SAS Realty Developments Pty Ltd v Quentin Kerr; Quentin Kerr v SAS Realty Developments Pty Ltd and Sean Shen [2012] NSWDC 110

District Court New South Wales

Medium Neutral Citation: SAS Realty Developments Pty Ltd v Quentin Kerr; Quentin Kerr v SAS Realty Developments Pty Ltd and Sean Shen [2012] NSWDC 110 Decision date: 04 May 2012 Before: MURRELL SC DCJ Decision: SAS cross claim: Verdict for the cross defendant. Mr Kerr's cross claim: Verdict for the cross claimant. Catchwords: Joint venture agreement Estoppel Conversion Unjust enrichment Breach of contract Non est factum Damages Misrepresentation Legislation Cited: Trade Practices Act 1974 s 52 Cases Cited: Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 Petelin v Cullen [1975] HCA 24 Ford by hist tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Allianz Australia Insurance Limited v Lo-Guidice [2012] NSWSC 145 Parsons v The Queen [1999] HCA 1 Category: Principal judgment Parties: SAS Realty Developments Pty Ltd Quentin Kerr Sean Shen Representation: Mr R de Meyrick (Second cross claimant) Wisdom Lawyers (Second cross claimant) Link Lawyers (Cross defendant) File Number(s): 2010/386136

Judgment

Background Facts 1Mr Sean Shen and his property development company, SAS Realty Developments Pty Ltd (SAS), are in dispute with Mr Quentin Kerr concerning a 2010 joint venture property development that did not proceed. The central issues relate to a sum of $400,000 that Mr Kerr paid to Mr Shen, a sum of $145,845 that Mr Kerr withdrew from the SAS account, and whether Mr Kerr breached the joint venture agreement by failing to pay a sum of $1M. 2SAS owned a development site in Parramatta. It had development approval to construct a residential/commercial development on the property. SAS was negotiating with Nazero Constructions Proprietary Ltd (the builder) for the construction of the development. The property was subject to a mortgage of $1M to the National Australia Bank. SAS was seeking bank finance of about $6.5M for the development, to be secured by a registered first mortgage. 3SAS needed an investor to pay out the existing $1M loan and to meet any shortfall in development finance. Mr Gao knew both Mr Shen and Mr Kerr. In June 2010, he introduced the two men. Thereafter, he acted as an intermediary. Mr Shen gave Mr Kerr a copy of a "project feasibility" document (Court book, tab 6, p 107 - p 108). 4On 25 June 2010, SAS and Mr Kerr signed a joint venture agreement (the JVA), which Mr Shen had adapted from a standard form document. Mr Kerr paid $50,000 and committed to paying further sums of $350,000 and $1M. Under the JVA, SAS would derive its profit by retaining/selling nine commercial lots and one parking space (the retained lots). Mr Kerr's profit would be the difference between the development cost and the sum achieved by selling the remaining lots. 5On 30 June 2010, Westpac Bank furnished SAS with an "expression of interest" in providing development finance of $6.22M (tab 8, p 45). 6On 21 July, there was a meeting at a restaurant, which was attended by the builder, Mr Shen, Mr Kerr, Mr Yu (who was to be the project manager), Mr Gao and Mr Leamey (the solicitor for SAS). SAS and the builder signed the building contract (tab 6, p 24), pursuant to which the development was to be constructed for a fixed price of $5.4M plus GST (p 28). The work was to be undertaken in two stages. Stage 1 comprised the piling and the ground floor slab. The cost of Stage 1 was capped at $300,000 plus GST. The contract required that SAS deposit $200,000 into its account in relation to Stage 1 (special condition 13). At the meeting on 21 July, the builder noted that $300,000 (or possibly $200,000) should be deposited into the SAS account before Stage 1 work commenced. Stage 2 was to commence after bank finance was obtained. 7In July 2010, Mr Kerr provided Mr Shen with a cheque for $350,000 made out to "Sean Shen" (tab 10, p1). Mr Kerr and Mr Shen executed a document dated 21 July 2010 (tab 6, p 109; the July document). Mr Shen asserted that, on about 21 July 2010, Mr Kerr requested a shareholding in SAS, he agreed that Mr Kerr could purchase 600 shares in SAS (a 37.5% shareholding) for $400,000, and he arranged for Mr Kerr to be appointed a director of SAS. On about 9 August, Mr Kerr was issued with 600 shares in SAS (tab 9, p 8 and p 10). 8The sum of $400,000 paid by Mr Kerr ($50,000 plus $350,000) was applied to Mr Shen's personal purposes rather than to the joint venture. 9On 11 August, there was a meeting at the Westpac Bank. An email dated 12 August from Minnie Yao (Mr Kerr's wife) to Mr Shen, stated: "the bank made it clear we have to prepare $1,000,000 to settle or it won't release the money to us ... $400,000 by SAS share (done)" 10In about August 2010, Stage 1 construction work commenced. Mr Kerr became concerned about the security of the sum of $400,000 and other sums that he had paid into the SAS account. Despite Mr Shen's objection, on 19 August 2010 Mr Kerr withdrew $145,854 from the SAS account. From about 18 August 2010, Mr Kerr asked Mr Shen to stop construction until funding issues were resolved (tab 8, p 56). On 23 August, Minnie Yao, wrote to the lawyers for SAS requesting that construction be halted due to the "funding problem" (tab 8, p 56). 11In September 2010, the builder stopped work (tab 11, p 85). Stage 1 was about 90% complete. The builder had received its first progress payment of approximately $130,000. Later, the builder sued SAS and recovered a judgment of approximately $117,000 plus costs in relation to its second progress claim. At a meeting on 2 November 2010, SAS purported to terminate the joint venture (tab 10, p12).