New South Wales Supreme Court CITATION : Phoenix Constructions Pty Limited v Cesar Sarkis & Anor [2006] NSWSC 151 HEARING DATE(S) : 15, 16 & 17 March 2006 JUDGMENT DATE : 24 March 2006 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Malpass at 1 DECISION : The summons is dismissed; the plaintiff is to pay the costs of the summons; the exhibits may be returned. CATCHWORDS : Feud between families - property joint ventures - challenge to decisions of Local Court - the scope of the appeal - not a de novo review of magistrate's findings and the evidence - no error in point of law - no mixed question of law and fact - leave considerations. LEGISLATION CITED : Local Courts (Civil Claims) Act 1970, s69(2) & (3) CASES CITED : Dr Jonathan Carne v United Medical Protection Limited [2005] NSWSC 556 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) & Ors (1999) 160 ALR 588 Phoenix Constructions Pty Limited (Plaintiff) PARTIES : Cesar Sarkis (First Defendant) Manzac Pty Limited (Second Defendant) FILE NUMBER(S) : SC 12925/05 COUNSEL : Mr R J Burbidge QC & Mr R W Tregenza (Plaintiff) Mr G C Lindsay QC & Mr P M Barham (Defendants) SOLICITORS : R M Legal (Plaintiff) John Ajaka (Defendants) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 6201/03; 12442/03 LOWER COURT JUDICIAL OFFICER : Lulham LCM - 15 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Associate Justice Malpass 24 March 2006 12925 of 2005 Phoenix Constructions Pty Limited v Cesar Sarkis & Anor JUDGMENT 1 His Honour: These proceedings come to this court as a challenge to a decision of the Local Court. The summons was filed on 7 July 2005. A provisional publication of the reasons of Lulham LCM took place on 15 June 2005. Judgment and orders were made on 17 June 2005 (after the parties were heard on certain matters). 2 The decision dealt with disputes between two families. One has been referred to as the Sarkis family. The other has been referred to as the Elias family. 3 The families are wealthy. They had been friends. There was a relationship by marriage. They had been engaged in business interests of a joint venture nature. There was a particularly close relationship between Cesar Sarkis and Georges Elias. A mutual relationship in the nature of father and son had existed. A bitter feud now exists. 4 The disputes that went to the Local Court involved two proceedings which were heard together. These proceedings arose out of two joint ventures. One concerned the development of a property at Bankstown (the Bankstown venture). The other concerned a property at Casula (the Casula venture). 5 On the Sarkis side, the principal players were Cesar and Michael Sarkis (who are brothers). Other members of the family (Robert, Jeanne and Theresa) were also involved in the proceedings. 6 On the Elias side, the principal players were the brothers Georges and Joseph. Georges is the younger brother and a solicitor of this court. He had acted for both families. 7 Both families had corporate vehicles which were used in ventures. Cesar Sarkis had a successful timber business which operated under the name Sarkis Timber Pty Limited (Sarkis Timber). He also had a company known as Manzac Pty Limited (Manzac) and there was a Manzac Trust. The Elias family controlled a company called Phoenix Construction Pty Limited (Phoenix). Both families had an interest in Florida Kitchens Pty Limited (Florida Kitchens). Florida Constructions Pty Limited (Florida Constructions) was an Elias family company which was formed, it is said, solely for the purposes of the Bankstown venture. 8 In 2002, the relationship between the families turned sour. Disputes arose concerning missing funds in Florida Kitchens which saw it being wound up (see, inter alia, letter dated 14 March 2003 (see Exhibit 3 pp1288-1289)). Since then, the friction has escalated. 9 There was other litigation which preceded the Local Court proceedings. In August 2003, the Sarkis family raised what has been described as the "overpayment claim" in respect of the Casula venture. Proceedings were commenced in November 2003. 10 The ventures have been brought to an end. The development approval was obtained for the Casula development in 2001, largely, as a result of the efforts of a consultant (Mr Sullivan). The Sarkis family wanted the property sold. This course was taken and the money distributed equally. The Elias family purchased the interest had by the Sarkis family in the Bankstown venture (in May 2003). 11 Generally speaking, the joint ventures had been conducted on a 50/50 basis. However, the Bankstown and Casula ventures were alleged by one side to involve other arrangements. The business dealings were informal and short on documentation. The Elias family say that the Bankstown venture was the subject of an agreement whereby Florida Constructions undertook the development for which it was entitled to be paid a fee. They say that it became entitled to be paid a sum of $40,000 by the Sarkis family for its services. The Sarkis family dispute that contention. A similar disputed arrangement was said to exist in respect of the Casula venture which required the Sarkis family only to pay a fee. 12 On 2 December 1999, Joseph Elias attended an auction. On behalf of Phoenix, he purchased the property at Casula for the sum of $690,000. Contracts were exchanged and he gave a cheque for the deposit in the sum of $69,000. 13 Communication then took place between Joseph Elias and Cesar Sarkis concerning the Casula venture. There is dispute as to that communication. Save for the consensus that the family entered into a further 50/50 joint venture, there is generally dispute as to what happened thereafter. 14 There is no dispute that on 3 December 1999, Cesar Sarkis had a visit from, inter alia, Joseph Elias at his office in the timber yard. Cesar Sarkis gave Joseph Elias a cheque in the sum of $69,000. There is dispute as to the purpose of the cheque. 15 The Elias family say that it was a term of the joint venture that the Sarkis family pay the outstanding fee (said to be owing to Florida Constructions from the Bankstown venture) and agree to a management fee of 10 per cent payable to Phoenix for the Casula venture. They contend that the $69,000 represented a payment of half the deposit ($34,500) and a part-payment towards the $40,000 management fee. 16 In opposition to that contention, the Sarkis contention is that the whole of the amount related to moneys payable for the deposit (for the reason that Phoenix could not cover the cheque given for the deposit). 17 The Elias family say that the ten per cent fee for the Casula venture was to be paid in two instalments. One was to be paid upon settlement of the purchase and the other on development approval being obtained. This is disputed by the Sarkis family. 18 On 9 February 2000, a meeting took place. Cesar Sarkis and Georges Elias were both present. There is dispute as to whether or not Joseph Elias was in attendance. What resulted from that occasion was a cheque being written in favour of Phoenix for a sum of $30,000. There is dispute both as to the purpose of the cheque and as to other matters. Georges has conceded that he wrote out the cheque. He disputes that he made the notes on the butt (the butt contained the word "loan" in running writing). It was this payment that gave rise to what has been described as the loan claim. 19 The meeting took place shortly before settlement (it occured on 16 February 2000). Cesar Sarkis says that the cheque was given as a loan and that he did not ask the reason for the need of such a loan). This is disputed by the Elias family. They say that it was part-payment of the fee owing in respect of the Casula venture. 20 The overpayment claim is founded on the contention that the Sarkis family paid more than the 50 per cent that it was required to contribute under the Bankstown venture. The amount claimed was $33,771.51. This was said to be comprised of half of the deposit (which was in fact $34,500) and certain other payments. 21 In this claim, the plaintiff was Manzac and the defendants were Phoenix and Georges Elias. During the hearing before the Magistrate, the claim made against Georges Elias was discontinued and can be put aside for present purposes. 22 It appears that the amount claimed in the process understated what should have been claimed by Manzac. The matter of this error was raised during the Local Court proceedings. No amendment was made to the process (it was not regarded as being of any significance). It can be put aside for present pursposes. 23 In the loan claim, Cesar Sarkis was the plaintiff and Phoenix was the defendant. The proceedings were brought to recover the alleged loan of $30,000. 24 By way of defence and cross-claim, the plaintiff propounded the alleged agreements to pay fees in respect of both ventures. 25 A hearing in the order of four days took place before the Magistrate. Both families were represented by senior counsel. Because of the length of the hearing that had taken place and fears that considerable future time might be taken up, the course was taken of the parties making written submissions. This was adopted by the Magistrate following a submission to do so by the parties. 26 This may have been an unwise decision. It would have been advantageous for the Magistrate to have the assistance of counsel orally supplementing the written material. Such a course may have obviated many of the complaints now made by the plaintiff (including those of denial of procedural fairness). In my view, it is not now open to the plaintiff to complain that the choice to make the submissions in writing brought about a denial of procedural fairness to it. 27 The Magistrate delivered a lengthy judgment (73 pages). Largely, the Sarkis family were successful in the Local Court. Judgment was recovered in respect of both of the claims made against Phoenix. The cross-claim was unsuccessful. An order for costs was made in favour of Georges Elias in respect of the claim that was discontinued against him. 28 The hearing of the proceedings in this court commenced on 15 March 2003. It spilled over three days. Again, the families were represented by senior counsel. 29 There was common ground between the parties as to the applicable legislation and as to what relief was available. There is an appeal as of right where there is error in point of law. Leave may be granted where there is a question of mixed law and fact. 30 A persisting problem in these proceedings has been a precise identification of the grounds of appeal. The trail starts with the grounds of appeal which form part of the originating process. There are the appellant's submissions on appeal dated 27 October 2005. 31 At the outset of the hearing in this court, following a submission made by counsel for the defendants, counsel for the plaintiff was asked to identify those grounds on which error in point of law was founded (s69(2) of the Local Courts (Civil Claims) Act 1970 (the Act)) and those grounds in respect of which leave was sought (s69(3)). He was also asked to identify the issues that these grounds threw up. 32 Counsel for the plaintiff later produced two documents. One contained the following:- s.69(2): - Misdirected himself as to approach. - Failed to determine case presented. - Failed to give adequate reasons. - Failed to do justice between the parties. - Determined matters without reference to objective evidence not in issue. s.69(3): - Permitted his views on credibility of one witness to influence his views on matters to which that witness's evidence was irrelevant. - By failing to have reference to incontrovertible facts and uncontested testimony he reached conclusions that were plainly wrong. - Reached conclusions as to credibility based on material wrongly admitted and material to which he attributed unwarranted significance. - Took into account irrelevant considerations in determining witness credibility. - Failed to take into account the circumstances in which evidence he regarded as critical was adduced. The other document was headed "Issues" and contained the following:- 1. The Florida Constructions Fee – Bankstown development – Sarkis contribution 2. The Casula Contract 3. Handwriting Issue 4. Judgment error: i. Reversal of onus ii. Inadmissible evidence iii. Reliance on material not put – inappropriate reliance. iv. Fail to deal with core submissions v. Speculation - Tax [199] Phoenix accounts [200] vi. Reliance on Mansour 33 Before proceeding further, it may be observed that what is contained in these two documents is not particularly helpful in defining the alleged errors in point of law and the alleged erroneous questions of mixed law and fact. Likewise, it is not particularly helpful in defining the issues. 34 At the end of the second day, at the request of the defendants, these documents were admitted into evidence as, respectively, Exhibits A and B. I should add that towards the conclusion of the plaintiff's submissions, issue was taken between counsel on the question of whether or not those documents imposed a constraint on the submissions that could be made on behalf of the plaintiff. 35 At the conclusion of submissions for the plaintiff, its position seemed to be that none of the documents should be regarded as being definitive and that the contents of the grounds of appeal in the summons and the written submissions together with Exhibits A and B, should be looked at for determining the nature of its case. 36 The position was further complicated by oral statements as to the position made during submissions. These statements themselves were in the nature of generalisations and were also not particularly helpful. I shall come to them in due course. 37 In the proceedings before the Magistrate, the defendant relied on two witnesses in chief (Cesar and Michael Sarkis). The plaintiff called three witnesses (Georges Elias, Joseph Elias and Leslie Sullivan). The defendants called a number of witnesses in reply (Adrian Minard, Robert Sarkis, Jeanne Sarkis, Theresa Sarkis, Mansour Yousef and Paul Denison Westwood). 38 The Magistrate was called upon to decide questions of fact. He had before him, inter alia, competing versions of conversations. Credibility and reliability were matters of significance. He was in the best position to deal with them. He had to consider those matters in the context of the other material that was placed in evidence. 39 I have earlier briefly referred to the judgment. It was divided into a number of segments, each having a heading. I shall mention certain of them. There were segments headed "Background to the dispute" and "Brief description of factual background to these proceedings". There was a segment headed "Determination of actual issues between the parties". There was a segment headed "The evidence". In this segment, the Magistrate recorded evidence given by each of the witnesses. There was a segment headed "Findings re credibility". There was a segment headed "Findings" in which the Magistrate dealt with the "Warren Avenue property" and "the purchase of the Casula property". Finally, there was a segment headed "Defendant's submissions" (being a reference to the submissions made by the plaintiff in the proceedings in the Local Court). 40 Under the heading "Findings re credibility", the Magistrate expressed his views on certain of the witnesses. 41 The Magistrate formed a strongly adverse view as to the credibility of Georges Elias. His expression of reasoning process could be described as being lengthy and detailed. Whilst he did not form any adverse view as to the credibility of Joseph Elias, he ultimately came to prefer other evidence in respect of certain matters. However, he did express his concern that Joseph Elias had been present during the giving of most of the evidence (including evidence given by his brother). Cesar Sarkis was regarded as having a much lesser understanding of English and clearly less fluent in that language. An interpreter had been used to assist him, where necessary, in the answering of questions. No adverse finding as to honesty or truthfulness was made against him. However, the Magistrate gained the impression at times that Cesar was confused and he did not accept certain of his evidence. The Magistrate concluded that, at the very least, Cesar Sarkis was either a poor historian or did not have a good recollection of certain events. The Magistrate did not regard Michael Sarkis as a good witness. Whilst there were findings made as to faulty recollection, the Magistrate did not get the impression that Michael Sarkis had attempted to deliberately mislead the court. He was impressed with the evidence of Mr Westwood (a handwriting expert). 42 Whilst the findings made as to credibility have significance, they were not crucial in the making of the determinative findings in the case. In reaching those findings, the Magistrate expressed that he had paid particular attention to objective evidence, which he considered overwhelmingly supported the evidence of Cesar Sarkis. 43 At later stages in the judgment, the Magistrate came to express further credibility views. He was impressed with the evidence of Mansour Yousef (he had been an accountant involved in the preparation of accounts for Florida Constructions and did work for the Sarkis family). 44 The Magistrate was satisfied on the balance of probabilities that the cheque drawn on 9 February 2000 for $30,000 was a loan. He found that he was not satisfied on the balance of probabilities that there was an agreement between the Sarkis and Elias interests for a fee of $80,000 to be paid jointly to Florida Constructions. 45 The Magistrate was satisfied that the payment of $69,000 by Cesar Sarkis was in payment of the deposit and that Manzac was entitled to a refund in the amount claimed in the statement of claim ($33,771.51). 46 At this stage, I refer to the matter of the presentation of the plaintiff's case before this court. It proved to be a long exercise. It has been described by counsel for the defendants as a "de novo review". There was a detailed analysis of the judgment of the Magistrate. There was a detailed analysis of the evidence. The aim seemed to be to demonstrate that numerous errors had been made by the Magistrate and that the wrong result was reached. The exercise ranged far and wide. During it, what was listed in Exhibits A and B was not fleshed out in identifiable form (as either error in point of law or error in respect of a question of mixed law and fact). 47 The defendants complain that the plaintiff's case has proved to be a moving target which was no more than an attempt to dress up error of fact as a question involving law. It was further said that no real attempt was made to identify any error in point of law or any error that involved a question of mixed law and fact and that it was difficult to appreciate the nature of the case they were called upon to meet. In my view, there is force in those contentions. 48 At an earlier stage in the proceedings, counsel for the plaintiff had summarised his client's case as being very much what was described as being another Earthline case (State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) & Ors (1999) 160 ALR 588). Towards the end of the hearing on the second day, the court was presented with what might be regarded as a different general summation, which was accepted as being in the nature of a conclusion drawn from what had been earlier put in the submissions. It was then said that although the plaintiff had received a trial, it had not received a trial according to law. It was further said that the trial had seen too many departures from what the Magistrate was obliged to do and that he had failed to deal with the case as presented by the plaintiff. Towards the end of the submissions, matters of alleged procedural unfairness seemed to acquire some prominence. 49 Before proceeding further, I should mention that in the proceedings before the Local Court, the plaintiff did raise issues concerning the correctness of the parties named in the proceedings. The Magistrate put these issues aside and dealt with the cases as disputes between the two families. The court has been told that these issues will no longer be pursued. 50 It may well be that many errors have been made by the Magistrate. It may well be that his observations can be the subject of much valid criticism. There is no need to express any final view on these matters. What is abundantly clear is that the presentation has failed to demonstrate a basis that would justify this court in disturbing the decisions of the Local Court. In my view, this was why the questions of law were never identified and the erroneous de novo review approach was adopted. 51 I consider that this is not a case in which it would be either necessary or realistic to confront the task of addressing each and every one of the avalanche of arguments presented on behalf of the plaintiff. Both parties have prepared lengthy and detailed submissions. They deal with much of the detail. What has been put, can be disposed of in general terms. However, for the further assistance of the parties, I will make brief observations as to certain matters which were either listed in Exhibits A and B or otherwise raised. 52 One specific matter that was mentioned in the documents was the matter of reversal of onus. As I understand certain of the submissions, they related to findings made in relation to the agreements alleged by the plaintiff and which form part of the defence and cross-claim relied on in the Local Court. It seems to me that the Magistrate was doing little more than observing that the plaintiff had failed to make out those matters of defence and cross-claim. These were matters on which it bore the onus. 53 It was argued that there had been a failure to sufficiently disclose reasoning process in relation to a number of matters. It needs to be borne in mind that what will suffice as a disclosure of reasoning process will vary from case to case. In my view, what appears in the judgment suffices in this case to disclose the Magistrate's reasoning process. Indeed, if complaint were to be made, it seems to me that it could be said that he embarked on a process of too-extensive detail. 54 This was a case in which the Magistrate had before him a significant volume of evidence. In my view, it is not a case in which it could be said that any determinative finding was made without supporting evidence. 55 Complaint is made that the Magistrate failed to deal with the case as put on behalf of the plaintiff and/or call for submissions. In my view, that complaint has not been made out. 56 It needs also to be borne in mind that a court is not required to expressly address all of the submissions that are made on behalf of a party. 57 In this case, the Magistrate expressly observed that he had considered carefully all of the written submissions that had been made by counsel on its behalf and that he had taken them all into account. I see no reason to not accept those observations. 58 The Magistrate was confronted by a plethora of issues. In my view, he addressed all of the issues that were determinative of both proceedings. 59 Perhaps, I should also expressly mention that I am not satisfied that this is one of those cases where a finding of credit can be set aside where, in the light of other evidence, the Magistrate had too fragile a base to support his conclusions (State Rail Authority of New South Wales v Earthline). 60 There is dispute between the parties as to whether such authority has application where relief is sought pursuant to s69 of the Act. The question was not fully argued and does not need to be determined in these proceedings. It suffices to say that I am not satisfied that it is one of those cases. 61 As has been earlier said, there was an attempt to belatedly revive denial of procedural fairness as a ground of challenge. This ground did not appear in either Exhibits A and B or in the earlier written submissions. 62 Generally speaking, the matters which were said in the summons to have that character were of the nature that might be seen as falling within different areas of challenge. To the extent that they were traversed in submissions they were dealt with as part of the attempted review. As such, it is not necessary to give them special consideration. 63 For the purposes of clarity, I shall observe that I am not satisfied that there was any procedural unfairness that justified the disturbing of the decision. 64 A new submission was also made by the plaintiff. It was acknowledged that it was not put to the Magistrate. It was not a matter of any substance and I do not consider that the plaintiff should now be allowed to agitate it in these proceedings. 65 As earlier mention, whether it was raised in Exhibits A and B or otherwise during argument, I am not satisfied that the plaintiff has demonstrated any matter which should lead this court to the disturbing of the decisions that were made. The onus that it bears in such respects has not been discharged. 66 Whilst I am not satisfied that there has been any error involving a question of mixed law and fact, I should add that any such question would only assist the plaintiff if there was also a grant of leave. The matter of leave has been considered in a number of cases (Dr Jonathan Carne v United Medical Protection Limited [2005] NSWSC 556). 67 Whatever error there may have been, I do not consider that this is a case in which what has been described as manifest error in respect of determinative findings has been demonstrated. Whilst the amounts in dispute may be significant to certain parties, they are not of such magnitude as to see a ready grant of leave. Not only is there no question of law involved, there is no other matter which could suggest that the public interest is best served by the granting of leave. Indeed, it seems to me that it would be against the public interest if the courts of this State were required to devote further time to these disputes. 68 In my view, these considerations of themselves would suffice to defeat any application for leave in this case. But, leaving them aside, there is one other consideration which seems to me of importance in this case. 69 What is now before this court has been the subject of four days litigation in the Local Court, with the Local Court thereafter being required to consider very lengthy and detailed written submissions (together with the further subsequent appearances before it). It has now taken up three valuable days of hearing time in this court. If leave were to be granted, there would have to be a retrial. A retrial would lead to a further lengthy hearing in the Local Court. 70 The quantum of the amounts involved is not the paramount reason for the present contest between the families. The court has been told that attempts at commercial resolution have been fully and unsuccessfully explored. It seems that the families are not interested in such a resolution. These proceedings are a continuation of their feud. The litigation so far and any continuance of it could be regarded as a self-indulgence for these parties. I take the view that in considering a question of leave in this particular case, weight should be given to these additional considerations. 71 The plaintiff's claim for relief fails. The summons is dismissed. The plaintiff is to pay the costs of the proceedings. The exhibits may be returned. ********** 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.