- Unreported Judgment
Gekko Developments Pty Ltd v Centa Company Pty Ltd (No 3)  QSC 87
GEKKO DEVELOPMENTS PTY LTDACN 139 260 674
CENTA COMPANY PTY LTD
SC No 7936 of 2012
Supreme Court at Brisbane
16 April 2015
2 February 2015; 3 February 2015; 4 February 2015; 5 February 2015
Philip McMurdo J
Judgment for the defendant.
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – where parties dispute the content and existence of a legal relationship allegedly arising from dealings between the parties – where the defendant had previously granted the plaintiff an option to purchase property belonging to the defendant – where the plaintiff claimed the parties agreed, in consideration of the plaintiff giving up its claim to a contractual entitlement to the property, that the defendant would pay to the plaintiff $3 million – whether the defendant made an agreement to make a conditional or unconditional payment to the plaintiff – where the defendant denies any conversation to that effect and existence of any contract
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSIDERATION – WHAT AMOUNTS TO CONSIDERATION – whether there was an agreement that the defendant would pay the plaintiff $3 million in consideration for giving up its contractual entitlement to the defendant’s property – where the plaintiff’s case was that there would have been consideration by a forbearance to sue – unnecessary to consider whether there was good consideration – it would be sufficient consideration for the agreement upon which it sues if the plaintiff gave up what it genuinely believed to be a legal entitlement – not clear that the plaintiff genuinely believed it had a legal entitlement to the property
EVIDENCE – WITNESSES – where the credibility of witnesses was questionable – where the conclusion resulted not from a favourable impression of the defendant’s witnesses, but from an assessment of the relative probabilities of the respective cases from uncontroversial facts
Corporations Act 2001 (Cth), s 127(3)Duties Act 2001 (Qld), s 11
Alford v Ebbage  1 Qd R 343, cited Butler v Fairclough (1917) 23 CLR 78, citedMiles v New Zealand Alford Estate Company (1886) 32 Ch D 266, cited
A J Morris QC, with V Brennan for the plaintiff
G A Thompson QC with M Trim for the defendant
ClarkeKann Lawyers for the plaintiff
McCullough Robertson Lawyers for the defendant
 In the centre of Brisbane there is a shopping centre called Broadway on the Mall. At all relevant times it was owned by the defendant, a company controlled by Mr Henry Yuen. In 2009, the defendant was looking to sell it and to that end the defendant signed documents in the form of an option to purchase granted to the plaintiff, a company controlled by Mr Darren Brown.
 From October 2009 until late May 2010, there were dealings between the parties to the end of the property being sold. As I will discuss, the content and even the existence of a legal relationship between the parties, at least from March 2010, is controversial. The plaintiff maintains that its option to purchase was still exercisable, or at least that the plaintiff so believed, when Mr Brown and Mr Yuen, in the foyer of a hotel in Amman, had a conversation which is the basis for the plaintiff’s case. The plaintiff claims that the parties then agreed, in consideration of the plaintiff giving up its claim to a contractual entitlement to the property, that the defendant would pay to the plaintiff $3 million. The defendant denies that there was a conversation to that effect and that any contract was then made.
 The plaintiff’s claim is for payment of that sum of $3 million. There is no alternative claim, such as for damages for breach of the option agreement. The plaintiff does not seek to establish that it had an enforceable option at the time of the oral agreement upon which it sues. It is unnecessary for the plaintiff to prove that there was such a pre-existing contractual entitlement. It would be a sufficient consideration for the agreement upon which it sues if the plaintiff gave up what it genuinely believed to be a legal entitlement.
The option to purchase
 Curiously, the parties signed two forms of agreement under which the defendant granted to the plaintiff an option to purchase. One provided for a purchase price of $85 million. The other was in the same terms but for a price of $150 million. And the parties subsequently managed to sign a document which provided for both prices.
 Each party says that the mutual intention was to confer a call option for a price of $150 million. But each says that it was the other’s idea to have another document which falsely recorded the lower price. Mr Brown’s evidence was that Mr Yuen proposed that the price of $150 million would be paid as to one half in Australia and as to the other half in Singapore, because Mr Yuen wanted to evade a large liability for capital gains tax. He said that Mr Yuen explained that he would be instructing lawyers in Singapore to record that the half to be paid there would be for “intellectual property” and that it would be necessary for Mr Brown to incorporate a company in Singapore to facilitate that part of the transaction. About a week later, Mr Brown said in evidence, Mr Yuen said that he had taken some taxation advice from his son, in consequence of which he wanted $85 million of the price to be paid in Australia and $65 million to be paid in Singapore.
 When asked, in examination in chief, whether Mr Brown intended to avoid paying stamp duty on the full consideration of $150 million, Mr Brown said:
“No, I didn’t because the advice I had from Nicholsons Lawyers was that the value of the property was $60 million. I would be paying stamp duty eventually on $85 million so I was paying well and above what the … value of that property was for stamp duty.”
It is unlikely that Mr Brown received that advice because it would have been so clearly incorrect. Duty would have been payable on the true consideration, regardless of any view about the value of the property. (Duty is payable according to the “dutiable value” of a dutiable transaction, but that is defined by s 11(1) of the Duties Act 2001 (Qld) as the amount payable for the transaction.)
 Mr Yuen said that it was Mr Brown’s idea to have the two forms of option agreement. When he was asked, in evidence in chief, to explain why there were two different prices, Mr Yuen answered:
“I suppose tax wise.”
He said that Mr Brown explained there was a “tax purpose” for which Mr Brown was requesting documents recording these different prices. The implication here is that Mr Brown was looking to avoid stamp duty.
 Exhibit 3 is the original of a document entitled “Call Option Deed” dated 1 October 2009. Some of the pages bear the names of Nicholsons Solicitors, who then acted for the plaintiff. Some other pages bear the name of McCullough Robertson, who at one stage advised the defendant in respect of this transaction. On no view of the evidence could the two firms have been involved together in an exercise of drafting this document. Rather, the document seems to be the result of the compilation of some of the distinct drafting work of the two firms.
 The deed provided for the grant of an option to purchase which could be exercised after the satisfaction of certain conditions and no later than 12 months from the date of the deed. The conditions were that the grantee (the plaintiff) should obtain a development approval for the property no later than 11 months from the date of the deed and was to notify the grantor of that event. The relevant approval was defined to mean:
“[A]n approval for subdivision of the Land and/or material change of use of the Land substantially in accordance with the Development Proposal, issued by the Local Government on terms as determined by the Grantee”.
The “Development Proposal” was defined to mean “the Grantee’s proposed development of the Property including the reconfiguration of the Property to create a high quality mixed use development which complies with the Local Government’s planning scheme including the City Centre Local Plan”.
 Clause 4.4 of the deed provided that if a development approval was not obtained by the grantee within that period of 11 months and the grantee did not waive the benefit of that provision within that time, “either party may terminate this Agreement”. Just why the grantee would have wished to terminate the agreement, under which it could elect but was not bound to purchase the property, is not apparent.
 Clause 2.1 provided that the agreement was also subject to the grantee’s being satisfied with the results of its “Due Diligence”, failing which the grantee might terminate the agreement no later than the Due Diligence Date, which was defined to mean 90 days from the date of the deed.
 By cl 13.1, the grantee was to cause the so-called Security Deposit, specified as an amount of $2 million, to be paid to the grantor upon the satisfaction or waiver of the Due Diligence condition. The Security Deposit was to be credited towards the contract price if the option was exercised but was not to be refunded if it was not.
 The grantee was to pay a so-called “Call Option Fee” to the grantor upon the signing of the option agreement. The amount of this fee was $10.00.
 This document provided for a contract price of $150 million. It did so by specifying that amount as the price in Item 6 of Schedule 1 of the deed, although again curiously, this page, which was inserted between pages “13 of 20” and “15 of 20”, was numbered “2 of 20”.
 A further Call Option Deed, dated 1 February 2010, was tendered as exhibit 5. Again, it appears to be a compilation of the work of Nicholsons and McCullough Robertson. It appears that it was originally dated 1 October 2009 and was re-dated. It is common ground that the parties did sign an amended Call Option Deed on or about 1 February 2010.
 In this 2010 deed, the Due Diligence Date was amended to 30 days from the date of the agreement, so that it was effectively postponed to 3 March 2010. The price stipulated in Item 6 of Schedule 1 was $85 million. In this document, the page containing Schedule 1 was again between pages 13 and 15 of 20, but this time the page was numbered “14 of 20”. However, the document also contained a draft form of contract for the sale of land, in REIQ form for commercial land and buildings, which showed the price as $150 million.
 Mr Brown’s evidence is that prior to anything being signed he and Mr Yuen met with lawyers from McCullough Robertson for the purposes of drafting an option agreement. He said that during this meeting he became concerned that Mr Yuen was telling his lawyers that the contract price was to be $85 million and saying nothing to them about a price of $150 million and that after the meeting, he told Mr Yuen that McCullough Robertson should have been told the truth. Subsequently, Mr Brown recalled, Mr Yuen told him he had received an invoice from McCullough Robertson which Mr Yuen regarded as an excessive fee and that for this reason, as well as the fact that Mr Yuen considered McCullough Robertson to be “too straight”, Mr Yuen had decided not to retain them further in the transaction. Consequently, Mr Brown said, the parties went to his lawyers (Nicholsons) to finalise the documents.
 Mr Yuen’s version is different. He says that he had first signed documents at Nicholsons which they had prepared, after which the parties went to McCullough Robertson where they signed amended documents. (This occurred in late 2009 and was not a reference to the amended document signed in February 2010.)
 McCullough Robertson are the defendant’s lawyers in this proceeding. When queried whether they should act having been involved in relevant events, they advised that they had done no work in the (then proposed) transaction after early September 2009. It thereby appears they were not involved by the time documents were signed and dated 1 October 2009. As I have said, some of the work of McCullough Robertson was used in the compilations which were then signed. But I infer that this was because Mr Yuen wanted to make some use of their work.
 Mr Brown gave evidence of the occasion on which he signed the documents of October 2009. His evidence was that he signed them at the office of Mr Deriard, a real estate agent at the Gold Coast, in Mr Deriard’s presence. That was disputed by Mr Yuen who, as I have noted, said that the documents were signed at the offices of Nicholsons. It was also disputed in the evidence of Mr Deriard. That factual issue seemed to receive particular attention in the evidence because of a perceived importance of the evidence of Mr Brown, which was disputed by Mr Deriard, that Mr Brown handed two $10.00 notes to Mr Deriard on the occasion of signing the two versions of the option agreements, as the Call Option Fee for each. Mr Deriard was not named in the option agreements. Mr Brown claimed that Mr Deriard was acting as the defendant’s real estate agent in this transaction, but that was denied by Mr Deriard and Mr Yuen. And in the February 2010 document, the proposed contract of sale refers to no vendor’s agent.
 Should it matter, I am not persuaded that Mr Brown did make those payments. If Mr Deriard was not acting as the actual or apparent real estate agent for the defendant, there was no reason for him to be given these payments. Mr Deriard had had dealings with Mr Yuen for other real estate transactions. But I accept, as Mr Deriard said in evidence, that he was to be remunerated (if at all) by Mr Brown’s side of the transaction. Mr Deriard’s evidence that he was to be remunerated by Mr Brown’s interest is supported by the fact, as Mr Brown conceded, that Mr Deriard promptly became a director, with Mr Brown, of a company which Mr Brown caused to be incorporated in Singapore for this transaction. There was evidence in the plaintiff’s case from Mr Max Pride that he was present on the occasion on which Mr Brown claims that he signed the option agreements and handed the two $10.00 notes to Mr Deriard. I am not persuaded to act on his evidence. Mr Pride is not an independent witness, in that he admitted that he has a financial interest in the outcome of this case. He also agreed that there was an inconsistency between his evidence and an affidavit sworn as to the same occasion.
 In any event, the amended option deed was signed on or about 1 February 2010 with apparently no objection from Mr Yuen that a Call Option Fee of $10.00 had not been paid. Subsequently, Mr Yuen says that he terminated the option agreement because the security deposit of $2 million was not paid. But the defendant did not purport to terminate the agreement for a failure to pay the fee of $10.00. Ultimately, this question of the $10.00 payment or payments is relevant to an issue only if it affects the probability that the plaintiff, through Mr Brown, had a genuine belief in the existence of the option agreement at the time of the critical conversation in late May 2010. Because of the absence of any apparent protest by the defendant that this fee had not been paid, its non-payment is unlikely to have affected Mr Brown’s understanding of his legal position.
 The defendant suggests that absent the payment of this fee, there was no consideration for the grant of the option. But the option agreement was expressed to be a deed and was apparently executed by the company according to s 127(3) of the Corporations Act 2001 (Cth). Further, the promise to pay the Call Option Fee would itself constitute good consideration for the grant of the option. Again, this question is relevant only if it affects the probability of a perception that, as in May 2010, there was an existing agreement.
Mr Brown’s circumstances
 Mr Brown had no experience in property development, at least for a project of this scale. Nor did he have any capital to fund the acquisition and redevelopment of this property or even the pursuit of a development approval. The defendant had engaged an architect in respect of a proposed redevelopment, Mr Challen, with whom Mr Brown had discussions and meetings and with whom Mr Brown travelled to the Middle East. Mr Brown needed to find an investor or investors to fund the acquisition and development of the land. The most immediate need was to find an investor who would contribute the security deposit of $2 million within 90 days.
 Mr Brown met Mr Deriard through an architect named Warwick Lindsay, with whom Mr Brown had had some previous association. Mr Brown was introduced to Mr Yuen by Mr Deriard.
 According to none of the evidence was there any process of negotiation between the parties, most particularly as to price, which would be expected for a commercial transaction of this scale. And there is no indication that Mr Brown had any advice as to whether $85 million, let alone $150 million, would be a good price. These factors, together with Mr Brown having no capital or relevant development experience or expertise, suggest that Mr Brown was not intending to be the ultimate developer and owner of this property, either by his own company or in a joint venture.
 There was a handful of Australian investors who provided some funds to Mr Brown which he used to travel to the Middle East to look for a purchaser or joint venturer. But there was no prospect of that group (which I will call the Australian investors) funding the plaintiff or any other company of Mr Brown as the developer of this property.
 Mr Brown’s present occupation is that he conducts what he describes is a “property facilitation company” which works “with first home owners to secure a property for them and … also … finance for them”. He began his working life with a bank and obtained an “accounting degree” after which he worked for “a private firm as a CFO” before going into real estate. He worked in the real estate industry for 10 to 15 years in New South Wales, but not as a developer. He was involved in management of strata title properties. Subsequently, he went to work in Qatar in a large strata title development, where he worked on “the strata law” for that project. He was there for about two years during which he said he made several contacts in the Middle East, especially at certain banks. I infer that he promoted himself to Mr Yuen on the basis of that experience and that this encouraged Mr Yuen to transact with him as he did. Unsurprisingly then, not long after the option agreements were signed in October 2009, Mr Brown travelled to the Middle East to look for potential buyers.
Mr Brown in the Middle East
 In mid-October 2009, Mr Brown, together with Mr Deriard and Mr Challen travelled to Bahrain via Singapore. Mr Brown and Mr Deriard went to Singapore to have a lawyer there “set up a company in Singapore to act as nominee”. Mr Challen was in Bahrain for about a week but Mr Brown and Mr Deriard stayed for about seven weeks.
 Through a contact of Mr Brown, they met Mr Ahmed Salem. According to Mr Brown, Mr Salem’s professional expertise was in capital raising and he and Mr Brown asked Mr Salem “to raise capital for the project”. On that trip to the Middle East, Mr Brown and Mr Deriard had discussions with a number of other potential investors in Bahrain, Kuwait and Lebanon, according to Mr Brown.
 By the end of October 2009, an agreement had been made with Mr Salem’s company, Worldlinks Advisors, under which, for a fee of US$20,000 per month, that company was to assist in the introduction of potential investors in what this agreement referred to as “the QBI (Australian) Estate Opportunities Fund”. But as time passed, the monthly fee was never paid because the plaintiff was without sufficient money from the handful of its own Australian investors to do so. Mr Brown claims that he “renegotiated” the agreement with Mr Salem’s company. Whether or not that is strictly correct, Mr Salem remained involved in Mr Brown’s attempts to find investors at all relevant times.
 Yet Mr Brown was reporting to his Australian investors, which included Max Pride, that large amounts of money were being raised. In an email to them of 7 November 2009, Mr Brown wrote that “we have a commitment from the Khalleji Bank for 100 Million”. As Mr Brown conceded in cross-examination, that statement was false. In the same email, Mr Brown wrote that “we have a commitment from The Bahrain Commercial Investment Bank to underwrite the project, and to put there [sic] name to the project which will give us credibility in the Market …”. Mr Brown said in cross-examination that this was correct because “we had a verbal commitment from [Mr Salem] that this was going to happen”. He also wrote in that email that “I have a meeting with the chairman [of that bank] this week”. Mr Brown’s evidence was that he subsequently met with the chairman although unproductively, but this was not reported to Mr Brown’s group of local investors. This email was sent from Singapore, to which Mr Brown had briefly returned from Bahrain before going back to Bahrain in mid-November 2009. On 17 November 2009, Mr Brown emailed Mr Challen that he was “meeting with the bank in Bahrain to set up the fund” and that “as you [know] the bank will be underwriting the deal …”. Nothing of that kind occurred, although Mr Brown said in cross-examination that at the time he thought that his statement was true.
 On 24 November 2009, Mr Brown emailed Mr Challen, saying that Mr Salem had “been in Saudi this week and we expect some good news hang in there we are very close …”. Mr Brown said in evidence that this was his genuine belief upon the basis of what Mr Salem was then saying. On the same day, Mr Brown emailed his group of investors to provide a purported report on his progress. The email referred to the likelihood of “money through a private family in Kuwait” as well as through another broker to be appointed in Lebanon.
 On 28 November 2009, from Bahrain Mr Brown emailed his Australian investors saying that “[w]e have had a very successful week raising funds”. In cross-examination, Mr Brown conceded that in truth, he had raised no funds. But he explained that “a successful week was talking to potential investors to raise funds”. He also wrote in that email that “all is still going well with the raising of the first trench [sic]”, although in evidence he could not identify any investor who was involved.
 On 3 December 2009, Mr Brown again emailed his investors saying, amongst other things, that he had met certain merchant bankers in Lebanon with whom he and Mr Deriard had been “going over the project” and who would be “representing us on the next stage of fundraising”. Mr Brown admitted in cross-examination that these merchant bankers were not engaged by him.
 On 8 December 2009, Mr Brown emailed from Singapore to his investors, saying that his trip had been “a huge success” and that “we have established a number of Investors who will be involved in the project” as well as appointing “3 different brokers to work on our behalf to raise the capital needed [sic] to proceed”. Mr Brown said in cross-examination that he believed that this was all true, based upon what he says he had been told by Mr Salem, although he did not know who these investors were and on what terms they might be involved.
 Shortly afterwards, Mr Brown and Mr Deriard were back in Australia and resuming their discussions with Mr Yuen. Mr Brown was conscious of the approaching deadline for the payment of the Security Deposit of $2 million, which was to be paid 90 days from 1 October. It was to this that Mr Brown referred in his email to some of his investors, Mr Challen and Mr Deriard where he wrote “Maurice and I met with Henry [Yuen] last week and I am happy to say we have secured more time on the option …”. Clearly Mr Brown was not expecting to have the $2 million which was required to be paid at the end of that month.
 In a purported report to his investors of 15 January 2010, Mr Brown said that Mr Yuen had discussed the option (to purchase) and that Mr Yuen was “fine to wait a few more weeks till [sic] all is finalised with the first trench [sic]”.
The amended option agreement
 The parties amended parts of an earlier option agreement document or documents and redated the compilation at 1 February 2010, extending the duration of the Due Diligence period and the date for payment of the Security Deposit to 30 days from then. No money had been raised then from any overseas investor. At least at this stage Mr Brown could not have believed that the plaintiff had an indefinite amount of time in which to pay the Security Deposit.
 Mr Brown then sought to raise $100,000 from the Australian investors, apparently to fund his further trips to the Middle East. Some funds were raised, although not of the order of $100,000. Mr Brown continued to provide them with frequent and misleading reports on his progress. On 2 February 2010, he reported that “the brokers in Bahrain … have secured an investor for the first $6 million [and that] they have secured at least another $50 million”. In fact, no such investor had been “secured”. Mr Brown said in evidence that he was then relying upon information provided by Mr Salem.
Mr Brown in the Middle East again
 By mid-February, Mr Brown and Mr Deriard had returned to Bahrain, where they found that there was so little interest from investors that they had little to do. Mr Deriard said so in an email to Mr Salem (copied to Mr Brown) on 23 February, expressing frustration at the lack of progress. Mr Deriard’s email concluded with the statement that “the reality is that we have 7 days”, an evident reference to the deadline for the payment of the Security Deposit.
 But Mr Salem did introduce a potential investor which was an entity called Crown Dilmun. Mr Brown and Mr Deriard had discussions with representatives at Crown Dilmun and in particular a Mr Roger Clay, who gave evidence in the plaintiff’s case.
 Mr Clay is an engineer by profession and was working for Crown Dilmun as its director of projects. It was one of a number of companies within a group based in Bahrain and its business was real estate development. He recalled that he and others from Crown Dilmun met Mr Brown and Mr Deriard, who was described as “director of marketing and sales”. It appears that the meeting was arranged upon the basis that Mr Brown wanted to procure materials from Crown Dilmun for a project in Australia, but that “the conversation shifted to the project itself rather than procuring materials for it” and there were discussions about Crown Dilmun “developing the project with Gekko”. Crown Dilmun was given “some very broad brush figures” about the likely construction cost and profit from the project and “the cost of dealing with the option” which was a figure of $2 million.
 There were further discussions in April before a memorandum of understanding was signed upon about 1 May 2010. The parties to this document were Crown Dilmun and not the plaintiff but “Gekko Developments (Singapore) Pte Ltd”, on behalf of which the document was signed by Mr Brown and Mr Deriard. It recited that the parties had a common goal to join as a new company in the Kingdom of Bahrain, in order to develop real estate projects in Australia, the first of which was to be the development of the subject property. It recited that this company (not the plaintiff) had a call option under a deed, dated 1 February 2010, with “an option contract payment fee of AUD2,000,000”. The proposed company was to be 70 per cent owned by Crown Dilmun and 30 per cent by Gekko Singapore. Subject to due diligence, Crown Dilmun was to use its best endeavours to provide AUD10 million to the new company “as a loan to be utilised for the option contract payment fee on the land and to provide working capital”. Crown Dilmun was also to use its best endeavours to arrange project finance up to AUD 300 million or such sum as was necessary to complete the project once the final design and costings were complete.
 At about the same time, Mr Brown and Mr Deriard were introduced to another potential investor, Mr Al Jibouri. Mr Brown, Mr Deriard and Mr Salem travelled to Amman where they had several meetings with him in the first few days of May 2010. According to Mr Brown, in the fourth of these meetings, Mr Al Jibouri expressed a preparedness to invest in a joint venture with the plaintiff to develop the property on terms which included a payment by Mr Al Jibouri’s interest to the plaintiff of $175 million. But Mr Brown does not contend that this was a concluded contract made with Mr Al Jibouri.
Mr Yuen in the Middle East
 By this stage, Mr Brown believed that he had made considerable progress. He had found two investors, each of whom had expressed a considered interest in this property. But rather than progress his negotiations with either of them to the point of a concluded agreement, what Mr Brown did next was to ask Mr Yuen to come to the Middle East to meet them. Mr Yuen did so, arriving in Bahrain on 23 May 2010.
 Mr Brown arranged a meeting between Mr Yuen and the representatives of Crown Dilmun in Bahrain. At that stage, Crown Dilmun had not completed its due diligence assessment of the project but remained interested in it, according to Mr Clay. Mr Brown and Mr Deriard were at this meeting as was Mr Ebrahim Abdulaal-Alfahad, who was the chairman of the group of which Crown Dilmun was a member.
 There are marked differences in the respective recollections of this meeting. According to Mr Yuen, at one stage Mr Brown and Mr Ebrahim left the meeting for about 20 minutes before they returned and Mr Ebrahim said that the property was too expensive and that Crown Dilmun would not be proceeding further with the proposal. Mr Deriard’s version is much the same: he said that Mr Brown and Mr Ebrahim left the meeting and returned shortly afterwards when it was Mr Brown rather than Mr Ebrahim who said “it was finished”.
 But both Mr Brown and Mr Clay said that there was no rejection by Crown Dilmun. Mr Clay’s evidence has relatively more weight because he has no apparent interest in the outcome of this case or in any ongoing business relationship with Mr Brown. There is also support for the evidence of Mr Brown and Mr Clay on this point from the fact that in July 2010, Mr Brown emailed Mr Clay saying that there was still an opportunity to invest in the project. That email is in terms which are inconsistent with Crown Dilmun having closed the door on any further negotiations at the May meeting. Mr Clay said that he learnt that the project would not be going ahead with Crown Dilmun on the evening of 5 July 2010, when he met Mr Brown in Bahrain who told him that “the project had been … sold to another party”. This was four days before Mr Brown’s email to him.
 Mr Clay was prepared to concede, in cross-examination, that Mr Ebrahim may have said that “the property wasn’t worth that much” but he did not recall it. It is possible but unlikely that Mr Ebrahim made such a statement. I accept Mr Clay’s evidence. Had Crown Dilmun abandoned any interest in the project, it is likely that Mr Clay would have known that fact. At this stage therefore, the prospect of a concluded contract with Crown Dilmun still existed.
The critical meeting in Amman
 Immediately after this meeting, Mr Brown, Mr Deriard, Mr Yuen and Mr Salem went to Amman to meet Mr Al Jibouri. They arrived on 26 May 2010 and stayed at the Hotel Rama in Amman. They had dinner at the hotel with Mr Al Jibouri and his driver, Mr Firas Obaidat and agreed to meet the following morning in the foyer of the hotel.
 On the following day, Mr Brown was in the foyer at the appointed time and met Mr Al Jibouri and Mr Obaidat. At that stage, Mr Brown said, no one else had arrived. He said that Mr Al Jibouri then told him “your contract is finished and I only deal with Yuen”. Mr Brown said he replied that that was “bullshit”. At about this stage, Mr Deriard and Mr Yuen arrived with Mr Salem. Mr Brown said that he asked Mr Yuen if he could speak to him alone, at which point Mr Al Jibouri and Mr Salem went outside, leaving Mr Brown, Mr Yuen, Mr Deriard and (for some reason) Mr Obaidat. According to Mr Brown, he then said to Mr Yuen:
“How dare you, you’ve gone behind my back, you’ve done a deal direct with Al Jibouri.”
Mr Brown said that Mr Deriard then spoke saying that “we have a solution Henry [Yuen] will pay your costs”. He says that Mr Deriard then went outside before Mr Brown said to Mr Yuen that he “wanted $3 million”. Mr Brown said that he told Mr Yuen that he also “wanted the mark-up of the $25 million that was the difference between the $150 and $175 we were negotiating with Al Jibouri”. Mr Yuen is said to have responded that Mr Brown’s costs were “nowhere near $3 million”, to which Mr Brown replied “it’s not costs, I’ve been in the Middle East for the last nine months putting my heart and soul into this project. I want $3 million for my effort whether this goes ahead or not”. According to Mr Brown, Mr Yuen said “I agree … I do not tell a lie, I’m a Buddhist monk”, at which point Mr Yuen shook his hand.
 Upon the basis of this evidence, the plaintiff claims that the parties made a contract, under which the defendant became unconditionally bound to pay to the plaintiff that sum of $3 million.
 In his evidence, Mr Yuen agreed that there was a discussion between them that morning in the foyer of the hotel, in the circumstance that Mr Brown had just learnt that Mr Al Jibouri would deal only directly with Mr Yuen. He agrees that Mr Brown was upset and protested. But he disputes that he agreed to pay any particular sum and that he made any unconditional promise to pay anything. Mr Yuen’s evidence was that he said to Mr Brown “I will pay you something when this settle[s]”. He said that he has a recollection of an amount with the number three in it being mentioned by Mr Brown, as the amount of his costs. But he was adamant that he did not agree to any particular figure. And, on his evidence, any payment was to be made only in the event that his dealing with Mr Al Jibouri resulted in a settled contract. He said that he then told Mr Brown that if he instead sold the property in Australia, Mr Brown would not “get a cent”.
 Mr Deriard’s evidence was that Mr Yuen told Mr Brown that if Mr Al Jibouri bought the property, Mr Yuen would pay him something and Mr Yuen said “I will look after you”. His version was thereby consistent with that of Mr Yuen.
 The fourth witness about this conversation was Mr Obaidat, who gave evidence via video link from Amman. His version was consistent with that of Mr Brown. He says that he heard Mr Brown say that he wanted “US$3 million, my fees, my cost, my time” and that “if that deal has been success, it will be … $25 million”. He said that Mr Yuen answered that he would make each of those payments, including “if the deal is success”, the $25 million.
 There are several indications that Mr Obaidat’s evidence is unreliable. The first is that there is no apparent explanation for his presence during this conversation. His role was as a driver for Mr Brown’s group as well as for Mr Obaidat and, on occasions, as a translator for Mr Al Jibouri. Mr Salem and Mr Al Jibouri left the foyer, at Mr Brown’s request so that he could speak to Mr Yuen alone, shortly followed by Mr Deriard. Yet Mr Obaidat and Mr Brown said that Mr Obaidat remained. This was disputed by Mr Yuen and Mr Deriard.
 Further, Mr Obaidat was not an entirely disinterested witness. He lives and works in Amman but late last year, he applied for a visa to come to Australia for the purpose of undertaking a training course with Mr Brown’s company called Instant Equity Group Pty Ltd. He applied for his visa on the basis that he would be employed by Mr Brown’s company and that he would stay at Mr Brown’s house. He agreed that Mr Brown had offered him employment.
 And it is unlikely that Mr Obaidat would have such a precise recollection of this conversation. He had no particular interest in the subject matter of this conversation. He then worked for none of the participants. The outcome of the conversation, on either of the competing versions, would not have mattered for his employer, Mr Al Jibouri. If he was there and did overhear the conversation, he is likely to remember that there was a conversation but unlikely to remember what was said with a precision that might be expected of a party to whom the conversation mattered.
After the critical meeting
 Remarkably, Mr Brown claims to have continued his endeavours to promote the sale of this property. In October 2010, he submitted a number of schedules, said to be based upon his Outlook diary, which set out the hours that he had spent on this project. They included 371 hours allegedly worked during June 2010. I have mentioned that Mr Brown spoke to and emailed Mr Clay in early July 2010. He also sent some emails to Mr Al Jibouri or his assistant. But there is nothing which indicates how Mr Brown could have been spending so much time on a project from which, by this time, he had been effectively excluded.
 After the critical meeting, rapid progress was not made in the dealings with Mr Al Jibouri. Another potential investor, this time from Russia, emerged and Mr Yuen and Mr Deriard negotiated with that party and Mr Al Jibouri as a co-purchaser. (Mr Deriard says that he was still not Mr Yuen’s real estate agent at this point. Instead, he was hoping for remuneration from the Russian purchaser.) Exhibit 14 is part of a contract of sale made between the defendant as vendor and Mr Al Jibouri and the Russian investor as purchasers. It was dated 3 September 2010 and provided for completion 90 days from that date. The purchase price was $150 million. But that contract was not completed. Eventually, the defendant sold the property to an Australian superannuation fund.
 By late July 2010, Mr Brown was seeking payment of $3 million. On 26 July 2010, he wrote to Mr Yuen as follows:
“I write to you today after I have tried to call you several times over the last month to ask for a meeting with you.
The purpose of the meeting is to discuss the progress of the above mentioned development and to discuss your commitment to me on the 29th May 2010 to pay a figure of 3million Australian dollars compensation.
Gekko Developments has worked on this project for a period of nine months and brought to you two qualified Investors in good faith.
In light of the complexity of the deal we ask that a meeting be set with yourself and Jason Yuen to discuss the progress and a way forward.
The Board of Gekko Developments believes mediation is always the best solution in these complex matters before Lawyers and Government Authorities get involved.
I ask that you consider my request for a meeting and advise accordingly by email to …
I ask that you advice [sic] your decision before Friday the 30th of July 2010”
Mr Yuen did not respond to that letter.
The August incident
 On 26 August 2010, Mr Yuen was at his house in outer Brisbane when he received an unexpected visit from Mr Brown. With Mr Brown was his brother and another man named Siulai. Mr Brown’s purpose was to speak to Mr Yuen about a payment to the plaintiff.
 An argument quickly ensued such that the police were called. The evidence here includes statements taken by police officers from Mr Brown and Mr Yuen. Unsurprisingly there are differences in their versions of that event also. But on any view, Mr Brown had arrived uninvited and without warning, in the company of two other men at the house of a man in his sixties, in order to demand a payment.
 During the argument, Mrs Yuen telephoned their son Jason who quickly came to the house. What happened next was not disputed by Mr Brown in cross-examination. The relevant evidence was as follows:
“Ultimately, Mr Jason Yuen came?---That’s correct.
And Mr Jason Yuen said to you, ‘What will it take,’ or, ‘What will make this go away,’ or words to that effect?---That’s correct.
And he told you that there was a contract to be entered into with Al-Jibouri and another entity---?---That’s correct.
--- from the Middle East. is that correct?---I just said that.
And he said to you that Centa would pay you $3 million within seven days of that contract completing?---He did.
And you said, ‘I agree’?---I said sorry?
You said, ‘I agree’?---That’s correct.
And then there was discussion about a written contract being drawn up?---That’s correct.
And discussion about paying the solicitor’s fee of about $7,000?---That’s correct.”
 This evidence is the basis for a number of arguments advanced for the defendant, one of which is that this conversation gave rise to a binding agreement which resolved another dispute, namely one about the effect of the conversation in Amman. It was said that the defendant was thereby bound to pay $3 million, but only subject to a condition that was not fulfilled.
Was there a contract made in Amman?
 There are two questions here: first, what if anything was promised to be paid and second, was there consideration for a promise to pay?
 It is common ground that Mr Brown said that he wanted to be paid and that Mr Yuen said something which Mr Brown then appeared to accept. The circumstances of this conversation provided a good reason for Mr Yuen to say something which would placate Mr Brown. Mr Yuen was at a critical stage of negotiations with Mr Al Jibouri. A hostile Mr Brown could have been detrimental to the progress of those negotiations. But beyond that general observation, there was no apparent need for Mr Yuen to contract immediately and upon the terms which Mr Brown says that he proposed.
 There are several facts which indicate that more probably than not, there was no contractual promise, at least not an unconditional promise, which Mr Yuen then made.
 The first is that the plaintiff was not on obviously strong legal ground and Mr Brown does not appear to have thought otherwise. The plaintiff had not paid the security deposit of $2 million. It had no immediate means with which to make that payment. Accepting for the moment that the option agreement had not been terminated by the defendant, the plaintiff could have required performance only by making good its default in that respect, which it was unable to do.
 There is another factual issue as to what was said before the critical meeting about the then status of the option agreement. According to Mr Yuen, he told Mr Brown, upon Mr Yuen’s arrival in Bahrain, that “the contract is extended twice. It’s finished”. But in cross-examination, he agreed that he did not say that he was “terminating the option” and he conceded that he also said “keep going until you’ve found a buyer”. He also agreed that he similarly encouraged Mr Brown to “keep going” when he says he spoke to Mr Brown in early March 2010. Overall therefore, Mr Yuen’s evidence does not clearly establish an election to terminate the option agreement. Further, whether either party adverted to the point, the option agreement required, by cl 27, a written notice to remedy a default within 28 days before a termination for that default. No such notice had been given.
 Therefore the position as at the time of the critical conversation was that although the agreement was still on foot, the plaintiff had defaulted and knew that it had no means of immediately remedying that default. Mr Brown agreed that Mr Yuen had made statements to him to the effect that he should keep going until he found a buyer. But he could not have understood that this had resulted in his having an agreement under which Mr Yuen’s company would remain bound by the option agreement indefinitely notwithstanding the plaintiff’s failure to pay the security deposit. Rather, I infer that the plaintiff persisted until this point in the belief that the defendant would sell to the plaintiff, consistently with the terms of the option agreement, if the plaintiff became able to purchase the property by finding an investor. Mr Brown believed that for the time being he was being permitted to continue to “find a buyer”. But that is different from a belief that he had a tenable claim to an ongoing contractual entitlement under the option agreement.
 The fact that Mr Brown asked Mr Yuen to come to the Middle East to meet prospective purchasers strongly indicates that he did not believe that the plaintiff was able to deal with those parties, without the concurrence of the defendant, on the premise of an enforceable option to purchase. When challenged on this point in cross-examination, Mr Brown gave this evidence:
“But Mr Brown, you’re - you’ve got a call option, so you’re a purchaser; why are you wanting to bring the vendor under a call option to meet somebody that you’re going to potentially on-sell the business to, or on-sell the property to? Why would you want to do that?---Well, because I had a close relationship with Mr Yuen. I thought it was important Mr Yuen got to meet those parties, and we had two qualified buyers.
But why is it important for Mr Yuen, Centa, the vendor, under a call option, to meet people that you’re on-selling the project to? Why would that be relevant?---Because I felt it was.
Why did you feel it was; that’s the question?---Yeah. I felt it was because I thought it was very important Mr Yuen meet the two parties, because there would have been two different styles of offer once we negotiated with them, and I wanted him to be au fait with everything that was going on.
Well, Mr Brown, what two styles of offer are we talking about?---Look, there was a lot of conversation with both Roger Clay and Crown Dilmun, and, through Salem, with our friend, Al-Jibouri. Nothing was finalised. Nothing was finalised, but there was different conversations of how it would all work. Now, I just wanted Henry to be part of it. He was a very honest guy. I was - I had a lot of respect for the man, and I wanted him to be there.
In my view, Mr Brown did not satisfactorily explain why he asked Mr Yuen to come to the Middle East to meet these investors. I infer that by this stage he believed that he needed the concurrence of Mr Yuen to reach any agreement with an investor because the plaintiff could not enforce the option agreement.
 Notably, in his evidence in chief Mr Brown did not say that by the time of the critical meeting, he believed that the option agreement was enforceable.
 It is also significant that in the conversation which he says took place, he did not claim to have an enforceable option agreement. He protested that Mr Yuen had “gone behind his back”. But he did not assert that he could have held the defendant to the option agreement. Nor did he say words to the effect that he would release the defendant from the agreement on certain terms. His expressed grievance was that he had introduced Mr Al Jibouri and advanced negotiations with him but would receive nothing if the plaintiff was then excluded.
 Mr Brown’s conduct after the critical conversation further indicates that he had not made an agreement for an unconditional payment of $3 million. For example, in his email to Mr Clay of 9 July 2010, he wrote that:
“[I]f I did not have so much money invested in this project I would laugh, our company has invested over 3 million into this deal so far, so as you can imagine we are not keen to see it fail …”
Similarly, on 16 July 2010, Mr Brown emailed Mr Al Jibouri saying:
“[A]s you know I put my heart and sole [sic] into this deal, our company has invested over 3 million dollars in the project to date, money we do not want to loose [sic] …
If you are having trouble raising the capital with your other investors, I would like to help, I have two other investors that are willing to invest in this project and would be willing to join forces with you, you know I was not happy with the way the deal was concluded, but I have invested a lot of time and money into this deal and are [sic] not willing to let it fall over, I have too much to loose [sic] personally and financially …”
When cross-examined on this email and its reference to losing $3 million, Mr Brown sought to explain it by saying that it was really the loss of “the $25 million [that] I was alluding to …”. That may have been a reference by Mr Brown to a loss of $25 million profit from Mr Al Jibouri, but more likely it was to the loss of that sum from the defendant.
 Even on Mr Brown’s evidence, the defendant did not agree to make a payment of $25 million. In his evidence in chief, he said that he told Mr Yuen that he wanted $3 million and “I wanted the mark-up of the $25 million that was the difference between the $150 and $175 that we were negotiating with Al Jibouri”. His evidence was that Mr Yuen had then responded to the $3 million figure, saying that his costs were nowhere near that amount, to which Mr Brown responded that it was not just his costs but the personal efforts which he had applied to the project. He was then asked how Mr Yuen responded to that statement and he answered that Mr Yuen agreed. That evidence, if accepted, would not prove an agreement which contained a term for the payment of $25 million. In cross-examination Mr Brown’s evidence was that he said to Mr Yuen that “if the deal goes through, I want a profit of $25 million as well”, but without then attributing to Mr Yuen any acceptance of that term.
 It is highly improbable that Mr Yuen agreed to the payment, even conditionally, of $25 million. The plaintiff’s bargaining position was weak. A payment of $25 million would have placed the plaintiff in at least as good a position as if it had exercised its option and resold to Mr Al Jibouri at the price which was then being negotiated with him. (Indeed, the plaintiff would have been in a better position because, according to that evidence in cross-examination, the plaintiff would have received $25 million in addition to $3 million.) It is also significant that in his letter to Mr Yuen of July 2010, he made no mention of the component of $25 million.
 The weakness of Mr Brown’s evidence about a payment of $25 million is not saved by Mr Obaidat’s more definite purported recollection of such a term.
 In cross-examination, Mr Brown agreed that he said to Mr Yuen in the critical conversation that the plaintiff’s costs were “probably $300,000”. This supports the defendant’s pleaded case that Mr Brown did say words to the effect that he wanted $300,000 for his costs, although Mr Yuen was apparently unable to recall any amount other than something with a “3”. Assuming that the plaintiff’s costs had been as high as $300,000, a payment of $3 million would have represented a substantial profit for the plaintiff. Undoubtedly Mr Brown worked for some months on this project, but there is nothing to indicate that his services could command a level of remuneration of this order. A payment for $3 million in the event of a completed sale to Mr Al Jibouri might have been a realistic remuneration for the plaintiff (although at that stage there was apparently still much to be negotiated with Mr Al Jibouri). But a promise to pay $3 million, regardless of whether the defendant did sell to Mr Al Jibouri or anyone else, seems quite unrealistic, particularly in the circumstance of the plaintiff’s poor bargaining position.
 Then there was his conversation with Jason Yuen at Mr Yuen’s house in August 2010, when Mr Brown was prepared to agree that $3 million would be paid within seven days of the completion of the contract with Mr Al Jibouri. This concession is unlikely to have been made by Mr Brown had Mr Henry Yuen clearly promised unconditionally to pay that amount.
 For these reasons, I have concluded that the defendant did not contractually promise to pay $3 million to the plaintiff. I am not persuaded that the defendant promised to pay that sum conditionally or unconditionally. But if Mr Brown did seek a payment in that amount, I am not persuaded that Mr Yuen’s response resulted in an unconditional obligation to pay.
 It follows that I have not found Mr Brown and Mr Obaidat to be credible witnesses. Yet there were many reasons to question the credibility of Mr Yuen and Mr Deriard. Most importantly, Mr Yuen could not satisfactorily explain his participation in a transaction in which at least one of the option agreements must have been prepared as an intended means of a serious misrepresentation. Even on his own attempted explanation, he was assisting the plaintiff to commit a fraud. Thus my conclusion has not resulted from a favourable impression of the defendant’s witnesses, but from an assessment of the relative probabilities of the respective cases from uncontroversial facts.
 This conclusion makes it unnecessary to consider whether there was good consideration for the alleged promise by the defendant. But I should record my findings in that respect. The plaintiff’s case is that there would have been consideration by a forbearance to sue the defendant. The argument cited Butler v Fairclough, where Isaacs J said:
“A promise not to sue at all, that is, an abandonment of a substantive claim, is a valuable consideration, if there be either liability or a bona fide belief of liability.”
 The option agreement had been terminated. As I have discussed, even on Mr Yuen’s evidence, he had continuously encouraged Mr Brown to continue to look for a buyer and there had been no clear election to terminate. Further, the option agreement required first a notice to remedy a default before the agreement could be terminated on that ground. Therefore, a claim that the option agreement was on foot and that a direct dealing by the defendant with Mr Al Jibouri would have constituted a breach of that agreement, would not have been something which was “vexatious or frivolous to litigate”, to adopt the words of Bowen LJ in this context in Miles v New Zealand Alford Estate Company. In the above words of Isaacs J, such a claim would have been a substantive one.
 However, it is far from clear that Mr Brown (whose state of mind was that of the plaintiff) did have an actual belief that the plaintiff held such a claim. As I have discussed, there are many circumstances which indicate that by the time of the critical conversation, he did not believe that the plaintiff had an enforceable option agreement. Rather, his grievance was that the defendant was likely to benefit from his expenditure and efforts (or those of the plaintiff) without the plaintiff being reimbursed or remunerated. I accept that Mr Brown had a genuine grievance in that respect and believed that it was fair that he should be paid something, at least if a transaction was concluded with Mr Al Jibouri. But I am not persuaded that he had a bona fide belief that the defendant was legally liable in that respect.
 My conclusion as to what was not agreed makes it unnecessary to consider the arguments as to the effect of the conversation between Mr Brown and Jason Yuen at the Yuen house in August 2010. But I should record some findings about that event. The conversation took place in an atmosphere of hostility where, I am prepared to find, there was at least a threat of violence by the person who accompanied Mr Brown and his brother. It is sufficient to say that it was unsurprising that the police were called to the scene. That circumstance makes it relatively unlikely that, upon an objective view, the defendant intended to be immediately bound by what Jason Yuen was saying.
 There was an issue as to Jason Yuen’s authority to contract on behalf of the defendant. Henry Yuen gave evidence that his son did have his company’s authority, not because he was specifically authorised to contract on this occasion, but because it fell within his general authority to act on behalf of the company. That evidence was not immediately persuasive and gave the impression that it was tailored to suit a legal argument for the defendant. However, on my view of the evidence, what was said between Mr Brown and Jason Yuen must have been in the presence of Henry Yuen. Henry Yuen was thereby a participant in this conversation and, on an objective view, his own conduct, as his son spoke, manifested on the part of the defendant company a concurrence in what his son was saying. Therefore I would not have accepted the defendant’s argument about want of authority.
 The suggested contract of August 2010 was to the effect that $3 million would be paid only in the event that the property was sold to Mr Al Jibouri and another entity and that contract was completed. As already noted, such a contract was made but not completed.
 The plaintiff has failed to prove the agreement upon which it sues. There will be judgment for the defendant.
 T 1-35.
 T 3-18.
 T 3-5, 3-12.
 T 1-30.
 T 1-47.
 T 1-48.
 T 1-79.
 T 2-3.
 T 2-5.
 T 2-8.
 T 2-10.
 Exhibit 7.
 T 2-79.
 T 2-79, 80.
 T 2-80.
 T 2-80.
 T 3-25.
 T 4-10.
 Exhibit 12.
 T 2-84.
 T 1-68.
 T 3-75.
 T 4-13, 39.
 T 3-98, 102.
 T 3-28.
 T 4-13.
 T 2-59.
 T 3-24.
 T 3-22, T 3-62.
 T 2-37.
 T 2-51.
 T 1-69.
 T 3-77.
 (1917) 23 CLR 78.
 (1917) 23 CLR 78, 96.
 (1886) 32 Ch D 266, cited in Alford v Ebbage  1 Qd R 343, 353 (Williams JA).
- Published Case Name:
Gekko Developments Pty Ltd v Centa Company Pty Ltd (No 3)
- Shortened Case Name:
Gekko Developments Pty Ltd v Centa Company Pty Ltd (No 3)
 QSC 87
16 Apr 2015
No Litigation History