essentially paid all mandatory associated contributions to Waverley council on the 14th of august 2017, excluding any cost associated with items excluded from the agreed QS report. Please see attached brief summary of all extra/over 'exclusions' costs as omitted from the QS report circa $700K including additional s 96 internal floor space, likewise all remaining outstanding and/or amended items as mentioned earlier in this email amending final amount to circa $2.7 inc gst. In addition, included is a brief summary of expenses generated prior and/or during property tenant and DA submission phases circa $40K. Please review and let me know when you wish to discuss asap. With regards to 'defects' mentioned in your earlier email, as previously mentioned I am happy to attend to all items included in my scope right away. Please remember that I have issued you PC and OC without final payment in good will." 1. 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". 2. 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. 3. 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. 4. Mr Ratner swore another affidavit on 23 September 2021 in response to Mr Moses' affidavit of 3 September 2021. It included the following: "35 I refer to the conversation relayed in paragraph 19 of the affidavit of Michael Moses. That conversation did not take place. I did not say the words attributed to me by Michael Moses in paragraph 19(a) of his affidavit. I did not say 'We can construct two duplexes here, similar to those in Botany'. I did not say 'My company could build these for no more than $300,000 more than your project at Botany, say, $1,600,000 but otherwise on the same terms'. This statement is untrue. Michael Moses did not say the words which he described in paragraph 19(a) other than 'How much do you reckon we the build will cost'. In response to that question I said 'We don't know what the approval will be. It will be circa $5,000 to 6,000 per square metre internal space. The floor space control ratio is 0.5:1'. I said, 'The build cost will be subject to the final approved GFA and finishes.' The figure of $300,000 came up much later during this project when a potential buyer of Michael Moses property at 8A Blake Street, was asked to pay $300,000 of the purchase in cash. The sale did not go ahead. 36 Michael Moses asked me 'What do you think they will be worth when they're built'. I said to Michael Moses 'The finished properties will each be worth around $3.3m in my opinion'. 37 I did not say, to Michael Moses, as referred to in paragraph 19 of his affidavit 'Don't worry, the building costs are the same as for Botany but we will use better fixtures and finishes for Rose Bay which is the reason for the extra $300,000 in higher costs'. The two projects were completely different. There was no comparison. I did not say the figure of $300,000 when discussing the build cost for Blake Street. 38 In relation to paragraph 19 of the affidavit of Michael Moses, Michael Moses or I did say in relation to the Blake Street development 'We can each put up some money to purchase the property and the bank can fund the rest'. However Michael Moses did not say 'We can each put in any shortfall that the bank does not lend'. 39 The arrangement Michael Moses and I discussed and the agreement we reached was 'We will each put in an initial amount to buy the land and obtain the remaining funding for the land from a funder. Once we have our approval to build we will fund the entire project from a development financer including refinancing the land'. It was from my knowledge and experience the usual practice to go to a development funder to finance the land price (for any amount not put in by the developers/ investors) and then on approval, obtain finance for the development costs which included refinancing the land as a total fund. … 46 It was only after Michael's discussions with NAB in relation to the funding for the build that Michael said 'NAB will only lend $1.5M plus GST because of my other commitments' and 'NAB won't fund over $1.5 for the build' that Michael then said 'I can't leave NAB. I'll put in for the shortfall for the build over the $1.5m'. This was an amount well below what was required to fund construction. I was advised by Michael Moses that 'NAB is taking $100,000 off the building fund and putting that against the land'. I did not understand why NAB did that. That reduced the money for the build that was in the NAB fund for the development. … 48 I did not send the tender budget to NAB in that email of 1 March 2017 and spoke to Michael Moses. Michael Moses said 'Just put the Tender sum as $1.5m. That's all they want'. I said, 'What about the additional building costs which you are putting in'. Michael said 'Don't worry about it. I'll deal with that with NAB. Just put in the tender at $1.5m'. 49 I provided to Moses, at his request a Tender Budget dated 28 February 2017 which stated that the lump sum build cost was $1,506.447 plus GST.' I said to him in my cover email 'DO NOT SEND ON WITHOUT DISCUSSING WITH ME'. I then spoke to Michael again. I said again 'The Tender Budget doesn't have the whole cost of the build'. Michael Moses said 'I'll deal with NAB. I'll talk to them. You don't have to worry.' A trades summary was then requested. I spoke to Michael Moses. He said, 'Just send on a list that adds up to the $1.5M and I'll deal with the rest.' … 52 I refer to paragraph 20(a) of the affidavit of Michael Moses. Paragraph 20 sets out from points (a) to (f) the agreement that we had as to the build cost. We agreed to the build on a value of a square metreage rate of $5,000 to $6,000. The final cost of the build would depend on the approved floor space ratio, and the finishes and any additional work and on the project was $6,000 per square metre by the time the project was up-spec'd. 53 When a development is being considered, my practice and to my knowledge and experience in speaking to people in relation to developments, a common approach is to work out the probable return. The approach that I take and in conversations with others in the industry including with Michael Moses is to firstly look at the cost and at the potential resale price. The developer looks at council's planning controls, in particular the floor space ratio – that is the gross floor area of permissible build. Then you multiply the gross floor area by the build rate, which in this case was circa $5,000 to $6,000 per square metre. A figure for holding costs/ interest and professional fees and project management fees is added. That is how a calculation is done for the development cost and the potential profit from the development. The calculation that I used with Michael Moses and that I always used in practice was to multiply the square metre rate by the permissible gross floor area. To Moses I said, 'The rate per square metre for this development will be around $5,000 to $6,000'. Moses said 'OK'. … 57 In relation to paragraph 20(a) the square metreage rate for the build at Blake Street was stated and discussed between me and Michael from the earliest time when discussing Blake Street. … 66 In relation to paragraph 21 of the affidavit of Michael Moses, the agreement was that there would be a joint venture, that Gabby and I and Michael Moses would be the parties to the joint venture. There were to be equal contributions to the purchase of the property, and then finance through a finance contributor to take over the land debt and for the development. We agreed to develop a dual occupancy property, which we would divide and each then have our own property. I was to be the builder. … 69 It was not that Michael Moses had the resources to arrange finance, but the fact that he was tied in with NAB, that let [sic] to him taking the lead in dealing with NAB which was his bank. As we had finance with Tom Dim on the land, I asked Sam Panucci if he could arrange the finance on the development. Sam Panucci looked at it and said, 'Moses is too tied in with NAB'. There was no agreement that I would top up the shortfall. The agreement was that Moses would top up the shortfall, because we could not get finance elsewhere while he was tied up with NAB. The agreement was that I would do the build for the joint venture. There was no agreement and no discussion at any time that there would be 'building of the said development for the sum of $1650000 but otherwise on the same basis as the Botany Project.' The agreement was that the build would be on the basis of a square metreage rate of $5,000 to $6,000 per square metre, internal, plus any extras and professional costs. Given the quality of the finishes the value of the build was $6,000 on completion." 1. 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. 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. The oft cited passage from Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63] should be noted: "[63] The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn." 1. It is also instructive to note McDougall J's observations in LKT v Chun [2004] NSWSC 820 at [39]: "[39] As Campbell J pointed out in Manly Council v Byrne & Anor [2004] NSWCA 123 at [51], application of the principle in Jones v Dunkel & Anor (1959) 101 CLR 298, where it applies, may have two results. The first is that the tribunal of fact may infer that the evidence of the uncalled witness would not have assisted the party who should have, but did not, call that witness. The second is that the tribunal of fact may with greater confidence draw any inference unfavourable to that party if it appears that the evidence of that witness might have assisted the making of the decision, whether that inference should properly be drawn." 1. 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: "[79] I deny paragraph 24(c) of the affidavit of Michael Moses, and deny that there was any discussion or suggestion or agreement with Michael Moses that Gabby Ratner would 'hold her interest in the Blake Street Property as agent for John Ratner'. While most of the discussions with Michael Moses about finding a development project were with me and him, Gabby is part of the business. Gabby knows a lot about what is going on. She issues the invoices and pays all the bills. We talk each day about the work. For any project we may go into we discuss the pros and cons. For all development properties Gabby is an owner or part owner. Gabby also works in the office two or three days a week, on documentation and accounts. I agree with paragraph 24(d) of Michael Moses affidavit that Michael Moses' communication about Blake Street was almost always with me, with some exceptions. The property at Blake Street was not bought by Gabby as 'my agent'. She was the owner of the share of the property and a joint venture partner with Michael Moses and with me. I agree with paragraph 24(c)(ii) of Michael Moses' affidavit and agree that the JV parties were to be Gabby and me as to 50% and Michael Moses as to 50%." 1. 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. 2. 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". 3. 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: "Q. Was there any piece of paper where you recorded that the cost of the build was to be on a square metre basis? A. Our initial - our initial discussion when we looked at the site-- HIS HONOUR: No, no, Mr Ratner. WITNESS: --when we-- HIS HONOUR: Mr Ratner, just hold on. It's important that you just listen to the question and answer it. WITNESS: Yeah. Yep, there was. HIS HONOUR: The question was whether there was a piece of paper that records your square meterage … WITNESS: Yeah, later on throughout the project we have a series of emails where I confirm that. But everything before that was - was - was verbal. So later on throughout the course of the project, there's - there - there are emails that does spell that out. GRUZMAN: Where in the court book are those emails that spell out the square metre basis? A. Look, I'd have to - I - I - I can't - I'll have to - they're in the court book, but I don't know where they are exactly. HIS HONOUR: Mr Webb, if you can help him. WEBB: Yes, I understand, your Honour. GRUZMAN: Emails early on relating to the square metre basis, or any time during the job. A. Not - not - not early on throughout the course of the project we discussed everything on a square metre rate in the - in the initial stages, and that was a decision on which we - we - we - we based the purchase. Q. You say that this was confirmed in emails and they are in the court book? A. Not - not in the - not emails in the beginning. Throughout the course of construction, yeah, the - there are emails throughout the course of construction." 1. 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]: "[80] Also, as has recently been written by Rees J in the matter of Pacific Springs Pty Limited [2020] NSWSC 1240, at [139], the failure to produce documents where the plaintiffs might be expected to be in possession of documents to corroborate their account: "may lead to an inference that such documents may not have assisted the plaintiffs' case: Jones v Dunkel [1959] HCA; (1959) 101 CLR 298 8 at 320 per Windeyer J, citing with approval Wigmore on Evidence (3rd ed., 1940), vol. 2, page 162: 'The failure to bring before the tribunal some circumstance, document or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party…';…" [Emphasis added] 1. 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: "Q. Now, you well understand, don't you, that Mr and Mrs Ratner's case is that at the end of the job, there would be an assessment of the value of the property based upon square meterage? A. That's absolutely something I totally disagree with. … Q. Further, Mr Ratner said to you, about the time of the negotiations for the loan, that the deal was that the split between you was to be calculated by internal square meterage? A. I already said that that was not true, incorrect, never discussed, previously." 1. Mr Ratner's evidence about this was as follows: "Q. It's a document that you caused to be sent to the National Australia Bank, isn't it? A. Yes, it is. Q. The total contract sum including GST was $1,657,091? A. That's - yeah, at - at the request of Michael Moses, and it's a tender budget. It's not a contract amount as you can see from the front page. It's dated 28 February, and that was - that was a tender budget. Q. Why did you add in your answer, at the request of Michael Moses? A. Because the full value of the build was circuit [sic, circa] $2 million, and Michael Moses was only limited to 1.5 plus GST, and requested that that price go in that amount to the bank, and that he would top up the rest. Q. When you say Michael Moses was limited to $1.5 million plus GST. What do you mean by that? A. I meant - what I mean is that Michael Moses could only fund through NAB 1.5 plus GST. Michael Moses couldn't lead to any other financial institution because of his ties and cross-guarantees and everything with NAB, and Michael Moses insisted that the deal go ahead with NAB, and NAB were only willing to fund 1.65, or 1.5 plus GST. So at that request, that went in at - at that at that amount with the agreement that - that Michael was going to fund the remainder of it. Q. Do you have any documents that support your assertions in the speech that you've just made? A. Well, the documents that - that I have is the - is - is the quantity surveyor reports and - and just my affidavit of our original discussions that were always based around the square metre rate, and the value of that - the build based on the square metre rate, which was later on confirmed by the QS reports when the design development got further advanced and progressed, when we actually knew what we were dealing with. At - at that day, the - the development was nowhere near at its final stage of design. So we priced on a square metre rate, and Michael - Michael said it has to come in at this amount, and it was later verified by quantity surveyors that - that it was a circuit [sic circa] $2 million project with a comprehensive list of exclusions that - that was still needed on the job that would incur additional costs. So that's that. Q. Is there anything else you want to say, or are you finished, Mr Ratner? A. That's it for now." 1. 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: "Q. But I've taken you to your earlier affidavit at page 102. You never mention anything about a per square metre rate, do you? A. Yeah, but I've just explained to you, that I can't come to that figure without a square metre rate. The only - the only two things that I have to put a number on that project at the preliminary stages are the probable approval from council, which is the area, and the metre rate, the - the discounted metre rate of what it would cost to build. They're the only two things that I have. It's not designed, I don't have any Geotech information on the land, I don't know what the structure's like, I don't know what the access is like. I don't have any of that information. So the only - the only two things that I have is a metre rate and then area, and that's it. … Q. Why didn't you say anything about square metre rate in your first affidavit where you set out the conversation that you say you had with Michael? A. I've just - I explained to you previously that without the relevant documentation, without the design development, without anything that I can actually send out and issue to price, the only thing that I've got is the floor layout, and the - the - the rate a metre. That is obvious. We discussed about that. And - and - that - that was how that metre - that - that was how that build - build amount came to. It was based on square metre rate. There is no - I don't have anything else to go by. It's - it's in its early preliminary stages. There's nothing I can do. I can't - there's - there's no - there's nothing there." 1. 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. 2. 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. 3. 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: "… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." 1. 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: "I should add that my final conclusion is that having regard to the seven to eight year period that has elapsed between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time." [Emphasis added] 1. 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. 2. 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: "Q. Did you say that the build cost will probably be about 1.8 to $2 million? A. Yep. Yep. Q. That was at the time that you're entering into the joint venture? A. Yeah, that was at the time when we didn't know what approval we were going to have, or what - what design was going to be, the final design or anything like that, yeah. Q. When you said that-- A. Mm-hmm. Q. I beg your pardon. I withdraw that. I suggest that you didn't say to Michael that the build cost would be 1.8 to $2 million? A. Well what I suggested to Michael was that we were going to build it on a square metre rate based on the final design, based on the final approval, and based on the final decisions that we made with all the finishes and the - the - the materiality and everything else. So it was - they were variables. It was a variable range between 5 and 6, and it was a variable area that was going to be approved. Was it going to be .6, .5, .7; what was it going to be. So the only thing that we had was the metre rate. That's it and that's what we worked to. HIS HONOUR: What was the date when the final design, subject to variations, became available to the joint venture? A. Okay. So the final design, we had a construction draft issue-- Q. No, hold on. Don't, don't - Mr Ratner, just think quietly. All I want to know is the date. You're thinking aloud. A. Okay. The final - with - with the section 96, the final design date was 30/11/17. GRUZMAN: And the initial design, you had prepared a tender budget for the bank and caused that to be submitted in the sum of $1.657 million and a few, didn't you? A. At - at Michael's request. Q. No, no. Did you prepare that tender budget and cause it be submitted to the bank? A. I specifically wrote to the bank - I prepared that budget, tender budget, yes, based on Michael's instruction. I specifically wrote to the bank and when they requested information, I said, 'I'm emailing you everything excluding the - the - the contract'. I've then sent the tender to Michael. I said to Michael in an email, 'Call me before sending' and that was on 3 March 2017 and I said to Michael, 'Michael, this - I - this needs to be at the - at the - at the price that we agreed' which was circa $2 million. I'm not going to be signing any contract based on a $1.6 million sum because it's - it's just…" 1. Paragraph 22 of Mr Ratner's amended defence filed on 8 July 2021 reflects this theme in these terms: "22. The second defendant denies paragraph 5C of the second further amended statement of claim. Further in answer to paragraph 5C the second defendant says that the agreement was that the builder, John Ratner, would be paid for the build on the basis of the value of the build as calculated on a rate per square metre, plus extras. The second defendant therefore pleads that his entitlement to payment for the build value is on the basis of the principle of quantum meruit. The second defendant relies on the expert reports of the quantity surveyor and architect served by the defendants in these proceedings. The second defendant denies that an oral representation was made as alleged under the Particulars pleaded in paragraph 5C of the second further amended statement of claim. The second defendant further says that it was at the request of the plaintiff, specifically to assist the plaintiff in the obtaining of a mortgage and finance from his bank, that the plaintiff requested that a value of $1,650,000 be included in writing, as a preliminary estimate subject to exclusions. The second defendant further says that the figure of $1,650,000 was provided as a conditional and preliminary estimate, subject to exclusions which meant that it did not represent, the agreed value as between the plaintiff and the builder, John Ratner, and the first defendant as to the value of the build." 1. Paragraph 5C of the second further amended statement of claim to which that paragraph responds is in these terms: "5C. Prior to the purchase of the Blake Property, the second defendant represented to the plaintiff … that that the costs of demolition of the existing dwelling at the Blake Property and the construction of a dual occupancy development (being two new 2 storey residential dwellings each with a garage and swimming pool) in Rose Bay charged by the second defendant and/or the Builder would be $1,600,000.00 (inclusive of GST) ('the Building Cost Contribution'). Particulars The Representation was oral and made by the second defendant to the plaintiff, and later after being varied to $1,650,000.00 was confirmed in writing to the mortgagee/financier and the home warranty insurer." 1. 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. 2. 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. 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. 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. I will hear the parties on a date convenient to them and to the Court to be arranged in consultation with my Associate. ************* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 September 2022