Ambridge Investments Pty Ltd (in liq) (recvr app'td) v Baker & Ors [2010] VSC 59

ESTOPPEL - Alleged detriment out of proportion to relief sought.

EVIDENCE - Admissions by conduct in a civil proceeding - Adoption of company accounts by directors - Conduct giving rise to implied agreement - Admissibility and use of post contractual conduct.

PRACTICE AND PROCEDURE - Order 18 of Supreme Court (General Civil Procedure) Rules 2005 - Representative action - Whether applies to trust property - Prosecution of proceeding by plaintiff not in a representative capacity.

TRUST - Creation of express trust by words and conduct

1 This proceeding relates to a building situated at 176 Wellington Parade, East Melbourne (the "Wellington Parade Property"). The Wellington Parade Property was purchased at an auction on 24 November 1999 by the Sixth Defendant, Break Fast Investments Pty Ltd ("Break Fast"), for the sum of $6 million.

2 It was an attractive investment. The building is constructed in a reinforced concrete frame and slab design with aluminium framed curtain wall facades at the front (south) and rear (north) sides, and solid masonry walls on the east and west sides. The building has a ground floor which contained a café, together with eleven floors of office space and an open roof area. At the time of the purchase the building provided an opportunity for renovation and substantial growth in capital value.

3 At the time of the trial in October and November 2009, following its refurbishment, there were negotiations on foot to sell the property for $24.5 million.

4 How could such a seemingly successful commercial enterprise disintegrate into the tortured anatomy of this litigation? Perhaps the answer lies in the lines of Shakespeare's Henry IV Part 2:[1]

See, sons, what things you are,

How quickly nature falls into revolt

When gold becomes her object.

5 There is no dispute that an enterprise, which I will neutrally call the "Wellington Parade Project", was entered into to hold and develop the Wellington Parade Property. Indeed there was no dispute that the enterprise was a "joint venture", which I will call the "Wellington Parade Joint Venture".

6 The point of departure is as to the structure of the Wellington Parade Joint Venture. There was no written joint venture agreement signed by all of the parties who were the participating joint venture partners. The fundamental question for resolution in this part of the proceeding is: what was the precise ownership structure the parties put in place to serve their purposes?

7 There were a number of events leading up to the purchase of the Wellington Parade Property by Break Fast which are not in contention.

8 In late 1999, the Eighth Defendant, Mark Stanley ("Stanley"), met with the Second Defendant, Christos Voukidis ("Voukidis"), and the First Defendant, Theodore Baker ("Baker"), in a restaurant in Sydney. Voukidis, Baker and Stanley discussed a proposition to the effect that Stanley would look for a commercial property in Melbourne which could be purchased and leased to a company in which Baker had a substantial interest, Powerlan Technologies Ltd ("Powerlan").

9 In early to mid November 1999, Stanley located the Wellington Parade Property and advised Voukidis of the find whilst the latter was on holidays in Queensland. The required capital contributions and the percentages of those contributions from the participating parties could not be known until after the property had been purchased and financing had been arranged.

10 The auction of the property was scheduled for 24 November 1999.

11 On 23 November 1999, Voukidis, who was Baker's accountant, caused Break Fast to be incorporated. This he did through his accounting firm, Mason Voukidis. Each of Voukidis, Baker and Stanley were appointed directors of Break Fast. The paid up capital of Break Fast has at all times since its incorporation been $4, namely $1 per share issued. Two shares were issued to Baker, and one each to Voukidis and Stanley. Ambridge has never been a shareholder in Break Fast. Break Fast has never issued any further shares or raised any further share capital. From the date of its incorporation until about mid 2004, the ASIC records reflected that the shareholders of Break Fast held their shares beneficially.

12 On 24 November 1999, Stanley bid at the auction on behalf of Break Fast. The company was successful at the auction and purchased the Wellington Parade Property for $6 million. Garry Ganis ("Ganis") was present at the auction. He was a former director of Powerlan. At the auction he represented Voukidis and Baker. Following the auction, he drew a cheque for $600,000 drawn on an account of a Powerlan subsidiary to pay the 10% deposit for the purchase.

Ambridge's Case - Unincorporated Joint Venture Including Ambridge

14 Central to the dispute is the claim by the Plaintiff, Ambridge Investments Pty Ltd ("Ambridge") that the property was purchased by Break Fast in its capacity as the manager of what is commonly styled an "unincorporated joint venture"[2]. Pursuant to this arrangement it was contended that Break Fast would purchase and hold the property on trust for the participating joint venture partners. It says further that from the outset, Stanley's company Ambridge was one of those participating joint venture partners and that it held and continues to hold a 25% interest in the joint venture.

15 It says that on 24 November 1999 there was an initial agreement between Baker, Voukidis and Stanley, pursuant to which:

(a) a joint venture would be formed to collectively work together to purchase the Wellington Parade Property;

(b) Break Fast would be incorporated to purchase the property as trustee for the participating joint venture partners and in its capacity as the manager of the joint venture;

(c) the participating joint venture partners were Baker and Voukidis (or their corporate nominees), and Ambridge;

(d) Directors would be appointed to Break Fast to represent Baker and Voukidis (or their nominees), and Ambridge; and

(e) Ambridge would be paid a fee of $500,000 for finding and managing the redevelopment of the property, and that the fee would be treated as Ambridge's capital contribution to the joint venture.

16 Ambridge says further that, following nominations by Baker and Voukidis of the parties which were to hold their respective interests in the joint venture, as at mid February 2001, the joint venture agreement evolved to the point where the participating joint venture partners under it were:

(ii) Baker's company, the Third Defendant, Careerpath Pty Ltd ("Careerpath") as to 40%;

(iii) Voukidis' company, the Fifth Defendant, C & O Voukidis Pty Ltd ("C & O Voukidis ") as to 25%; and

(iv) A company nominated by a later introduced person, Tod McGrouther ("McGrouther"), the Fourth Defendant IMF Pty Ltd ("IMF"), as to the remaining 10%.

17 Ambridge says that the terms of the joint venture agreement are to be found in conversations between the parties, correspondence passing between them, from the conduct of the parties and in order to give business efficacy to the agreement.

18 Other terms or fiduciary duties in equity are also said to be implied by which the parties were to act in good faith towards each other; not to use the property of the joint venture for unrelated purposes; to avoid conflicts of interest; and not to deny Ambridge's interest in the joint venture. In other words it is said that the parties entered into a discrete joint venture agreement which was fiduciary in character.

19 If, contrary to its principal claim, there is no joint venture agreement as it alleges, Ambridge claims that:

(a) Break Fast and the participating joint venture partners are bound by the fiduciary obligations to which I have referred; and

(b) Break Fast holds a 25% interest in the Wellington Parade Property on constructive trust for Ambridge.

20 On Ambridge's case, Ambridge holds the entire legal interest in its 25% share of the joint venture. However, it says further that pursuant to an arrangement entered into between Stanley and Gregory Taylor ("Taylor") on or about 6 April 2000, a company associated with Taylor, Headland Properties Pty Ltd ("Headland"), acquired a beneficial interest in one half of the interest of Ambridge in the joint venture agreement. Thereafter, Ambridge continued to hold Headland's 12.5% beneficial interest in the promises contained in the joint venture agreement on trust for Headland, but remained as the legal owner of its 25% interest thereunder.[3] It was not contended by the Defendants that Stanley was not entitled to deal with the interest of Ambridge in this way.[4]

The Defendants' Case - Incorporated Joint Venture Excluding Ambridge

21 As to the case of Baker and Voukidis, their respective corporate entities and IMF (the First to Seventh Defendants, collectively called the "Defendants"), they say that there was no such unincorporated joint venture as claimed by Ambridge. An "incorporated joint venture"[5] arose, which did not include Ambridge. They contend that between mid November 1999 and 23 November 1999, Baker, Voukidis and Stanley agreed to invest in the Wellington Parade Property pursuant to a shareholder agreement (the "Shareholder Agreement"). The terms of the Shareholder Agreement were said to be:

(b) It would acquire the Wellington Parade Property and would hold it beneficially;

(c) Each of Baker, Voukidis and Stanley would hold their interest in the property by means of their shareholding in Break Fast;

(e) Baker would hold a 50% interest in Break Fast by holding 2 shares; Voukidis would hold a 25% interest in Break Fast by holding 1 share; and Stanley would hold a 25% interest in Break Fast by holding 1 share;

(f) Each member would, in proportion to their respective shareholding, contribute capital to Break Fast, including for the purposes of acquiring, renovating and maintaining the property, with the initial capital contribution payable by each shareholder being determined on the basis of the price of acquisition of the property after its purchase;

(g) Each member would be entitled to any distributions paid by the company from profits earned, in proportion to their respective shareholdings; and

(h) Each of Baker, Voukidis and Stanley would be appointed a director of Break Fast and as a director would be entitled to participate in the management of Break Fast to the benefit of all members.

22 Upon its incorporation immediately prior to the purchase of the Wellington Parade Property, Break Fast issued a total of four shares, each with a paid up capital of one dollar. Two shares were issued to Baker, one to Voukidis and one to Stanley. It was therefore contended that there was no joint venture which included Ambridge, and as Ambridge had no shareholding in Break Fast, it had no interest in the Wellington Parade Property.

23 Schematically represented, the ownership structure established for the Wellington Parade Property contended for by the Plaintiff, Ambridge, looked like this:

24 On the other hand, the ownership structure established for the Wellington Parade Property contended for by the Defendants looked like this:

25 On the application of the Defendants at the trial, I made an Order on 6 October 2009 pursuant to Rule 47.04 of the Supreme Court (General Civil Procedure) Rules 2005 that specified questions and issues raised in the pleadings be tried before the trial of other questions in the proceeding.

26 This step had the effect of confining the trial at this stage to questions of liability, leaving such matters as the taking of accounts, any breaches of any alleged agreement or duties, and damages, to be tried subsequently.

27 The questions for determination at this stage of the proceeding may be conveniently grouped in the following categories:

1. The existence of any joint venture agreement between the parties, the parties to any such agreement, the terms of any such agreement, and any duties which arose under any such agreement;[6]
2. If such a joint venture agreement did arise, is it enforceable given that it was not evidenced in writing or signed as required by the Statute of Frauds (s.126 Instruments Act 1958) (Vic)?

1. Whether any joint venture arose in equity, and if so, what duties arose under such a joint venture?[7]

1. Whether Ambridge, by its knowledge of a transaction called the "Tauber Loan Agreement" and the securities pertaining to that transaction, is estopped from asserting that it has an interest in the Wellington Parade Property, and otherwise has no interest in the property?[8]
2. Whether Ambridge is precluded by the terms of a guarantee which it entered into as part of the Tauber Loan Agreement from asserting that it has an interest in the Wellington Parade Property, or by reason of the guarantee it should be denied equitable relief ?[9]
3. Further, it being common ground that Stanley was later bankrupted pursuant to a sequestration order made against him on or about 17 May 2005, the Defendants contended that, if Stanley had any interest in the joint venture through ownership of his share in Break Fast, any such interest now vested in his trustee in bankruptcy;
4. An issue also arose as to whether any interest which Stanley had in his share in Break Fast is now held absolutely by the Seventh Defendant, Oxley Group Finance Pty Ltd, by reason of an alleged mortgage of his share to that company;[10]
5. The Defendants contended further in their opening at trial, that in any event, on the Plaintiff's case, given that Ambridge had declared a trust in respect of one half of any interest in a joint venture in favour of Taylor's company Headland, it held only a 12.5% interest in the Wellington Parade Property for which it could sue. I shall deal with it as a preliminary point;
6. During the trial the Defendants made an application to amend their defence and counterclaim to introduce a claim that the Plaintiff Ambridge was not entitled to equitable relief by reason of its entry into a loan transaction (the "H2O Loan Agreement") with Taylor's company, The H2O Company Pty Ltd ("H2O"). I refused this application and publish my reasons below.

28 The relief sought by the Plaintiff, Ambridge, at this stage of the proceeding is as follows:

(a) A declaration that there is a joint venture agreement between the third Defendant ("Careerpath"), fourth Defendant ("IMF"), fifth Defendant ("C & O Voukidis"), Ambridge and the sixth Defendant ("Break Fast) as pleaded.[11]

(b) Alternatively to (a), a declaration that Break Fast holds a 25% interest in the Wellington Parade Property at 176 Wellington Parade, East Melbourne (the "Wellington Parade Property"), on constructive trust for Ambridge.

(c) A declaration that Break Fast holds the Wellington Parade Property as nominee and trustee for the joint venturers, including Ambridge as to its 25% share of the joint venture.

29 In this case, the contemporaneous use of the term "joint venture" at various times and in various contexts by the parties to describe the nature of the ownership structure which existed to hold and develop the Wellington Parade Property, is not conclusive in determining whether the structure contended for by the Plaintiff or that contended for by the Defendants is to be preferred.

30 As was said by the High Court in United Dominions Corporation Limited v Brian Pty Limited:[12]

The term "joint venture" is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing, money, property or skill. Such a joint venture (or under Scots' law, "adventure") will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried on through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a "joint venture" and what should more probably be seen as more than a simple contractual relationship may on occasion be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to profits made by the other.

31 An example of the use of the term "joint venture" arose from the email prepared and sent by Voukidis on 8 February 2001 to Baker and McGrouther.[13] This email was sent in the context of finance being sought in respect of the Wellington Parade Property from Colonial First State. Voukidis said in this email that he required firm details from Baker and McGrouther "of which entity or individual you would like to hold your interest in the Wellington Parade joint venture". [Underlining added for emphasis]. This does not constitute an admission by Voukidis which is against the case he seeks to advance in this proceeding.

32 Statements of this type, considered without the benefit of any context which may explain the sense in which the term "joint venture" was used, are consistent with the characterisations of the ownership structure advanced by both the Plaintiff and the Defendants. A joint venture, properly called, may be constituted as an incorporated joint venture in which the participants become shareholders in a joint venture corporate vehicle. [14] Alternatively, it may be structured as an unincorporated joint venture having the characteristics of a partnership, with a separate legal personality, or it may simply be an association which does not exist as an entity separate from the legal personality of its participants. [15]

33 As to the terms of a joint venture, the authorities relating to joint ventures show that questions of whether or not a joint venture incorporates identified fiduciary duties, depends upon the facts of each individual joint venture.[16]

34 In Gibson Motor Sport Merchandise Pty Ltd & Ors v Robert James Forbes & Ors[17] ("Gibson Motor Sport"), Crennan J, after considering the authorities, concluded that the "recognisable and common characteristics of joint ventures include":

1. Participants hold proprietary interests in the assets of the joint undertaking, often, but not necessarily, as tenants-in-common.

2. Participants exercise joint control of the undertaking.

1. Participants contribute to the joint undertaking, not necessarily equally; such contributions may be disparate.
2. Participants in the joint undertaking enjoy rights and assume obligations, which are often several, and calculated by reference to ownership of shares and/or contributions made.
3. Participants have a joint (or community of) interest in the performance of the undertaking's purpose.
4. Participants associate in the undertaking for mutual commercial gain which can be mutual profits.

These recognisable and common characteristics can be found in various permutations and constellations such that it is not appropriate to attempt to isolate which characteristics would be both necessary and sufficient for the constitution of a joint venture agreement. It is always a question of fact whether any particular undertaking constitutes a joint undertaking for mutual commercial gain.

35 Further, if reliance is to be placed upon a joint venture agreement being inferred from conduct over a period of time, as it is in this case by the Plaintiff, in order to constitute a binding contract, the conduct relied upon must be capable of providing all the essential elements of an express contract. See: the further observations of Crennan J in Gibson Motor Sport, citing McHugh JA in Integrated Computer Services Pty Ltd v Digital Corp (Aust) Pty Ltd.[18]

36 The share structure of Break Fast is consistent with the characterisations of both the Plaintiff and the Defendants.

37 The fact that Baker was issued with two shares did give him greater voting power as a shareholder in the conduct of the affairs of the company. Under the constitution of Break Fast, on the taking of a poll at a meeting of members, a member is to have one vote for each share held.[19] The powers of members effected by resolution included the removal and replacement of directors.[20] This reflected his greater financial interest in the Wellington Parade Joint Venture.

38 However, this structure did not unequivocally point to the ownership structure of the joint venture contended for by the Defendants.

39 To the extent that the Wellington Parade Joint Venture arose from a contract, in order to have binding effect, the contract must satisfy the fundamental essentials under Australian law. Agreement upon essential and critical terms is a prerequisite of an enforceable contract.

40 The leading High Court decision on the point is Thorby v Goldberg,[21] where the Court observed:

It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential and critical terms, have been agreed upon. So there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties.

41 More recently, in an observation which is apt to the circumstances of this case, Weinberg J said in Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd:[22]

A promise or agreement is not legally binding and enforceable as a contract unless the requirements for the formation of contract, including consideration and certainty of terms, are satisfied. Not all contracts are negotiated and formally agreed. Contracts are frequently informal, with little specific negotiation.

42 The Defendants contended that Ambridge at best had a 12.5% beneficial interest in the Wellington Parade Property, the other 12.5% interest being held on trust by Ambridge beneficially for Headland.

43 It was further submitted that the proceeding was not commenced or prosecuted by Ambridge by its receiver as a representative action, and neither Taylor nor his company Headland are parties to the proceeding.

44 In these circumstances, the Defendants contended that Ambridge cannot recover an interest held on trust for the third party Headland, with the result that it can sue only in respect of its alleged 12.5% beneficial interest in the Wellington Parade Property, and not for the 25% interest which it presently claims. Ambridge may only recover its beneficial interest in the Wellington Parade Property, so it was said.[23]

45 They say further that Headland should have been joined so as to be bound by the result. However, it is now statute barred from bringing separate proceedings to recover any interest in the Wellington Parade Property.[24]

46 These claims were raised by the Defendants for the first time in the course of their opening at the trial,[25] and were not made in the Defendants' pleadings.

47 It appears that the Defendants relied in part upon Order 18 of the Supreme Court (General Civil Procedure) Rules 2005 (the "Rules"), which by r.18.02 provides in respect of a proceeding by (or against) a representative:

A proceeding may be commenced, and, unless the Court otherwise orders, continued, by or against any one or more persons having the same interest as representing some or all of them. [Underlining added for emphasis]

48 However, r.18.01 specifically excludes Order 18 of the Rules from applying to property which is the subject of a trust. Rule 18.01 provides:

This Order applies where numerous persons have the same interest in any proceeding, but does not apply to -

(a) a proceeding under Part 4A of the Act;

(b) a proceeding concerning -

(i) the administration of the estate of a deceased person; or

(ii) property subject to a trust.

49 I do not accept the contentions of the Defendants.

50 Ambridge claims both a legal and an equitable interest in the subject matter of the Wellington Parade Joint Venture. It claims a legal interest in the contractual promises contained in the joint venture agreement which it pleads. [26] It also claims a beneficial interest in the Wellington Parade Property pursuant to an express trust of which Break Fast is the trustee. [27]

51 Insofar as reliance is placed on Order 18, Rule 18.01 excludes its operation because Ambridge claims, inter alia, that Break Fast holds the Wellington Parade Property on trust for it and the other joint venture partners.

52 Further, the fact that Headland may have had a beneficial interest in Ambridge's interest pursuant to arrangements between Ambridge and Headland does not require Ambridge's proceedings to be brought in a representative capacity. Ambridge's claim is also made in its capacity as the alleged owner of a legal interest in the Wellington Parade Joint Venture under the joint venture agreement which it pleads.

53 Ambridge is entitled to claim that it holds a beneficial interest in 25% of the Wellington Parade Property and a 25% legal interest in the Wellington Parade Joint Venture under the joint venture agreement. If the material facts support such allegations, and relevant discretionary considerations permit the grant of declaratory relief, the Plaintiff would be entitled to one of the declarations it seeks.[28]

54 Further, the matter was only raised by the Defendants in submissions. It was not the subject of any application to amend their pleadings to plead the matters now alleged. The current defence and counterclaim[29] presents no pleading of any material fact or law alleging that Ambridge can sue only in respect of its alleged 12.5% beneficial interest in the Wellington Parade Property, and not for the 25% interest in the joint venture which it presently claims. Given the present state of the pleadings, which allege no material facts upon which the Defendants' new contentions may be properly founded, in my opinion, it is not open to raise the allegations which they now seek to press.[30]

55 On 28 October 2009, on the twelfth day of the trial, the Defendants made application to further amend their defence and counterclaim. They sought leave to file and serve a Third Further Amended Defence and Counterclaim. I refused the amendment and indicated that I would deliver my reasons for doing so in these reasons.

56 The proposed Third Further Amended Defence and Counterclaim was drawn to introduce a claim that the Plaintiff Ambridge was not entitled to equitable relief by reason of its entry into a loan transaction (the "H2O Loan Agreement") with Taylor's company, The H2O Company Pty Ltd ("H2O").

57 It was alleged in the proposed pleading that on or about 26 March 2003, Ambridge entered into the H2O Loan Agreement with H2O pursuant to which Ambridge borrowed the sum of $240,000 from H2O. The purpose of the H2O Loan Agreement was to pay out a loan (the "CBA Loan Agreement") which Ambridge had taken out with the Commonwealth Bank of Australia (the "CBA"). The H2O Loan Agreement was secured in part by a second ranking registered debenture charge over the whole of Ambridge's assets and its uncalled capital (the "H2O Charge"). It was pleaded in the proposed amendment that there were terms of the H2O Loan Agreement that:

(a) Ambridge would advance H2O the sum of $240,000;

(b) Interest on the principal sum was to be payable in the form of two QANTAS first class around the world airline tickets;

(c) The principal sum and interest was payable by Ambridge to H2O on demand, but no later than by 17 April 2003;

(d) Ambridge would pay to H2O interest at the rate of $10,000 per week for each week that the principal and interest remained unpaid after the due date;

(e) Ambridge would give H2O security, amongst other things, in the form of the H2O Charge and an assignment of an existing charge in favour of the CBA (the "CBA Charge").

(a) On 27 March 2003, Ambridge discharged its indebtedness to the CBA under the CBA Loan Agreement in full;

(b) Thereafter the CBA Charge ceased to secure any sum. At settlement of the CBA debt, the CBA assigned the CBA Charge to H2O;

(c) On 17 August 2004, Ambridge was placed in liquidation by order of the Supreme Court of New South Wales, and a liquidator was appointed to the company. Then on 18 August 2004, H2O appointed a receiver of Ambridge pursuant to the CBA Charge which had been assigned to it;

(d) The H2O Loan Agreement was not repaid by Ambridge by 17 April 2003 and the debt with accrued interest, calculated in accordance with the terms of the H2O Loan Agreement, currently stands at approximately $4 million;

(e) It was further pleaded that the default interest rate under the H2O Loan Agreement was exorbitant and was a penalty, and at the time of entry into the H2O Transaction, Ambridge, to the knowledge of Taylor and H2O, was in financial difficulty and was unable to pay some of its debts as they fell due;

(f) It was pleaded that no reasonable person in the position of Ambridge would have entered into the H2O Loan Agreement or the H2O Charge (together called the "H2O Transaction"). It was said that the H2O Transaction was not at arm's length and had the effect of substituting the CBA overdraft facility which was provided at the bank's interest rate with the H2O Loan Agreement which charged an exorbitant rate of penalty interest;

(g) It was said further that there was "no benefit to Stanley, Ambridge or to its creditors, save for H2O and Taylor, in entering into the H2O Transaction";

(h) It was pleaded that the H2O Transaction was an unconscionable transaction, and that it would not be consistent with equity or good conscience to permit:

(i) the receiver of Ambridge to represent the interests of one creditor, H2O, who relies on the penalty interest chargeable under the H2O Loan Agreement to disadvantage all other creditors of Ambridge;

(ii) Taylor and/or H2O to rely on the penalty interest chargeable under the H2O Loan Agreement to prosecute this proceeding in the name of Ambridge to the detriment of all other creditors of Ambridge; or

(iii) to permit the receiver of Ambridge to enforce and recover for the benefit of H2O a penalty being interest chargeable under the H2O Loan Agreement.

59 By reason of this conduct, it was pleaded that Ambridge is "not entitled to equitable relief in the proceeding".

60 The Plaintiff Ambridge, in the proceeding as it presently stands, seeks relief in its Fifth Further Amended Statement of Claim (the "Statement of Claim") to the following effect:

1. A declaration that there is a Joint Venture Agreement between Career Path, IMF, C& O Voukidis, Ambridge Investments and Break Fast ...[to the effect pleaded].
2. Alternatively to A, a declaration that Break Fast holds a 25% interest in the Wellington Parade Property on constructive trust for Ambridge.

1. A declaration that Break Fast holds the Wellington Parade Property as nominee and bare trustee for the Joint Venturers, including Ambridge, as to its 25% share of the Joint Venture.

1. The taking of all necessary accounts ....as the Court considers appropriate for the purpose of taking accounts.
2. Damages (including exemplary damages) or equitable compensation.
3. An equitable charge or lien in favour of Ambridge over the interests of C & O Voukidis, Career path and IMF in the Joint venture and the Wellington Parade Property to the extent of any sum found to be due on the taking of accounts or any orders for damages or equitable compensation.
4. A declaration that Voukidis, Baker and Oxley holds moneys received (or their traceable proceeds), as to 25%, on constructive trust for Ambridge, alternatively, as to 100%, on constructive trust for Break Fast or equitable charge or lien in respect thereof.
5. An order that a receiver be appointed to manage the affairs of Break Fast or such other remedy to protect Ambridge as the Court deems appropriate.
6. Such further or other orders, directions or relief as the Court deems fit.

61 Relief by way of a declaration does not depend upon and is not confined to claims for equitable relief. Further, although it is discretionary in nature, it is not a form of equitable relief.

62 As to declaratory relief, as was said by the High Court in Ainsworth v Criminal Justice Commission:[31]

It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which "[i]t is neither possible or desirable to fetter...by laying down rules as to the manner of its exercise".[32]

63 In Forster v Jododex Aust. Pty Ltd[33] Gibbs J considered the jurisdiction of a superior court to grant declaratory relief. In that case a submission was made that the Equity Court in New South Wales had no jurisdiction to make the declaration sought, or if it did have jurisdiction the Court should exercise its discretion to decline to grant any declaratory relief. In New South Wales, the view taken originally was that the power to grant a declaration was appropriate in a suit in equity, namely a suit for equitable relief or relating to equitable rights and titles. This restrictive approach prevailed in New South Wales until the passing of an amendment to s.10 of the Administration of Justice Act 1924 (NSW) in 1965. Thereafter, the power of a judge sitting in equity to grant declaratory relief was broadened to the point where Gibbs J said in Forster: [34]

The jurisdiction to make a declaration is a very wide one. Indeed, it has been said that, ... [under the relevant rule] the power of the Court to make a declaration, where it is a question of defining the rights of two parties, is almost unlimited; I might say only limited by its own discretion. [Citations omitted]

64 Speaking extra curially in 2007, Justice RS French[35] in his paper "Declarations - Homer Simpson's Remedy - Is there anything they cannot do?"[36] considered the function of a declaration. Noting its inherent flexibility and procedural simplicity, the following question was posited: "Well may we ask rhetorically of declarations as Homer Simpson asked of donuts - 'is there anything they can't do'?"[37] His Honour analysed the nature of the remedy in the following terms:[38]

... [The question is raised as to] whether a declaration is, strictly speaking, an exercise of power at all. A judicial declaration says something about something. It is a formal statement which may be of fact or law or mixed fact and law.

65 In the same paper[39], his Honour noted that: "Importantly, it [a declaration] does not create rights capable of enforcement without a further order of the Court". His Honour proceeded:

As PW Young observed in the 2nd edition of his text, "Declaratory Orders":[40]

The enforceability of a declaratory order is the weak spot in its armour, as there is no sanction built into declaratory relief.

Zamir and Woolf put it thus in the 3rd edition of "The Declaratory Judgment":

A declaratory judgment is a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs. It is to be contrasted with an executory in other words coercive, judgment which can be enforced by the courts.

Nevertheless, declarations by courts have legal consequences. A declaration is not "a mere opinion devoid of legal effect".[41] It "operates in law either as a res judicata or an issue estoppel and such an order is a final order for the purposes of appeal".[42]

The absence of any coercive element in declaratory judgments is reflected in the difficulty of securing stay orders in relation to them. Again citing PW Young:

The effect of the court's order is not to create rights but merely to indicate what they have always been ... Because of this, if an appeal is lodged against a declaratory order, conceptually there can be no stay of proceedings.

66 Thus it can be said that a curial declaration says something about something. It has a legal effect but otherwise does nothing.[43]

67 In Victoria, the general jurisdiction of the Supreme Court is defined in s.85 of the Constitution Act 1975, which provides:

(3) The Court has and may exercise such jurisdiction (whether original or appellate) and such powers and authorities as it had immediately before the commencement of the Supreme Court Act 1986.

(4) This Act does not limit or effect the power of the Parliament to confer additional jurisdiction or powers on the Court.

68 Section 36 Supreme Court Act 1986 provides for declaratory judgments. Rule 23.05 of the Supreme Court (General Civil Procedure) Rules 1986 is to the same effect. Section 36 Supreme Court Act provides:

A proceeding is not open to objection on the ground that a merely declaratory judgment is sought, and the Court may make binding declarations of right without granting consequential relief.

This provision is modelled on s.50 of the Chancery Procedure Act 1852 (UK) and its successor, O.25 r.5 of the Supreme Court Rules 1883 (UK).[44]

69 The matter was considered by the Court of Appeal in the early English case Chapman v Michaelson,[45] where it was held that, the grant of a declaration could not be considered to be a purely equitable remedy. Cozens-Hardy MR observed:[46]

The simple answer is that it is not equitable relief. It is a mere accident that the judgment has been given in the Chancery Division and not the King's Bench Division, since this action might perfectly well have been brought in the Common Law Courts.

70 In a proceeding in which purely declaratory relief is sought, as distinct from a proceeding in which a declaration is sought, for example, in aid of the grant of an injunction, which is of course itself a remedy in equity, a defence of unclean hands is no defence. This is so because the grant of a declaration is not the exercise of jurisdiction which is "truly equitable, it is merely statutory. If this be so, unclean hands is no defence to any merely statutory remedy".[47]

71 In AWB Ltd v Cole and Anor (No 2),[48] Young J expressed the position in the following terms:

It is a common misconception that a declaration is an equitable remedy. It is not; it is a statutory remedy that is conferred in terms emphasising that its grant or refusal is within the discretion of the court: see Tito v Waddell (No 2) [1977] Ch 106 at 259; 3 All ER 129 at 256; 2 WLR 496 at 636; Mayfair trading C Pty Ltd v Dreyer [1958] HCA 55; [1958] 101 CLR 428 at 454; [1958] HCA 55; [1959] ALR 104 at 117 per Dixon CJ; and RP Meagher, J Heydon and M Leeming, Equity: Doctrines and Remedies, 4th ed, Butterworths, 2002, at [19-159

While the refusal of declaratory relief on discretionary grounds will always be heavily dependent on the facts of the particular case, the discretion must be exercised within a framework of relevant legal principle. The cases afford guidance as to the way in which the discretion is to be exercised. In this sense, the question whether declaratory relief should be refused as a matter of discretion raises questions of fact and law, albeit heavily weighted towards the former.

72 The statutory remedy of a declaration may declare equitable, as well as legal rights. However, the mere declaration of equitable rights does not render the relief subject to equitable defences such as laches, unclean hands, hardship and refusal to do equity. This is so because the relief is a declaratory judgment which is made pursuant to the exercise of a statutory power.

73 On the other hand where a declaration is made which is ancillary to or part of equitable relief, the usual equitable defences may apply. Although the categories are not closed, two examples of such relief are: the grant of an injunction, where a declaration may be made in aid of the injunction; and secondly where a declaration is made as a means of imposing a constructive trust as an equitable remedy in the appropriate case.

74 Meyers v Casey[49] provides an example of declarations being sought in aid of an injunction. There the Plaintiff claimed: (a) A declaration that the stipendiary stewards or the committee had no power to disqualify him for suspicious practices in connection with the running of Blackpool; (b) A declaration that the decision of the committee dismissing the appeal was invalid and inoperative; (c) An injunction restraining the Victoria Racing Club, the stipendiary stewards, and the Moonee Valley Club from acting on or advertising the disqualification, and from hindering the Plaintiff from entering upon the Flemington Racecourse, or enjoying the privileges of his membership of the Victoria Racing Club thereon, or from entering any other course subject to the Rules of the Victoria Racing Club, and from ejecting the Plaintiff from Flemington or such other racecourse, and the like. The trial judge dismissed the action on the ground that the Plaintiff, in seeking the assistance of equity, did not come into Court with clean hands. On the appeal before the High Court, Barton ACJ dismissed the evidence as to the turpitude or integrity of the Plaintiff's conduct, holding that it was not admissible on the case made. However, it is implicit that evidence of unclean hands, if it was available to be properly considered, could have been taken into account in determining whether to grant the relief sought, including the making of the declarations claimed by the Plaintiff.

75 It is now well established that a declaration of a constructive trust may be used as an equitable remedy in the appropriate case. The remedial and equitable nature of a constructive trust was considered by Dean J in Muschinski v Dodds.[50] His Honour observed:

Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle ...

Once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another (cf. Hanbury and Maudsley, op. cit., p.301; Pettit, op. cit., p.55).

76 Further, as an equitable remedy, a constructive trust is available only when its grant is warranted by established equitable principles. Thus, there may be circumstances in which a Court will not impose a constructive trust even where a breach of duty to an identified beneficiary has resulted in an identifiable gain in the hands of a fiduciary.[51] Referring again to the discussion by Dean J in Muschinski v Dodds:[52]

Indeed, in this country at least, the constructive trust has not outgrown its formative stages as an equitable remedy and should still be seen as constituting an in personam remedy attaching to Wellington Parade Property which may be moulded and adjusted to give effect to the application and inter-play of equitable principles in the circumstances of the particular case. In particular, where competing common law or equitable claims are or may be involved, a declaration of constructive trust by way of remedy can properly be so framed that the consequences of its imposition are operative only from the date of judgment or formal court order or from some other specified date. The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles. [Citations omitted] Viewed as a remedy, the function of the constructive trust is not to render superfluous, but to reflect and enforce, the principles of the law of equity.

77 Accordingly, the imposition of a constructive trust by declaration being an equitable remedy should reflect the principles of equity, including, where warranted, application of the classic equitable defences. The remedy of a declaration of a constructive trust may be lost by reason of the operation of such doctrines of equity, including unclean hands.

78 It follows that, in my opinion, the defence proposed by the Defendants in their Third Further Amended Defence and Counterclaim, which seeks to introduce a claim that the Plaintiff, Ambridge, was not entitled to equitable relief by reason of its entry into the H2O Loan Agreement with Taylor's company H2O, if not for the privative consideration discussed below, could apply to some, but not all of the relief claimed in this part of the proceeding, provided the necessary facts are established. On this basis, the defence would not be open in respect of the Plaintiff's claim for a declaration that there is a joint venture agreement between Career Path, IMF, C & O Voukidis, Ambridge Investments and Break Fast, and in my opinion, it would not be open in respect of the declaration sought by Ambridge that Break Fast holds the Wellington Parade Property as nominee and bare trustee for the Joint Venturers, including Ambridge, as to its 25% share of the Joint Venture. However it would be available in respect of the declaration sought to the effect that Break Fast holds a 25% interest in the Wellington Parade Property on constructive trust for Ambridge.

Connection Between Alleged Wrongful Conduct and the Subject Transaction

79 However, in my opinion, there is a flaw in the Defendants' proposed defence founded upon unclean hands.

80 Although, as I.C.F. Spry puts it in Equitable Remedies 7th ed. at p. 169: "The maxim that a Plaintiff in equity must approach the court with clean hands is, in truth, best understood as a statement that alludes to a number of distinct rules whereby particular conduct may lead to a refusal of relief", it is well accepted that, in order for the defence to operate so as to justify a refusal of relief, it must be shown that there was such an "immediate and necessary relation" between the relief sought and the delinquent behaviour in question such that it would be unjust to grant that particular relief.[53] As I.C.F. Spry says further in Equitable Remedies:[54]

Indeed, to speak of a requirement of clean hands is misleading if it is intended to suggest an abstract moral examination of the actions of the Plaintiff. In no circumstances is an examination of this kind appropriate; ...

To similar effect is the observation of Lord Brougham in Attwood v Small,[55] where it was said:

... general fraudulent conduct signifies nothing; that general dishonesty of purpose signifies nothing; that attempts to overreach go for nothing; that an intention and design to deceive may go for nothing, unless all this dishonesty of purpose, all this fraud, all this intention and design, can be connected with the particular transaction, and not only connected with the particular transaction, but must be made to be the very ground upon which this transaction took place, and must have given rise to this contract.

81 The High Court considered the matter in Meyers v Casey.[56] Isaacs J observed in relation to the question, quoting from a leading eighteenth century case on the point Dering v Earl of Winchelsea:[57]

But the maxim [want of clean hands], even where the Plaintiff is forced to resort to equity for its assistance, has not an unrestricted application. In the leading case of Dering v Earl of Winchelsea 1 Cox, 318, at p. 319, Lord Chief Baron Eyre, with reference to an objection that the Plaintiff had been guilty of misconduct, said:- "It is not laying down any principle to say that his ill conduct disables him from having any relief in this Court. If this can be founded on any principle, it must be, that a man must come into a Court of equity with clean hands; but when this is said, it does not mean a general depravity; it must have an immediate and necessary relation to the equity sued for; it must be a depravity in a legal as well as in a moral sense.

It is altogether different from the cases where the right relied on, and which the Court of equity is asked to protect or assist, is itself to some extent brought into existence or induced by some illegal or unconscionable conduct of the Plaintiff, so that protection for what he claims involves protection for his own wrong. No Court of equity will aid a man to derive advantage from his own wrong, and this is really the meaning of the maxim.

82 As noted by I.C.F. Spry in Equitable Remedies:[59]

It has been emphasised that it is not sufficient for the Defendant merely to show that the Plaintiff has been guilty of inequitable, or indeed, even of dishonest conduct, but it must be shown further, as was said by Scrutton LJ, that "the depravity, the dirt in question on the hand has an immediate and necessary relation to the equity sued for".[60] So also it has been said that a refusal of relief on this ground may be appropriate "where the right relied on, and which the court of equity is asked to protect or assist, is itself to some extent brought into existence or induced by some unconscionable conduct of the Plaintiff, so that protection for what he claims involves protection for his own wrong".[61]

83 In my opinion, there is no relevant connection between the conduct alleged by the Defendants in their proposed Third Further Amended Defence and Counterclaim and the interest in the Wellington Parade Property which Ambridge claims in the proceeding. It is not alleged, nor can it be alleged, that the conduct complained of by the Defendants in any way gave rise to the interest in the Wellington Parade Property which Ambridge claims in this proceeding. Furthermore, the Defendants, in their capacity as alleged debtors of Ambridge, are not in any position to deny their obligation to compensate Ambridge, assuming such an obligation exists, by raising matters of the kind referred to in their proposed Third Further Amended Defence and Counterclaim.

84 Further, insofar as the Defendants by their proposed Third Further Amended Defence and Counterclaim seek "relief against penalty and unconscionable conduct", such claims relate to rights as between Ambridge and H2O. They do not relate to Ambridge's claims against the Defendants.

85 The liquidator of Ambridge, pursuant to the powers vested in him by the Corporations Act 2001,[62] is empowered to manage the affairs of Ambridge. The suggested claim which Ambridge may have in respect of the enforceability or validity of the H2O Loan Transaction may only be raised by Ambridge, or the liquidator in control of the company. Any alleged debtors of Ambridge, such as the Defendants, have no standing to raise such matters. It is a matter for the liquidator of Ambridge to determine what rights if any, Ambridge may have as against H2O, and how the interests of the creditors are best served in pressing for recovery against it, if that is considered to be the appropriate course.

86 Further, and for these reasons, the matters pleaded are not, in my opinion, properly relevant to the exercise of the discretion to grant or withhold the declaratory relief sought.

87 In short, the matters pleaded do not have a sufficiently close connection between the inequitable behaviour alleged and the transaction or transactions which are the subject of the relief claimed in the proceeding, and it is not open to contend that they do. Further, there is no standing in the Defendants to raise the matters in the proposed Third Further Amended Defence and Counterclaim by way of defence to the claims made against them, or by way of counterclaim.

88 For these reasons the proposed amendments to the defence could not provide a viable defence to this proceeding. It is a hopeless endeavour, and the amendment should not be permitted.

89 Furthermore, given the extraordinary lateness of the application to amend, in my opinion, even though it may have been possible to split the trial yet further to accommodate a separate trial of the amended defence sought to be agitated by the Defendants, it would not be consistent with the principles stated by the High Court in Aon Risk Services Australia Limited v Australian national University[63] to do so.

90 The application of the Defendants to further amend their defence and counterclaim is refused.

92 Ambridge was in business of syndication of investments in film production partnerships, retirement development partnerships, and Wellington Parade Property syndication. It derived fees and commissions from those investments. About 80 to 90 per cent of its income was derived from tax minimization investment schemes and the balance of its income was derived from Wellington Parade Property investments. It targeted high net worth individuals as its clients.

93 Ambridge carried out initial feasibility work in assessing the suitability of the Wellington Parade Property as an investment prior to the auction, and after the purchase it undertook management and refurbishment work on the building in furtherance of the objectives of the Wellington Parade Joint Venture. It was also responsible for the preparation of the accounts for Break Fast until late 2002.

94 On 17 August 2004, Ambridge was placed in liquidation by order of the Supreme Court of New South Wales, and a liquidator was appointed to the company. Then on 18 August 2004, H2O appointed a receiver of Ambridge pursuant to the CBA Charge which had been assigned to it.

95 Stanley was the sole shareholder and one of the two directors of the Plaintiff, Ambridge.

97 He was appointed a director of Break Fast from the time of its incorporation on 23 November 1999, until his resignation on 12 December 2002.[64] He was also issued one share in Break Fast, with a paid up capital of $1.00.

98 He was a charismatic character. He presented himself as a person of considerable wealth and financial success. He was accustomed to an unrestrained and lavish lifestyle which he conspicuously displayed. Between the early 90's and 2004 he indulged in the use of the illegal addictive stimulant drug cocaine. He was convicted in 1996 for possession of the drug.

99 At the time of the trial Stanley was serving a term of imprisonment at the Fulham Correctional Centre, West Sale, Victoria. The sentence he is currently serving relates to convictions in the County Court of Victoria for theft arising from stealing approximately $2.5 million from investors in the Casey Downs Retirement Village between May 2003 and July 2004; stealing a further $268,000 from investors in the Casey Downs Retirement Village between November 2004 and May 2005; avoidance of payment of sales tax on the acquisition of luxury vehicles in the sum of approximately $884,000; and theft of $651,000 from Baker in respect of a GST refund in relation to a property development in New South Wales.

100 Stanley filed for bankruptcy on 17 May 2005. At that time, he had incurred debts of approximately $12.6 million and held assets consisting of a Cartier watch, antique furniture and artwork valued at approximately $63,000. In a report to creditors prepared by his trustee in bankruptcy dated 18 July 2005, it was noted that at the time of his bankruptcy Stanley was the director of 28 companies.

101 Stanley conducted the affairs of Break Fast and his dealings with his co-venture partners in a dishonest manner as hereinafter described.

102 Stanley's evidence was central to the Plaintiff's case.

103 I had the advantage of observing him giving his evidence under cross-examination over some two and a half days. I find Stanley to be an unreliable witness. I do not accept his evidence on contentious matters unless it is supported by cogent independent evidence which I accept or as to which I am otherwise satisfied on the balance of probabilities.

104 Graeme Jacobs ("Jacobs") was employed by Ambridge as its general manager from May 1998 to July 2003. Further, from time to time between August 2003 and November 2003 he provided assistance to Ambridge. In his capacity as general manager of Ambridge, he was responsible for, amongst other things, the preparation of its financial statements and the administration of Ambridge's participation in a number of property development projects. He had a key role in the preparation of the accounts for Break Fast, at least until late 2002. He also assisted in the giving of instructions to solicitors for the preparation of draft joint venture agreements for the Wellington Parade Joint Venture. In various his roles with Ambridge, he took instructions from Stanley. In some of his correspondence, he described himself as the "Financial Controller" of Ambridge.

105 Jacobs was a chartered accountant and a member of the Institute of Chartered Accountants. He had conducted an accounting practice for 16 years until 1993.

106 In 1993 Jacobs pleaded guilty in the County Court of Victoria to a charge of theft arising from his conduct in misappropriating client funds in the course of his practice and was sentenced to two years' imprisonment which he has now served.

107 Jacob's evidence was also central to the Plaintiff's case.

108 I had the advantage of observing him giving his evidence under cross-examination over some one and one half days. I approach the evidence given by Jacobs in this proceeding with caution.

109 Taylor is a solicitor holding a current practising certificate. He is also a property developer.

110 Taylor is the sole director and shareholder of Headland. For some years prior to 1999, Headland and Stanley's company Ambridge had been involved in various property projects together. There was evidence that for a period of time, Taylor was a friend of Stanley's.[65]

111 Taylor acted on behalf of Ambridge and assisted it in undertaking much of its management and refurbishment activity in relation to the Wellington Parade Property.

112 I am satisfied that the other joint venture partners were not aware of Taylor's participation in the Wellington Parade Joint Venture until December 2002.

113 Taylor is also registered in the records of the Australian Securities and Investment Commission as a director of Break Fast as from 12 December 2002 upon Stanley's resignation. Baker and Voukidis take issue with this appointment.

114 The Defendants were critical of a number of aspects of Taylor's credit in this proceeding.

115 The principal matter highlighted by the Defendants involved the H2O Loan transaction, which has already been described. As part of the loan transaction a charge was assigned to H2O by the original lender, the CBA, upon its loan being discharged. Taylor caused H2O to appoint a receiver to Ambridge and has funded the bringing of this proceeding. H2O, and through it, Taylor, have an interest in recovery of debt now said to be owing under the H2O Loan agreement, claimed to be about $4 million.

116 Other matters involving Taylor's management of documentation in business affairs with Stanley and his accounting practice applied to his trust account were also brought into question by the Defendants.

117 As things developed in the course of the Wellington Parade Joint Venture, Taylor took a dislike to both Baker and Voukidis. This manifested itself in the course of him giving evidence.

118 Taylor is also the person who stands behind Ambridge in the present litigation and has a direct interest in the outcome. Further, by reason of the H2O Loan and the security held by H2O over Ambridge in respect of it, his interest extends beyond the claimed interest of Headland in Ambridge's alleged share of the Wellington Parade Joint Venture. I assess Taylor's evidence with these matters fully in mind.

119 However, having taken these matters into account, I am satisfied that Taylor was a witness of truth in giving evidence as to the central matters in dispute in this proceeding.

121 He was appointed a director of Break Fast from the time of its incorporation on 23 November 1999 and remains a director of the company. He was also issued two shares in Break Fast, with a combined paid up capital totalling $2.00.

122 He is a successful and astute businessman. He is the managing director of CL Asset Holdings Ltd (formally known as Community Life Limited), a company listed on the Australian Stock Exchange. He is also a director of a number of other companies. Up until 24 August 2009 he was a director of Careerpath, the Third Defendant.

123 Baker started an information technology company, Powerlan Technologies Pty Ltd, in September 1992. It was listed it on the Australian Stock Exchange in September 1999 when it became Powerlan Limited ("Powerlan"). It had a market capitalisation of $70 million. Following the float, Powerlan made approximately 30 different acquisitions of companies in the course of expanding its information technology business. As a result of these acquisitions, Powerlan became a significant business in Australia and Asia, with offices in all Australian capital cities as well as 12 offices in Asia including in Hong Kong and China. The companies acquired by Powerlan included software development companies, IT recruitment companies, IT training companies and other IT businesses.

124 Baker was first introduced to Stanley in 1998 at a seminar presented by the Village Road Show Production Company. The seminar was the promotion of an investment opportunity in a film being produced by Village Road Show known as "Three Kings" which was said to have had significant tax benefits.

125 I found some key aspects of Baker's evidence to be unsatisfactory.

126 Voukidis is the Second Defendant in this proceeding. He is also a director of the Fifth Defendant, C & O Voukidis Pty Ltd and the Sixth Defendant, Break Fast.

127 He was appointed a director of Break Fast from the time of its incorporation on 23 November 1999 and remains a director of the company. He was also issued one share in Break Fast, with a paid up capital of $1.00. Since 23 November 1999, he has been the company secretary of Break Fast.

128 In or about 1993, Baker met Voukidis. They developed a business relationship. Powerlan Technologies began engaging Voukidis to do accounting work on its behalf.

129 Voukidis, was an experienced taxation accountant. In or about 1994, Voukidis commenced practice in his own accountancy firm known as Mason Voukidis Chartered Accountants ("Mason Voukidis"). His firm, Mason Voukidis, was a general accounting practice which included the provision of services to its clients in the areas of taxation, accounting and audit. A number of his clients were high net worth individuals. From time to time some of those clients would ask to be involved in tax effective investments.

130 Since about 1994, Baker was a personal client of Voukidis and his firm. Voukidis undertook all of Baker's personal taxation work and provided him with accountancy and investment advice. Voukidis also dealt with all taxation and accountancy matters for Baker's company, Powerlan.

131 In or about mid 1999, Powerlan Technologies was preparing to list on the Australian Stock Exchange. It needed to engage a Chief Financial Officer. Voukidis was appointed to the position and left Mason Voukidis to assume his duties with Powerlan Technologies. Voukidis was also appointed a director of Powerlan Technologies.

132 During the course of the present proceeding, Voukidis engaged in dishonest conduct which can only be described as reprehensible.

133 Voukidis, on behalf of the sixth Defendant Break Fast, discovered bank statements of the company in respect of accounts maintained by it at the National Australia Bank ("NAB"). Prior to discovery of these bank statements, Voukidis altered a number of entries in the bank statements relating to two of the accounts. This process commenced in December 2005 or late 2006[66] and continued until at least 31 October 2008.[67] The present proceeding commenced in 2005. The alterations were undertaken systematically, deliberately and skilfully. To all but perhaps a highly trained expert eye, supported by sophisticated technical apparatus, the alterations were contrived with the appearance of complete authenticity. The false bank statements, which had been fabricated by Voukidis, were discovered by him in the course of the proceeding progressively in affidavits of documents which he swore in the proceeding. They were presented to the Plaintiff and to the Court as if they were genuine.

134 During May of 2009 the Plaintiff sought to subpoena the original bank statements from the NAB in respect of the Break Fast accounts held with the bank. Voukidis and Baker gave instructions to oppose the subpoena of those documents.[68] At that time, Voukidis knew that the documents which had been discovered had been altered.[69] Their opposition was not successful. A subpoena directed to the NAB to produce the bank statements of Break Fast was issued on 28 May 2009.[70]

135 Had it not been for this step taken by the Plaintiff, the dishonest conduct of Voukidis may never have been exposed.

136 Voukidis did not formally admit to making his alterations until his conduct had been undeniably laid bare. Even then he delayed. He subsequently swore an affidavit in the proceeding dated 24 August 2009 in which he said, inter alia:

Some of the statements which have been discovered are incorrect or incomplete. I have altered some of these statements prior to them being discovered in this proceeding.

The affidavit proceeded to explain in detail the alterations to the bank statements which he had carried out and proffered an apology to the Court, saying that:

I now realise that my actions were not appropriate. The extreme seriousness of the conduct I have engaged in has been thoroughly explained to me by my lawyers. I am deeply regretful of my actions and sincerely wish to apologise to this Honourable Court.

137 As detailed in a schedule to his affidavit, the alterations to the Break Fast NAB bank statements undertaken by Voukidis were extensive in the two accounts which he described. The alterations included changes to the description of transactions recorded in the bank statements, in four instances adding additional information as to the source of the funds recorded, and others adding numbers of references to payment of directors fees. There were also cases of large transactions being deleted entirely from the original record, and other cases in which the figures involved in the transactions recorded were altered substantially.

138 In relation to the Break Fast Business Management Account (Account No.55-930-9682), a large transaction dated 1 August 2007 recorded in the original bank statement as involving a credit of $340,000 for "Internet Transfer Legal Fees" and a debit of the entire sum on the same day recorded as "Internet Transfer Rigby Cooke Trust", was entirely deleted. More is to be said about this transaction. Another transaction dated 6 November 2007 recording a credit of $150,000 by "Internet Transfer" and a debit of the entire sum on the same day recorded as "Internet Transfer", was also entirely deleted. A similar transaction involving a credit of $500,000 and a debit of the same sum, both entered in the original statement on 6 February 2008, was also deleted. A transaction to similar effect involving $70,000 entered on 14 May 2008 was also deleted. A credit and debit entered in the original statement dated 20 June 2008 was altered from $155,000 to $275,000, and a $60,000 credit and a $30,000 debit originally recorded in the statement on 17 October 2008 were altered to record a credit of $230,000 and a debit of the same sum.

139 In relation to the Break Fast Business Cash Maximiser Account (Account No. 87-401-8316), a transaction involving $500,000 and another transaction involving $613,022.16 both recorded in the original statement dated 6 February 2008 were deleted; a credit of $155,000 recorded in the original statement dated 20 June 2008 was altered to $275,000; internet transfers dated 17 October 2008 for $230,000 and $500,000 were added; and there were alterations to the amounts recorded in nine other cases between 29 February 2008 and 31 October 2008.

140 Another matter of considerable concern is the evidence, which I accept, of the deliberate flouting by Voukidis of an order of this Court made in this proceeding. On 3 May 2007 Williams J made an interlocutory order in the proceeding which permitted Break Fast to increase its loan facility with Colonial First State, which was secured by a mortgage against the Wellington Parade Property, by an amount of $890,620.48. The increase so permitted, was required specifically by the order "to be applied as follows, but not otherwise", followed by a number of stipulations in the order as to the permitted expenditure. One item of expenditure permitted was:

$340,000 to be paid into an interest bearing trust account with Rigby Cooke solicitors and from which monies may only be withdrawn to pay for legal fees and disbursements incurred by the Sixth Defendant [Break Fast] in defending these proceedings which have been brought against it by the Plaintiff.

The order made by Williams J on 3 May 2007 was made by consent. Break Fast was represented by counsel before her Honour.

141 However, on 1 August 2007 Voukidis defied the order made by Williams J on 3 May 2007. In 2007 both Voukidis and Baker were involved in another joint venture in New South Wales through a vehicle known as Clarence Street Pty Ltd. The company was involved in litigation in New South Wales, in which in an order for security for costs was made against it. Voukidis and Baker discussed the security for costs application between them.[71] In order to provide the required security for costs, Voukidis used the sum of $340,000 made available to Break Fast from the additional credit provided by Colonial First State on its loan facility secured by a mortgage over the Wellington Parade Property. He admitted to doing this "all off [his] own back",[72] and said that Baker "was aware of the need for the funds but not necessarily of the source of the funds".[73] This evidence was somewhat modified after further questions in cross-examination, to "Mr Baker was aware that the funds were required for the security of the costs, but he was not aware of the source of the funds".[74] Voukidis said that by May 2009 the funds were no longer outstanding and had been replenished.[75] The original bank statements derived from the NAB indicate that the sum was repaid on 27 October 2008.[76]

142 Voukidis gave further evidence in relation to the matter in cross-examination. After first taking the position that it was only now that he was aware that the moneys could only be withdrawn to pay legal fees and disbursements incurred by Break Fast in defending these proceedings,[77] he then made some telling concessions. He said in response to the cross-examination of Senior Counsel for the Plaintiff:[78]

Tell me Mr Voukidis, did you think that you could mortgage the Wellington Parade Property at 176 Wellington Parade for the purposes of the Clarence Street joint venture? --- Under the circumstances, [answered Voukidis] with the undertakings having been given to the court, I was aware that that was not the purpose. That was not something we were entitled to do.

Yet you did it anyway? --- That is correct.

Yes, and you did this deliberately? --- Knowingly, yes.

143 The transaction involving the transfer of the sum of $340,000 recorded in the Break Fast Business Management Account (Account No. 55-930-9682), dated 1 August 2007, as already noted, was deleted by Voukidis as part of his program of falsification of the NAB Break Fast bank records. Further, repayment of the money, which is recorded as a credit in the account on 27 October 2008, is disguised by the alteration of the credit which is recorded for that day from $340,000 in the original bank record to $500,000 in the falsified account. I infer that the purpose behind Voukidis undertaking this elaborate deception was to eliminate from the record the payment which was made in breach of the order of the Court.

144 The conduct of Voukidis in breach of the order of Williams J made on 3 May 2007 was wilful, contumelious and dishonest.

145 The evidence given by Voukidis was central to the Defendants' case.

146 I had the advantage of observing him giving his evidence under cross-examination over some four days. I find Voukidis to be an unreliable witness. I do not accept his evidence on contentious matters unless it is supported by cogent independent evidence which I accept or as to which I am otherwise satisfied on the balance of probabilities.

147 Oxley Group Finance Pty Ltd ("Oxley") is the Eighth Defendant in the proceeding.

149 Voukidis remains the sole director of Oxley since its incorporation.

151 It was incorporated on 23 November 1999. It became and remains the registered proprietor of the Wellington Parade Property. It has four shares on issue, with a paid up capital of $4.00, there being $1.00 paid in respect of each share.

152 Upon its incorporation, Baker, Voukidis and Stanley became directors of Break Fast. Baker held 2 shares in the company, and Voukidis and Stanley held one share each. Stanley resigned as a director on 12 December 2002, however Baker and Voukidis remain as directors. There is a dispute as to whether Taylor was appointed a director of Break Fast on 12 December 2002 in place of Stanley and as to whether he is entitled to remain a director of the company.

153 McGrouther is a banker by profession and a director of KTM Capital Pty Ltd ("KTM"), which is an investment banker.

154 He is also a director of the Fourth Defendant, IMF.

155 McGrouther met Baker and Voukidis in the course of KTM providing advisory services to Powerlan Technologies ("Powerlan") in relation to the float of that company. The float process commenced in early 1999. Powerlan was floated on the Australian Stock Exchange in September 1999.

156 I found McGrouther to be a truthful witness, however, inconsistencies with an earlier signed statement exposed his account of a later recollection of a crucial conversation to considerable doubt. I am left with the impression that McGrouther's recall of the details of his involvement in the Wellington Parade Joint Venture was hazy. He left the management of his investment to Voukidis and Baker.

157 The parties, by their conduct from time to time, made admissions which were adverse to their respective interests in the outcome of the proceeding.

158 Acts or statements which do not involve any communications between the parties may constitute an admissible admission. However, in considering such conduct, I bear in mind the caution expressed by Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988), where his Honour observed:[79]

In so far as acts or statements ... not involving communications between the parties are claimed to be relevant ... upon the ground that they constitute an admission, it seems to me that it will often be necessary to identify with some care the fact which is said to have been admitted. As we noted, there may be some cases in which the issue is such that the subjective state of mind of one or the other of the parties is relevant. Normally, however, when an issue is not their subjective state of mind but their "intention as expressed" ... caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant. [Citations omitted] [Emphasis added]

159 An admission may be made on a question of law.[80]

160 However, where the construction of an agreement is involved, being faithful to the objective theory of contract necessarily renders the subjective intention of the parties irrelevant. The Court in such cases derives no assistance from the fact of any such admission. Accordingly, the subjective intention of the parties is generally considered not admissible as evidence because it could not be given any weight by the court in construing the contract. As Brooking J reasoned in FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd:[81]

The view which a party to a contract takes of its effect has no bearing on its construction, whether that view is made manifest by conduct or by express statement and whether that view is sought to be proved by evidence of conduct (including statements) or by direct evidence of state of mind given in the litigation by the party to the contract. As a matter of legal principle, I can see only one basis on which the subsequent conduct of a party to a contract might be said to bear on its interpretation so as to support a general principle that evidence of conduct by the parties under a contract might be used in its interpretation. That is the principle which allows admissions by words or conduct made by a party to litigation or his predecessor in title to be used against him. There is some support for the view that the matter of conduct under a contract as bearing on its interpretation should be considered in terms of admissions. ...

The construction of a written contract is a question of law. But it seems that a question of law may be made the subject of an admission: see Grey v Australian Motorists and General Insurance Co Pty Ltd [1976] 1 NSWLR 669, at p.684, per Mahoney JA. Where, however, the question of law is one of the construction of a written contract that is before the court, it seems to me that the court will derive no as opposed to little assistance in determining that question from the fact that one party or his predecessor in title has made an informal admission on the question. As a matter of strict analysis I would venture the suggestion that the admission, while theoretically available for use, is not admissible because it could not be given any weight at all by the court in construing the contract.

161 Secondly, where the question is whether the conduct has been sufficient to constitute a contract, an admission as to whether the conduct had that effect, is not something from which a court is likely to derive assistance. Again the subjective opinion of a party is not relevant in determining this issue. This point was made clear by the Court of Appeal in Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (recs and mgrs apptd).[82]

162 The position, however, is different when conduct is analysed with a view to determining whether a binding contract has been created or by later conduct whether an earlier agreement has been varied. Thus in Sinclair, Scott & Co Ltd v Naughton ("Sinclair"),[83] Isaacs J in dissent spoke of the use of the respondent's admission as confirming the view that would otherwise be taken of the proper construction of the memoranda, that admission being a statement in a letter acknowledging that a contract had been concluded.

163 This position was confirmed recently by the Court of Appeal in Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (recs and mgrs apptd) ("Atco").[84] The Court [85] said this:

... we recognise that where, as here, the question is one of inferring the existence of an agreement from conduct, as opposed to construing a written agreement, it is permissible, indeed it may be essential, to have regard to the parties' conduct not only in order to determine whether at some point they may have reached a binding legal agreement but also to determine whether by later conduct they should be taken to have varied that earlier agreement.

164 In the passage which I have cited from Atco, the Court of Appeal considered that where the question is one of inferring the existence of an agreement from conduct, what is recorded in the accounts of the relevant company "may be significant",[86] although on the particular facts of the case before it, the Court did not regard the point as decisive.

165 Thus the question of subsequent conduct can be dealt with either in terms of admissions, which is, after all, one form of conduct, as was the approach of Isaacs J in Sinclair, or it can be considered as conduct in its own right from which a binding agreement may be inferred, as was the approach of the Court of Appeal in Atco.

166 The admissions relied upon in this case are generally in writing and generally comprised express admissions, but in some cases the admissions are to be implied and inferred from conduct. Further, remaining silent or doing nothing when presented with a document or a statement which is such as to naturally call for action or comment from the recipient if not true, and when it is both appropriate and possible for him to do so, may constitute an admission which is to be inferred from such conduct.

167 An admission, if made, amounts to evidence against the case of the party which made it.

168 Further, admissions made by natural person parties may also amount to admissions against other parties or companies which they represent, provided the admissions are made within the scope of the authority of the person to make them. In relation to Careerpath in the case of Baker, C & O Voukidis and Oxley in the case of Voukidis, McGrouther in the case of IMF, and Ambridge in the case of Stanley, I am satisfied that the individuals concerned were the controlling minds of their respective companies in respect of their investment and involvement in the Wellington Parade Property, and they had either the express or implied authority of those companies to make the relevant admissions in writing, and to engage in the conduct from which the relevant admissions are to be implied and inferred.

169 Jacobs, in his position as the general manager and financial controller of Ambridge, was also in a position to make admissions against the interests of Ambridge.

170 In this case, the admissions made by Voukidis also amounted to admissions against Baker in some cases, which will be identified in these reasons. Although Baker denied in his evidence that he conferred any authority on Voukidis to "make decisions" on his behalf about Break Fast, or his interest in that company or in the Wellington Parade Property,[87] I am satisfied that Voukidis acted in relation to the investment, not only on his own behalf, but also in relation to his client, Baker, in his capacity as Baker's accountant and investment adviser. Voukidis undertook all of Baker's personal taxation work and provided him with accountancy and investment advice. Voukidis introduced Baker to the investment in the Wellington Parade Property. It was in or about November 1999 that Voukidis telephoned Baker while he was on holidays to talk about an investment opportunity which Stanley had identified in Melbourne. Voukidis described the property to Baker. Baker told Voukidis that he agreed that it may be an ideal opportunity to purchase and refurbish a building. At the same time, Baker's company Powerlan was looking for office space in Melbourne and it seemed to him that this building may have been able to satisfy Powerlan's needs. Baker told Voukidis that he was happy to pursue the opportunity and that Voukidis should liaise with Stanley about doing so. Baker subsequently told Voukidis that he should arrange for the incorporation of a company prior to the auction of the property in case they were successful in purchasing the property at auction. Voukidis proceeded to incorporate Break Fast and became its company secretary. Thereafter, Voukidis attended to much of the ongoing liaison relating to the joint venture between himself and Baker, who both resided in Sydney, and Stanley and Jacobs who both resided in Melbourne. As such, Voukidis had implied authority to represent Baker as his agent in the course of his dealings with Jacobs and Stanley concerning the development of the structure of the Wellington Parade Joint Venture and the management of its accounts. In late 2002, Voukidis assumed responsibility for the preparation of the accounts of Break Fast. Esquivel provided bookkeeping services for Break Fast under the direction of Voukidis since that time. I am satisfied that, in certain cases, Voukidis had the express or implied authority of Baker to make admissions on his behalf and to engage in the conduct from which such admissions are to be implied and inferred. The cases in which the admissions made by Voukidis amounted to admissions against Baker, arise where Voukidis had implied authority to act for Baker and the subject of the admission was within the scope of his authority. Such cases included acting in organising the structure of the Wellington Parade Joint Venture and reviewing, and after 2002 managing, the way in which the accounting records of Break Fast were being prepared to reflect the structure.

171 As to McGrouther, and his company IMF, McGrouther did not pay much attention to his involvement with his investment in the Wellington Parade Property. He described it as a "passive investment".[88] He said that he had never been to the property and that he was "content to leave it to Baker and Voukidis to manage".[89] I regard this delegation as sufficient to confer express or implied authority on Baker and Voukidis to make admissions on his behalf and on behalf of IMF as to the formation of the Wellington Parade Joint Venture as it proceeded to be structured by them in the course of discussions with Jacobs on behalf of Ambridge. They also were delegated by McGrouther to act as his agent in the course of developing the structure of the Wellington Parade Joint Venture and the management of the accounts of the joint venture.

172 From time to time Break Fast engaged accountants to prepare its accounting records and taxation returns. In a number of cases, these accounting records and taxation returns constitute admissions which are adverse to the interests of Break Fast in the outcome of the proceeding. The admissions made in this way are all in writing, and were made by the accountants engaged by Break Fast in the course of their engagements to prepare the relevant accounts and taxation returns and were admissions made within the scope of their authority.

173 Further as to the Break Fast, Baker, Voukidis and Stanley, until the latter's resignation on 12 December 2002, were the directors of the company.

174 Section 286 of the Corporations Act 2001[90] establishes a mandatory obligation to keep financial records of a company. Indeed the section provides for an offence of strict liability if the obligations are not complied with. Section 286 provides:

(1) A company, registered scheme or disclosing entity must keep written financial records that:

(a) correctly record and explain its transactions and financial position and performance; and

(b) would enable true and fair financial statements to be prepared and audited.

The obligation to keep financial records of transactions extends to transactions undertaken as trustee.

(2) The financial records must be retained for 7 years after the transactions covered by the records are completed.

(3) An offence based on subsection (1) or (2) is an offence of strict liability.

175 A failure to comply with the requirements of s.286 may result in a presumption that the company has been insolvent throughout the relevant period.[91]

176 Further, directors are personally liable if their company's financial records are not kept and prepared properly in accordance with section 286. Section 344(1) is a civil penalty provision[92] which renders a director of a company liable if he or she fails to take all reasonable steps to comply with or to secure compliance with, inter alia, s.286.[93] Pursuant to s.290(1), a director of a company has a right of personal access to its financial records.

177 A director is also required by the companies legislation to sign the annual director's declaration that there are reasonable grounds to believe that the company is able to pay its debts when due and payable and that the accounts of the company represent a true and fair view of the company's financial position: ss.295(4) and 297.

178 Like provisions were in place under the predecessor legislation to the Corporations Act 2001, namely the Corporations Act 1989.[94]

179 It follows that the directors of Break Fast, being Stanley, Baker and Voukidis, at all times since their appointment each had a duty to ensure that the financial records of the company correctly recorded and explained its transactions, and each had the opportunity to ensure that this was the case.

180 By the conduct of Baker and Voukidis in not taking issue at any time with the form of the accounts prepared for Break Fast, when the state of those financial records would naturally call for action or comment from them as directors if they did not correctly record and explain its transactions, it is to be inferred that the Break Fast accounts in fact correctly recorded and explained the transactions of the company.

181 When the accounts of Break Fast are analysed, this conduct gives rise to admissions on the part of Baker and Voukidis which are adverse to their respective interests in the outcome of the proceeding.

CONDUCT WHICH MAY GIVE RISE TO A BINDING IMPLIED AGREEMENT

182 It is common ground that no joint venture agreement or shareholders agreement was ever executed by all of the parties who were the participants in the Wellington Parade Project.

183 This is not a case in which a binding agreement arose where there was an offer made which was explicitly accepted. Nor is it a case where an outstanding offer might be treated as accepted by the performance of the obligations contained in the offer.

184 The case presented by the Plaintiff was of the kind described by Ormiston J in Vroon BV v Foster's Brewing Group Ltd ("Vroon BV"),[95] where his Honour observed that it was contended before him that:

... it is unnecessary to analyse the parties' arrangements strictly in terms of offer and acceptance and that the court may imply that arrangement has been reached by looking at the whole of the circumstances.

185 Further, in Vroon BV[96] Ormiston J said that he was prepared to accept that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances.[97] Ormiston J referred to what was said by Lord Cairns LC in Hussey v Horne-Payne,[98] namely, that "[i]n order to fairly estimate what was arranged and agreed, if anything was agreed between the parties, you must look at the whole of that which took place and passed between them".

186 As to the circumstances in which an implied contract may arise, Nettle JA said in PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd ("PRA Electrical"):[99]

Ultimately, however, the question is whether "viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain".

187 In the same case, Ashley JA, who delivered the leading judgment, accepted on behalf of the Court that an enforceable implied contract could arise, saying that an implied contract did "provide the appropriate characterisation of the events which occurred".[100] His Honour proceeded to cite with approval Brogden v Metropolitan Railway Co ("Brogden"),[101] which was described as being oft cited as an exemplar of the circumstances in which a contract may be implied and as to the relevant principles. The facts of Brogden were shortly described in PRA Electrical as follows:[102]

The parties to a longstanding arrangement for the supply of coal by the one to the other took steps to reduce their arrangement into a formal agreement. A draft was prepared, but the matter went no further. Thereafter, for a period, the parties acted in accordance with the arrangements mentioned in the draft. Then a dispute arose concerning the supply of coal. The supplier denied that there was a contract which bound him. The House of Lords held otherwise.

188 In Brogden, Lord Hatherley said this:[103]

My Lords, Mr. Herschell, in his extremely able argument in this case, has given us every assistance that we could wish to have for its determination, and has, as it appears to me, put the case on a very proper foundation, when he says that he will not contend that this agreement is not to be held to be a binding and firm agreement between the parties, if it should be found that, although there has been no formal recognition of the agreement in terms by the one side, yet the course of dealing and conduct of the party to whom the agreement was propounded has been such as legitimately to lead to the inference that those with whom they were dealing were made aware by that course of dealing, that the contract which they had propounded had been in fact accepted by the persons who so dealt with them.

189 The Court of Appeal in Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (recs and mgrs apptd)[104] also noted the observations of McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd:[105]

Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words ... The question in this class of case is whether the conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract ...

and also those of Allsop J in Branir Pty Ltd v Owston Nominees (No.2) Pty Ltd, where his Honour said:[106]

... a number of authorities discuss the need not to constrict one's thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i's and crossing t's or where they think they have done so ... Sometimes this failure occurs because having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation.

In such circumstances, even in the absence of clear offer and acceptance, and even without being able ... to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: "and we hereby agree to be bound" in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract. The authority for the above can be found in, at least, the following: _Meates v Attorney-Gener_al [1983] NZLR 308 at 377 per Cooke J (as his Lordship then was); Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118 per McHugh JA (Hope and Mahoney JJA concurring); Vroon BV v Foster's Brewing Group [1994] VicRp 53; [1994] 2 VR 32 at 81-83 per Ormiston J (as his Honour then was); Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 555 per McHugh JA (with whom Samuels JA concurred); Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 at 611 per Bingham J (as his Lordship then was) affirmed on appeal at 615; Pobjie Agencies v Vinidex Tubemakers [2000] NSWCA 105 at [22]- [24] per Mason P (with whom Meagher and Handley JJA concurred); Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 at [74]- [80] per Heydon JA; though see Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] VicRp 55; [1994] 2 VR 106 at 178 per Tadgell J (as his Honour then was); and in this context see also Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 473 at 489 per Kearney J and Manzi v Smith [1975] HCA 35; (1975) 132 CLR 671 at 674.

190 In The Bell Group Ltd (In liq) v Westpac Banking Corporation,[107] Owen J referring to contracts which are implied, said of the process of assessment:[108]

... it is a search for the "objective intention" of each party to be inferred from what is manifested by its communications and other conduct.

191 The Wellington Parade Project was a dynamic commercial relationship. It evolved over time with the introduction of new parties who participated in the venture.

192 In this case it is necessary to look beyond the time when the relationship was first formed, and consider the relationship as it evolved in order to pin point the precise time when a commercial agreement may have come into existence, the parties to it, the terms of the agreement and whether and when the agreement, once formed, was subsequently varied. As McHugh JA said in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd:[109]

... in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed.

193 As to the evidence required to establish an implied contract, it is well accepted that acts done or statements made by the parties when property is acquired are admissible as evidence of intention as to how the beneficial interests should be held.[110]

194 However, in order to consider whether a binding agreement arose by implication, and the terms of any such agreement, it is necessary to view the commercial relationship which developed as a whole, and determine whether the dealings between them demonstrate that a concluded bargain was arrived at. This exercise is to be undertaken objectively and assessed from the point of view of reasonable persons in the position of those who are said to be parties to the agreement.

195 In concluding his analysis of Brogden, Ashley JA in PRA Electrical described the ratio decidendi in the following terms:[111]

... it shows that where, subsequent to the preparation of an unexecuted document - which the parties intend should constitute a contract between them - those parties act consistently with its provisions, it may be concluded that they have entered into an informal or implied contract in the terms of that document - and from a date identified by particular conduct.

196 In Geebung Investments Pty Ltd v Varga Group Investments (No.8) Pty Ltd[112] a question was raised as to whether an oral agreement to settle a proceeding, intended to be formalised in an executed document, was binding upon the parties in the absence of such a document. A majority of the New South Wales Court of Appeal[113] held that the parties had evinced an intention to enter into a binding agreement, and were bound by it. Kirby P said this:[114]

It is well settled that a court may have regard to the parties' communications after the formation of an allegedly binding agreement in order to determine, objectively, whether or not the parties intended to form a binding agreement: ...

The principles to be derived from the authorities, relevant to the resolution of the present appeal, may be summarised as follows:

1. The mere fact that the parties contemplate the execution of a formal contract, subsequent to an informal agreement, does not mean that that informal agreement is not presently binding.
2. The fact that the parties contemplate the drawing up and execution of a formal contract is a consideration which may point to the conclusion that no presently binding agreement was intended until that formal contract is executed.
3. The existence of matters of importance in which the parties have not reached consensus in their informal agreement will render it the less likely that they intended immediately to be bound before the execution of a formal document. Even where the parties have agreed on the "major matters", their subsequent conduct may indicate that they did not intend to be bound until the other issues between them were resolved in a formal document ...
4. In order to determine in what areas the parties were, and were not, in agreement, and what matters they considered necessary in order for an agreement to exist, it is legitimate to examine their subsequent conduct. ...
5. Depending on the size, importance and complexity of the subject matter, the less formal the initial agreement, the less likely it will be that it was intended to be legally binding and enforceable. Thus, an oral discussion which contemplates a subsequent formal written agreement is less likely to have been intended to have been immediately binding.
6. It is necessary in every case to consider the nature and importance of the transaction which the parties contemplate. Where the agreement concerns a large sum, or concerns a significant transaction, it is less likely to have been intended to be presently binding. ...
7. Where a binding agreement is said to have been formed as a result of correspondence, it is necessary to look at that correspondence as a whole. It is wrong to isolate any part of the correspondence from the rest in order to prove or disprove the existence of a binding agreement. ...

197 However, it is clear that conduct which occurred after the commencement of a commercial relationship cannot be used as evidence in two well recognises instances.

198 In the first place, while evidence of pre-contractual negotiations between the parties is admissible for the for the purpose of establishing objective background facts which were known to both parties at the time of contracting, evidence as to the actual intentions and expectations of the parties is not admissible to resolve questions as to the construction of a contract. As Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW)[115] put it:

... when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting ...

199 Secondly, evidence of conduct which took place subsequent to the formation of the contract cannot be used for the purpose of construing an agreement. The dangers of permitting reference to post-contractual conduct in aid of construing an agreement were referred to by Kirby P (as he then was) in Hide Skin Trading v Oceanic Meat Trades Ltd,[116] a case involving the construction of a written contract. His Honour said:

The dangers and disadvantages of permitting reference to post-contract conduct by the parties to the contract are obvious. The parties may tailor their post-contract behaviour to suit the case which they believe they may later have to present in court. They may seek to advance their understanding of the agreement, although they do not expect that the disputes will end up in court: simply to persuade their contracting partner towards accepting their construction of it.

The expansion of the field of inquiry by reference to post-contract conduct adds to the burden of fact finding. It consequently adds to the time and cost of litigation. The conduct of the parties may be based on an erroneous understanding of their legal rights. Estoppel apart, certainty in economic relationships favours holding parties to written contracts to their terms, properly understood ... [Citations omitted]

200 Heydon JA in Brambles Holdings Ltd v Bathurst City Council[117] summarised the principles in the following passage:

The first relevant principle of law is that pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term.

The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed.

The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed.

The fourth relevant principle is that the construction of a contract is an

objective question for the court, and the subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered or an estoppel by convention found ... [Citations omitted, emphasis added]

201 When conduct is analysed with a view to determining whether a contract has been created, the conduct of the parties must be capable of proving all the essential elements of an express contract before a binding agreement can be found. Subsequent conduct may therefore be looked at to determine the essential elements of the agreement in question. This exercise is essentially different from the exercise involved in construing the terms of an existing contract, where the subsequent conduct of the parties cannot be availed of as an aid to construction.

202 Finally, once a binding contract has been made, which may be inferred from the conduct of the parties, any subsequent communications or conduct may result in either a variation or a new contract, and in this way can affect the terms of the agreement which is first struck.[118]

203 By way of a distillation of the relevant principles which apply to the admission of evidence relating to the existence of a binding agreement which arises by implication and its terms, the following may be said:

1. In considering whether a binding agreement has arisen by implication and its terms, it is necessary to examine the conduct of the parties from the outset of the relationship and during the whole of the relationship. Evidence as to conduct at the time of the commencement of the relationship and conduct subsequent thereto is admissible for these purposes;
2. Admissions made by any party or on behalf of a party in the course of the relationship as to the existence of a binding contract and its terms, which are adverse to their respective interests in the outcome of the proceeding, are properly admissible against that party;
3. As part of the conduct which may be examined, the Court may have regard to the parties' communications after the formation of an allegedly binding agreement in order to determine, objectively, whether or not the parties intended to form a binding agreement and its terms;
4. The mere fact that the parties contemplate the execution of a formal contract, subsequent to an informal agreement, does not mean that that an informal agreement is not presently binding. If those parties act consistently with its provisions, it may be concluded that they have entered into an informal or implied contract in the terms of that document, and from a date identified by particular conduct;
5. In order to determine in what areas the parties were, and were not, in agreement, and what matters they considered necessary in order for an agreement to exist, it is legitimate to examine their subsequent conduct;
6. Evidence of pre-contractual conduct, including negotiations between the parties, is admissible for the for the purpose of establishing objective background facts which were known to both parties at the time of contracting, provided such pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term;
7. However, evidence as to the actual intentions and expectations of the parties is not admissible to resolve questions as to the construction of a contract;
8. Evidence of conduct which took place subsequent to the commencement of a commercial relationship is not admissible to resolve what the contract means, however, it may be admitted on the question as to whether and when a contract was formed and the content of its terms;
9. Subsequent conduct may therefore be used to determine the essential elements of the agreement in question, but not the construction of its terms; and
10. Once a binding contract has been made, which may be inferred from the conduct of the parties, any subsequent communications or conduct may result in either a variation or a new contract, and in this way can affect the terms of the agreement which is first struck.

204 With these principles in mind, I will proceed to analyse the facts with a view to determining whether any binding agreement did arise in this case, and if so when did it arise, and what were its terms. I will then proceed to consider the alternative claim that a joint venture arose in equity.

205 The first question is whether any binding agreement by implication arose prior to the purchase of the Wellington Parade Property on 24 November 1999.

206 I make the following findings as to events leading up to the purchase of the Wellington Parade Property which are the subject of dispute.

207 In late 1999, it was Stanley's company Ambridge, not Stanley which was engaged to seek out a property for purchase by Baker and Voukidis, its possible refurbishment and ultimate sale for a profit. Further, in November 1999 it was Ambridge, and not Stanley which identified the Wellington Parade Property as a potentially suitable investment.

208 I am satisfied that it was Ambridge which actually undertook work prior to the auction. Both Stanley and Ambridge's general manager Jacobs attended the auction of the Wellington parade Property on 24 November 1999. Taylor also attended.

209 Ambridge engaged a firm of architects and Wellington Parade Property consultants, AXIA Architects and Consultants ("AXIA"), to investigate the Wellington Parade Property and prepare a written report.[119] It gave instructions to Mr Kevin Greenhatch of that firm to provide a speedy but reasonably comprehensive pre-purchase report and feasibility study in respect of the Wellington Parade Property. AXIA prepared its report which was entitled in bold print on its front page "176 Wellington Parade East Melbourne, Wellington Parade Property Development Report, Including Existing Building Assessment, for Ambridge Investments Pty Ltd" [Underlining added for emphasis.] The AXIA report was dated November 1999.

210 The AXIA report was made available to Baker and Voukidis. It was sent by Stanley, in his capacity as Chief Executive Officer of Ambridge, to Voukidis at his firm Mason Voukidis, by facsimile transmission dated 22 November 1999 on the letterhead of Ambridge.[120] Baker said that he did not see this report until a few weeks before the trial.[121] However, I infer that Voukidis knew at the time that it was Ambridge which had commissioned preparation of the AXIA report and was undertaking the preliminary feasibility work for the project.

211 Ambridge also engaged a firm of solicitors Meerkin & Apel to review the auction contract for the Wellington Parade Property. A letter of advice from Rodney Saw of the firm was provided dated 23 November 1999 addressed to "Mr Mark Stanley, Ambridge Investments Pty Ltd".[122] It was sent by Stanley, in his capacity as Chief Executive Officer of Ambridge, to Voukidis at his firm Mason Voukidis, by facsimile transmission dated 23 November 1999 on the letterhead of Ambridge.[123] I infer that Voukidis knew it was Ambridge which had commissioned preparation of the advice from the solicitors and was undertaking the preliminary legal work for the project.

212 Prior to the auction, I am satisfied that Voukidis knew of the involvement of Ambridge in the project, which I have described. Voukidis took no objection to this involvement, and in fact made use of the material which was produced by it as preliminary work for the enterprise.

213 Garry Ganis ("Ganis"), who was then a director of Baker's company Powerlan, attended the auction, at the request of Voukidis. Ganis was a Melbourne based director of Powerlan at the time.

214 Prior to the day of the auction he was given instructions to attend the auction by Voukidis and if successful in the bidding, he was to sign a cheque for the deposit. Ganis was instructed to report back to Voukidis and Baker at the conclusion of the auction. Baker was informed of these arrangements by Voukidis. I find that Voukidis gave his instructions to Ganis on behalf of himself and Baker. They arranged for monies to be deposited into an account in the name of Networking Solutions Pty Ltd for payment of the deposit if the purchase was to proceed, as they hoped it would.

215 Ganis was also offered a percentage of the investment in his own right by Voukidis, which was up to 10% if he could come up with the money.

216 On 24 November 1999 Ganis met up with Stanley and Taylor, who also attended at the auction. Upon the bidding being successful for his parties, Ganis paid the deposit of $600,000, being 10 per cent of the purchase price from the account of Networking Solutions Pty Ltd and then reported back to Voukidis and Baker.

217 In examination-in-chief, Ganis said:[124]

Do you know who the venturers were to be from your discussion with Mr Voukidis? --- At the point - at that point in time, I understood it to be Mr Voukidis or - or a nominated entity, Mr Baker or a nominated entity, Ambridge being through Mark Stanley I assume, (indistinct) and myself.

I'm sorry, I beg your pardon. Did you know of Ambridge? --- Yes, I did.

218 In examination-in-chief, Ganis said further:[125]

MR PETERS: After the auction, did you speak at all with Mr Voukidis or Mr Baker about the property? --- I did.

Can you take it in steps and tell His Honour the substance of those discussions? --- Leading up to and immediately after the auction, my understanding was that Mr Baker was adamant that he retain 50 per cent share in - in the investment, and that Mr Voukidis would participate at least 25 per cent, and that there was 25 per cent left over which was going to be Ambridge's participation. I asked where my share was, as that was committed to me, and Mr Voukidis suggested to me that he had convinced Mr Baker to allocate part of their respective shareholdings and it was said to me that potentially 10 per cent would be available to me if I could come up with the money.

219 In cross-examination, Ganis said:[126]

Was it possible to identify the percentages before the participants were known, that is in the investment? --- As I recall I suggested that Mr Baker had declared that he wished to retain 50 per cent.

Yes? --- Mr Voukidis 75 per cent.

Yes? ---And Ambridge 25 per cent.

Yes? --- And that any offer to me was to come out of the percentages owned by Baker and Voukidis jointly.

I see, thank you.

HIS HONOUR: You mentioned 75 per cent for Mr Voukidis, you meant something else? --- Sorry, 25 per cent.

Yes.

220 I am satisfied that Ganis attended the auction in his capacity as an agent for Baker and Voukidis and acted on the instructions of Voukidis. Further, I am satisfied that Ganis had been instructed by Voukidis that the joint venture partners for the Wellington Street Joint Venture were to be Voukidis, Baker, Ambridge on behalf of Stanley, and possibly Ganis if he was able to take up the offer which had been extended to him. Further, I am satisfied that Ganis was told by Voukidis that his share of up to 10 per cent was to be allocated from the shares of Baker and Voukidis, if he could come up with the required capital.

221 Ganis subsequently had difficulty raising the $300,000 required for the investment offered to him. He was pressed by Voukidis or Baker to make the investment.[127] A disagreement arose between Ganis and Powerlan as to a sum of $100,000 which Ganis said was owing to him for share options under the Powerlan employee share option scheme. Ganis resigned from Powerlan in March 2000.[128] Accordingly his proposed investment in the Wellington Parade Joint Venture did not proceed.

222 The evidence given by Ganis as to the auction was broadly consistent with the evidence of Jacobs when the latter said:[129]

At the auction, I spoke to Ganis, who told me that he had spoken to Voukidis about the Property, and that he hoped to have a 10% interest in the Property if the Property was purchased (subsequently, in or about May 2000, Voukidis told me over the phone that he and Baker had decided to exclude Ganis from any involvement with the Property and that Todd McGrouther was to have that 10% share).

223 In short, I accept the evidence given by Ganis that Ambridge was to be a party to the joint venture and that this had been agreed prior to the auction conducted on 24 November 1999.

224 The parties also differed as to payment of a fee for finding the Wellington Parade Property and managing its development.

225 It was contended by the Defendants that prior to the auction there was no such agreement. They said that it was only after the auction and before settlement on 29 February 2000 that Stanley, Voukidis and Baker reached agreement as to the amount which would be paid as a fee for finding the property and managing its redevelopment, and that fee, which was agreed at $500,000, would stand as Stanley's capital contribution to the joint venture.

226 On the other hand, it was contended by the Plaintiff that agreement on the question of the fee was arrived at prior to the auction on 24 November 1999 and the agreement was that Ambridge would receive a $500,000 fee for finding the property and managing its redevelopment, and that fee would stand as Ambridge's capital contribution to the joint venture. Stanley gave evidence of his negotiations with Voukidis prior to the auction which included agreement as to payment of a $500,000 fee to Ambridge for its work and this was to be paid as part of its capital contribution to the project.

227 In a contemporaneous facsimile transmission dated 23 November 1999, which was admitted into evidence without objection, Stanley wrote to Taylor on the letterhead of Ambridge. The letter was signed by Stanley in his capacity as Chief Executive Officer of Ambridge. The letter read:

Dear Greg

Re: Joint Venture - Break Fast Investments Pty Ltd

Essentially the deal is:

• 500,000 fee for structuring and project managing the transaction
• 500,000 is then invested as a percentage of equity in transaction

ie. total equity 1.5m

we reinvest .500m

we are entitled to .500 plus 33% of profit

Any comments?

228 The letter to Taylor evidences a concluded agreement as at 23 November 1999 as to the payment of $500,000 as a management fee and the treatment of that fee as a capital contribution to the project.

229 Further, it would have been unlikely, as a matter of commercial prudence, that Ambridge would have gone to the expense of commissioning the AXIA report and the seeking the advice of its solicitors Meerkin & Apel on the auction contract without agreement as to reimbursement from the other joint venturers in advance of that work being undertaken.

230 I find that payment of the $500,000 fee was agreed to between Baker, Voukidis and Stanley by 23 November 1999, and that this fee was to be paid to Ambridge as a management fee for the work it had done, and was about to undertake, in managing the project.

231 I further find that it was also agreed between Stanley, Baker and Voukidis prior to the auction, that if they were successful in purchasing the Wellington Parade Property, Stanley's interest would be taken up by Ambridge in return for the fee which had been negotiated.

232 The records maintained by the Australian Securities and Investments Commission ("ASIC") show that Break Fast was incorporated on the day before the auction, on 23 November 1999. It was registered as a proprietary company limited by shares. The registered office was the office of Voukidis, being the office of Mason Voukidis Pty Ltd, Suite 2, Level 5, 255 George Street, Sydney. The company had three directors, Baker, Stanley, and Voukidis, who was also appointed the company secretary. The company had a share capital of $4.00 divided into four shares paid up to $1.00 each. Baker held two of the shares, whilst Stanley and Voukidis held one share each.

233 By a facsimile letter dated 24 November 1999, Mr John Esquivel ("Esquivel") of the firm Mason Voukidis advised Stanley of the incorporation of Break Fast, including its directors and shareholders. Esquivel had worked as an accountant in the Voukidis accounting firm since 1966 and remained there until mid 2000. It was part of his duties to incorporate companies for Mason Voukidis on behalf of its clients. These companies would usually be obtained from a firm known as BH Australian Company Formations ("BH").

234 Following incorporation of a company, Esquivel said that a company register would, as a matter of usual practice, be produced and couriered to Mason Voukidis. He identified the company register of Break Fast which he said he received from BH within a couple of days of Break Fast being formed.

235 I am satisfied that, at the time of the auction of the Wellington Parade Property on 24 November 1999, agreement as to the ownership of the property had not been finalised between the parties, although I am satisfied there was consensus on the basic structure to be used in moving forward.

236 At the time of the purchase of the Wellington Parade Property at auction, I am satisfied that the parties had not worked out between themselves precisely what their respective interests would be in the project. They agreed that this would be worked out once the purchase price and the actual capital contributions required to be made by each of them was known. Further, it was not known who would be the parties to the venture. Although I am satisfied that Stanley through his company Ambridge, Baker and Voukidis had agreed between them that they would participate, Ganis had been approached but had not then agreed to take part, and the corporate nominees in the project on behalf of Baker and Voukidis had not then been identified.

237 However, I am satisfied that close to, or shortly after the auction of the Wellington Parade Property, it was agreed between Jacobs on behalf of Ambridge, and Voukidis on behalf of himself and Baker, that the basic structure for the holding and development of the property would be an unincorporated joint venture, with Break Fast as the manager. Voukidis, an experienced taxation accountant, was alert to the taxation advantages of an unincorporated joint venture. Jacobs said in his evidence:[130]

Specifically, sometime in about December 1999, I had a telephone conversation with Voukidis in which we discussed that the appropriate structure for holding the Property was an unincorporated joint venture with Break Fast as manager. In this conversation, Voukidis, whom I believe to be an experienced tax accountant, and I discussed the joint venture structure held immediate tax advantages for the investors, particularly in the early years of the Break Fast JV when operating losses were predicted and those losses could be utilised for tax purposes by the investors' entities. We also discussed that any trading profits or capital profits would be dealt with individually by the investor entities for tax purposes, rather than having a corporate structure to bear tax.

I accept this evidence. The conversation is likely to have taken place as Jacobs described it.

238 As to the involvement of Ambridge in the joint venture, as I have already found, I am satisfied that by 24 November 1999 it was agreed between Baker, Voukidis and Stanley that Ambridge would participate in the joint venture as Stanley's corporate nominee.

Work Undertaken for the Joint Venture by Taylor on Behalf of Ambridge

239 Settlement of the purchase of the Wellington Parade Property took place on 29 February 2000.

240 Taylor, on behalf of Ambridge, did a number of things to advance the Wellington Parade Joint Venture.

241 Shortly prior to the settlement, Ambridge purchased café furniture sold by the proprietors of the café situated on the ground floor of the Wellington Parade Property for continued use in the café. Taylor's company Headland paid $10,000 for the furniture on behalf of Ambridge.

242 After the settlement, Taylor spent much of his time liaising with Mr Kevin Greenhatch of AXIA. Break Fast had appointed AXIA as the architects to undertake the refurbishment of the property. Alexander Robertson & Co was also retained as the managing agents for the property. An amount of about $25,000 fell due for payment from Break Fast to AXIA for the consulting work which AXIA had undertaken. On 14 April 2000 Ambridge and Headland each paid $12,134.75 to pay the AXIA account as a further capital contribution by Ambridge to the joint venture.

243 Throughout 2000 Taylor, on behalf of Ambridge, every two or three weeks attended consultants' meetings and project co-ordination meetings organised by AXIA in respect of the refurbishment project. Jacobs would also attend those meetings, and, on occasion, Stanley would also attend. AXIA would prepare minutes of these meetings, which included a summary of the decisions required to be taken by Break Fast for the development. Stanley, on Ambridge letterhead, would send copies of the AXIA minutes to Voukidis.[131] Taylor estimated that he spent approximately 15 hours a week on these tasks. He stated in his evidence, which I accept, that he received no payment for the work he was performing because, as he said:

... I was performing it on behalf of Ambridge on the basis that Ambridge was to undertake this work as part of its joint venture obligations.

244 In his capacity as general manager of Ambridge, Jacobs amongst his other duties was responsible for the preparation of the financial statements for Break Fast, during 2000, 2001 and into late 2002. From March 2000 Jacobs created a computer program for the accounts of Break Fast which enabled him to produce monthly financial management data, including a balance sheet, a profit and loss statement and a general ledger. He updated these accounting statements from time to time.

245 During March and April 2000 Jacobs had discussions with Voukidis in which it was agreed between them that Jacobs was to prepare the accounts for Break Fast and that Jacobs was to liaise with Voukidis in the relation to those accounts.

246 The first accounts prepared for Break Fast in respect of the Wellington Parade Project were prepared by Jacobs in the first and second quarters of 2000. This work was undertaken in his capacity as the general manager for Ambridge, pursuant to the arrangement agreed with Voukidis.

247 The form of the balance sheets were consistent with a partnership by way of a joint venture of the kind alleged by the Plaintiffs, with Ambridge included as a co-joint venturer along with Baker and Voukidis. The accounts were inconsistent with the structure of company ownership as alleged by the Defendants, with shares held by the contributors in Break Fast held reflecting their interests in the venture.

248 The Break Fast balance sheet dated February 2000 showed equity in the venture as follows:

249 The Break Fast balance sheet dated May 2000 was to similar effect in terms of the structure of ownership in the Wellington Parade Property. It showed equity in the venture as follows:

250 Pursuant to the arrangement between them, Jacobs sent a copy of this balance sheet to Voukidis by facsimile dated 13 July 2000, with an accompanying letter.[132] It is to be noted that in the balance sheet sent to Voukidis, reference is made to Baker and Voukidis personally, and not their corporate nominees. Further, and significantly, the balance sheet refers to Ambridge, and not Stanley, as one of the partners and records its capital contribution as $500,000.

251 There is no doubt that Voukidis received the fax which included the 30 June 2000 balance sheet for Break Fast. On or about 14 July 2000, a telephone discussion took place between Jacobs and Voukidis about the contents of the fax. Beside the reference in Jacobs' faxed letter to a request for information as to "Joint Venture details - parties, equity participation etc" Voukidis noted in his handwriting, referring to the joint venture partners: "Tod 10, Ambridge 25%, CV 25% and TB 40%".[133] This accords with Jacobs' contemporaneous note of the same conversation which recorded: "JV Parties: Tod McGrouther 10% 300 K; Ambridge 25% 500K; Chris V 25%; Theo Baker 40%".[134]

252 Voukidis attempted to explain away this note by saying that they were notes he took which recorded what Jacobs was asking for in the event that "we went down the path of a joint venture" however at that time, he continued "we had pretty much knocked that on the head".[135] I do not accept this explanation of Voukidis. For some time Jacobs had been requesting Voukidis to provide him with the corporate nominees proposed by Baker and Voukidis to represent their interests in the Wellington Parade Joint Venture so that the joint venture agreement could be completed. For example, on 5 April 2000, Jacobs wrote to Voukidis by email asking him to "advise of the joint venture parties to enable completion of the JV agreement". This was repeated by Jacobs in a facsimile to Voukidis dated 13 July 2000. It was in response to this request from Jacobs that Voukidis supplied the information to Jacobs that McGrouther would be the fourth joint venture partner with a 10% interest; McGrouther's 10% interest would come from the interests in the joint venture held by Voukidis and Baker; resulting in the interests of the four parties to the joint venture being: McGrouther 10%; Ambridge 25%; Voukidis 25%; and Baker 14%.

253 When cross-examined on the fax of 13 July 2000 and its contents[136] Voukidis admitted that he did not write back to Jacobs pointing to any error in the balance sheet. He said that there was "no need because I spoke to him about it".[137] I do not accept that Voukidis had any such discussion with Jacobs.

254 I am satisfied that Voukidis did not challenge Jacobs on the basis on which the May 2000 balance sheet had been prepared. Indeed he accepted that treatment of the Break Fast accounts. This provided a signal to Jacobs to continue to have the Break Fast accounts prepared on the same basis, which he did. Further, in his conversation with Jacobs of 14 July 2000, Voukidis accepted without question that Ambridge held a 25 % interest in the Wellington Parade Joint Venture.

255 This conduct amounts to an admission made by Voukidis, against the case which he now seeks to present, that Ambridge was in fact a joint venture partner with a 25% interest in the venture. Voukidis not only had the opportunity to correct the Break Fast accounts had he chosen to do so, given his professional qualifications as an accountant he had the knowledge to do so, and given his statutory obligations as a director of Break Fast he had the duty to do so, if in fact the accounts were incorrect.

256 Further, I am satisfied that in confirming the structure of the joint venture on 14 July 2000, Jacobs was representing the position of Ambridge and Voukidis was representing the position of himself, Baker and McGrouther. As such, the statement made by Voukidis to Jacobs amounted to an admission on the part of himself, Baker and McGrouther, that Ambridge held a 25% interest in the joint venture.

257 The Break Fast balance sheet dated June 2000 was to similar effect in terms of the structure of ownership in the Wellington Parade Property as the accounts had been previously drawn, save for the addition of McGrouther's 10% interest, which occurred in June 2000. It showed equity in the venture as follows:

258 This balance sheet was provided by Jacobs to Baker by an email dated 15 August 2000.[138] The balance sheet referred to "Partners' Equity" and referred to the partners as Voukidis, Baker, McGrouther and Ambridge. Baker denied receiving this email,. Moreover, he was emphatic in his denial when he was cross-examined on the matter.[139] However, and in contrast, he simply said in his witness statement which he adopted as his evidence in chief, that he could not recall receiving this email and said that he had "no record of ever having received that email".[140] Baker's change in position with regard to receipt of the email is significant. The email address of the email, tbaker@powerlan.com.au, was confirmed by Baker as being his email address at the time. He used this email address when he worked at Powerlan. He left Powerlan in September 2004. In cross-examination Baker said that he accepted that the email was sent to him, but he never received it.[141] No person was called from Powerlan was called to establish whether the company had received it or not, or if received, it was accessed by its intended recipient, Baker. I conclude that, as a matter of likelihood, the email was sent and that it was received by Baker. Further, if it was received by Baker, it is likely that the email was read by him.

259 The Break Fast profit and loss statement which was prepared in late 2001 for the year ended 30 June 2000 showed a net loss distributed among the participating partners as follows:

260 The Break Fast balance sheet for the same period 30 June 2000 showed:

The notes relevant to these entries in the Break Fast balance sheet said:

261 I conclude that the method used for the preparation of the Break Fast accounts for the year ended 30 June 2000 was brought to the attention of both Voukidis and Baker. Further, neither took any step towards correcting the position, if it was in fact wrong, when bo0th had the opportunity, and indeed the duty as directors of Break Fast to do so.

262 From time to time, commencing in early 2000, Ambridge engaged Mr Howard Obst ("Obst") of the firm of solicitors Tress Cocks & Maddox to prepare joint venture agreements on behalf of Break Fast for the Wellington Parade Joint Venture.

263 On or about 25 January 2000, Obst attended a conference with Jacobs and Stanley to discuss amongst other matters the structure of joint ventures for property developments. Obst was given instructions by Stanley and Jacobs to prepare joint venture agreements in respect of the Wellington Parade Joint Venture and the joint venture between Taylor's company, Headland, and Ambridge.

264 Following instructions given to him, Obst proceed to prepare a first draft joint venture agreement in respect of the Wellington Parade Joint Venture which he described as a "draft shell joint venture agreement". The first draft of a joint venture agreement was prepared by 3 February 2000.[142] The first draft was sketchy in terms of the participating entity which in each case was to represent the interests of Baker, Voukidis and those of Stanley and Taylor. Nevertheless, it recorded that Break Fast acted as the joint venture manager and held the Wellington Parade Property on behalf of the joint venturers as their nominee. A copy of the draft shell joint venture agreement was forwarded to Jacobs of Ambridge and Taylor of Headland.[143]

265 A second draft was prepared by 4 February 2000 which was forwarded to Stanley of Ambridge.[144] This added a specific reference to Ambridge, describing it as one of the "Joint Venturers". Reference was also made the "Participating Interest" of Ambridge which was described as 25%, and to an allocation of the $500,000 fee "Acquisition Fee" derived by Ambridge which was to be applied as Ambridge's capital contribution. The second draft joint venture agreement was sent to Voukidis on 4 February 2000.

266 The second draft joint venture agreement provided the following structure for the Wellington Parade Project:

(a) The joint venture partners to be nominated by Baker and Voukidis were collectively referred to as "X Pty Ltd (ACN ... ... ...) ("X")";

(b) Ambridge was identified by name, ACN number and address;

(c) Collectively, X and Ambridge were called "the Joint Venturers";

(d) Break Fast was identified by name, ACN number and address and was described as the "Venture Manager".

1. Pursuant to an agreement made between X and Ambridge in or about ... 1999:

(a) Ambridge identified as a suitable investment for X the land and buildings at 176 Wellington Parade, East Melbourne described in certificate of title volume 9262 folio 922 ("the Property"); and

(b) contracted on behalf of X and Ambridge to acquire the Property.

1. As a result of such identification Ambridge became entitled to be paid by X (as X acknowledges is now due) the sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) ("the Acquisition Fee").

1. The Joint Venturers have agreed that they shall enter into a Joint Venture for the purpose of completion of the purchase and the development and management of the Property ("the Objectives") and that the equity share of Ambridge shall be represented by Ambridge waiving its entitlement to the Acquisition Fee.

1. The Venture Manager shall mange the Joint Venture and shall hold the Property on behalf of the Joint Venturers as nominee.
2. For the purposes of regulating their relationship in the advance of the Objectives X and Ambridge have agreed to enter into a Joint Venture to achieve the Objectives ("the Joint Venture") whereby they shall:

(a) contribute by financial and non-financial means;

(b) appoint the Venture Manager to advance their common interests;

(c) execute this agreement.

OPERATIVE PART

Formation

1. The Joint Venturers agree to join in the Joint Venture for the purpose of achieving the Objectives.
2. The Joint Venturers shall pay by way of capital contribution to the Joint Venture the following sums:
   • X: $1,500,000.00 to the bank account operated by the Venture Manager by ... 2000;
   • Ambridge: $500,000.00 represented by waiver of its entitlement to the Acquisition Fee which by the execution of this Agreement it effects.
3. Upon the making of such capital contributions, and subject to clause 6, the Joint Venturers shall participate in the Joint Venture and be entitled to the return of capital and payment of profits and obliged to bear liability and losses in the following proportions ("the Participating Interests");
   • X: 75%
   • Ambridge: 25%.
4. Upon acquisition the Joint Venturers shall hold the Property in equity as tenants in common in the proportions of their Participating Interests.

1. The Venture Manager is hereby appointed manager of the Joint Venture to act on behalf of, and in the name of, the Joint Venturers, and, for the purpose of advancing the Joint Venturers' interests and achieving the Objectives, and not otherwise, is an agent of the Joint Venturers. The Venture Manager may hold assets of the Joint Venture in its name in which case it does so as nominee for the Joint Venturers as beneficial owners to the extent of their respective Participating Interests.
2. Each of X and Ambridge may appoint up to two representatives as directors of the Venture Manager.
3. Notwithstanding anything in this agreement or in the constitution of the Venture Manager decisions on the following issues must be made by the Joint Venturers unanimously:

(a) the borrowing of money;

(b) calls of capital;

(c) the granting of securities over Joint Venture assets;

(d) the terms and conditions of any contract for the sale of the Property;

(e) otherwise dealing with any Joint Venture assets.

1. The Joint Venturers agree that the provisions of clauses 6 and 7 shall operate in priority to the constitution of the Venture Manager to the extent that they are inconsistent with such constitution.
2. The Venture Manager shall do all things necessary to advance the interests of the Joint Venturers and to achieve the Objectives including without limitation:

9.1 the negation of all contracts to be entered into by the Joint Venturers, whether in the name of the Venture Manager or the Joint Venturers;

9.2 the operation of all bank accounts of the Joint Venture;

9.3 the preparation of all necessary financial budgets and time lines to the Joint Venture and reporting to the Joint Venturers all significant variations to the budget and time lines;

9.4 the maintenance of all books and records (as that expression is defined in the Corporations Law) of the Joint Venture;

9.5 the accounting for capital income and expense of the Joint Venture;

9.6 the management of the development phase of the Joint Venture;

9.7 the distribution of any profits of the Joint Venture to the Joint Venturers in proportion to their Participating Interests at the time of such distribution.

1. The Venture Manager shall retain an auditor independent of the Joint Venturers or either of them to audit the books and records of the Joint Venture no less frequently than annually.
2. Each of the Joint Venturers shall at all reasonable times be entitled to inspect the books and records of the Joint Venture as maintained by the Venture Manager provided it gives two clear business days' written notice to the Venture Manager and the other Joint Venturer of the time and date upon which it wishes to inspect such books and records.

12.1 from either one of them upon terms then agreed; and

12.2 from external financiers on commercial terms.

1. Should the Joint Venturers agree, the Venture Manager may call upon the Joint Venturers to loan funds to the Venture Manager in the same proportion as the Joint Venturers then participate in the Joint Venture. The Venture Manager shall pay to the Joint Venturers interest on such loans at the rate nominated by the Venture Manager when making the call such interest to be paid monthly in arrears.
2. If either Joint Venturer fails to provide such loan within seven days of the date nominated by the Venture Manager, the other Joint Venturer may loan an equivalent sum which sum shall be a loan by that Joint Venturer to the defaulting Joint Venturer repayable upon demand and incur interest at a rate of 2% p.a. in excess of the rate payable on loans made in response to the respective calls pursuant to clause 13 such interest to be paid monthly in arrears.

1. Except for the purpose of the commencement of proceedings for an interim or interlocutory injunction, a Joint Venturer shall not commence legal proceedings against the other alone in respect of a dispute between them related to the Joint Venture unless the dispute is referred to mediation before a mediator agreed between them, or failing agreement to be appointed by the President for the time being of Victorian Lawyers RPA Limited (ACN 075 475 731).

1. Should either Joint Venturer wish to dispose of its interest in the property and the Joint Venture it must first offer such interest for a nominated consideration and terms to the other Joint Venturer. If the Joint Venturers cannot agree upon consideration and terms for such disposition, subject to this agreement, the Joint Venturers may then, but not before, pursue such other course as each wishes.

1. Each party shall use its best endeavours to advance the interests of the Joint Venture and to achieve the Objectives.
2. Neither Joint Venturer may, without the written consent of the other Joint Venturer (which consent shall be at the absolute discretion of that Joint Venturer) mortgage, charge or otherwise encumber its interest in the property, the Venture Manager or the Joint Venture.
3. Neither Joint Venturer may, without the written consent of the other Joint Venturer (which consent shall be at the absolute discretion of that Joint Venturer) otherwise than in accordance with this agreement, assign or attempt to assign its interest in the property, the Venture Manager, the Joint Venture or this agreement to any third party.
4. The Venture Manager may not, without the written consent of the Joint Venturers (which consent shall be at the absolute discretion of the Joint Venturers) assign or attempt to assign its rights in this agreement to any third party.
5. Nothing in this agreement or the Joint Venture shall be construed to conclude that the parties are, or any of them is, a partner of the others or any of them. To the extent that a Joint Venturer holds itself out as representing the Joint Venturers it shall do so as agent only which agency shall be limited to the extent that such Joint Venturer is authorised by the Venture Manager (if any) or the Joint Venturers.
6. The Joint Venturers must do anything including the execution of any document that any other party may reasonably require to give full effect to this agreement.
7. Any provision of this agreement which is unenforceable or partly unenforceable is, where possible, to be severed to the extent necessary to make this agreement enforceable unless to do so would materially alter the intended effect of the agreement.
8. The parties and each party's directors, officers, servants and agents shall be bound to keep the terms of this agreement and information relating to the Joint Venture confidential except to the extent that they are required to be disclosed for the purpose of participating in any dispute relating to the agreement or the Joint Venture or otherwise as required by law.

267 On 21 February 2000, Jacobs sent a follow up facsimile letter to Voukidis which made reference to the second draft joint venture agreement. It asked: "Any comments on the proposed JV agreement"? Voukidis gave evidence that he received the facsimile letter and the second draft joint venture agreement but that he told Jacobs that the draft joint venture agreement was unacceptable and that both he and Baker did not agree to restructure the joint venture in relation to the Wellington Parade Property, which he said was in the form of a shareholding in Break Fast, to the structure which was in the draft joint venture agreement.[145] However, the version of this conversation given by Jacobs was quite different.[146] He said that on or shortly prior to 16 March 2000 he had a telephone conversation with Voukidis. He said they discussed the contents of the draft joint venture agreement. He said that Voukidis told him that he was largely in agreement with the operative provisions of the draft agreement, but that recital "A" needed to be fleshed out more fully to document the role of Ambridge in the selection, development and management of the Wellington Parade Property.

268 Although no notes or memoranda were produced by either party as to conversation which were taken contemporaneously with its occurrence, I prefer the version of the conversation given by Jacobs as to his conversation with Voukidis about the second draft joint venture agreement, because it is consistent with the events which followed.

269 On 16 March 2000 Jacobs sent a facsimile letter to Taylor, with a copy sent to Obst, which made reference to his conversation with Voukidis as he described it. Jacobs stated in that facsimile letter:

Chris is largely in agreement with the operative provisions of the deed but requires that Recital A be fleshed out to more fully document the role and responsibilities of Ambridge in the selection, development and management of the property.

270 As a matter of likelihood, I accept the facsimile letter of 16 March 2000 sent by Jacobs to Taylor as a reasonably contemporaneous and accurate record of the conversation which in fact took place between Jacobs and Voukidis after 21 February 2000.

271 On 21 March 2000, Jacobs met with Obst to discuss with him the proposed amendments to the second draft joint venture agreement. Obst proceeded to prepare a third draft joint venture agreement. On 22 March 2000, Jacobs received this document from Obst. This reflected the amendments which were discussed in the meeting of 21 March. The third draft joint venture agreement contains a recital "A" which contains further detail as to the role of Ambridge, consistently with the request of Voukidis, as related in the version of events given by Jacobs. The amended recital "A" was expanded to part "A" and part "B" in the following form:

(a) undertook a search of the Melbourne property market for a suitable investment for Voukidis Baker;

(b) identified as potentially a suitable investment the land and buildings at 176 Wellington Parade, East Melbourne described in certificate of title volume 9262 folio 922 ("the Property");

(c) caused to be produced for the benefit of Voukidis Baker a building assessment and development analysis in respect of the Property including:

(i) a project construction strategy and cost estimate,

(iv) a proposal for potential extension of the Property;

(d) bid for and contracted on behalf of Voukidis Baker and Ambridge to acquire the Property.

1. Further, Ambridge has agreed at the request of Voukidis Baker to manage the project of upgrading and adding value to the Property for so long as Voukidis Baker and Ambridge continue to have an interest in the Property. Such management to include, but not be limited to:

(a) management of the internal base building refurbishment and external construction including direction to the project supervisor whether through project meetings or otherwise;

(b) management of all tenancy issues including instructions to and reviewing reports from the real estate managers appointed for the time being; and

(c) management of all legal issues including instructions to and reviewing reports from the solicitors appointed for the time being.

272 Again, as a matter of likelihood, these instructions would not have been given to Obst, if in fact the earlier conversation between Jacobs and Voukidis had occurred as the latter described it.

273 After his meeting with Obst, Jacobs telephoned Voukidis and asked him who Ambridge should bill for the $500,000 fee for finding the property. Voukidis advised that the bill should be addressed to Break Fast as manager of the joint venture. Jacobs also asked, who would be the entities to the joint venture agreement that would represent Baker and Voukidis. Voukidis responded by saying that he would advise Jacobs of this in due course. Jacobs made a note of the conversation at the time.[147]

274 I find that Voukidis never told Jacobs that he objected to any operative term of the second draft joint venture agreement; his only suggestion was to include some further information in the non operative part of the agreement, described as "BACKGOUND". In particular he did not take issue with the central planks of the structure for the joint venture which provided for Break Fast to act as the "Venture Manager" which could hold the assets of the defined "Joint Venture" in its name as "nominee for the Joint Venturers as beneficial owners to the extent of their respective Participating interests". Further, and importantly, Voukidis did not take issue with the inclusion of Ambridge as one of the "Joint Venturers" holding a "Participating Interest" of 25%.

275 Of note is the fact that there was no evidence that Voukidis sought to convey instructions to Obst, either directly or through Jacobs, to draw up an agreement, such as a Break Fast shareholders agreement, which reflected the structure of ownership of the Wellington Parade Property which is now contended for by the Defendants. Indeed, at no other time did either Baker or Voukidis seek to formalise the structure of the Wellington Parade Project by a written agreement in conformity with their present case.

276 Insofar as the non operative part of the agreement, described as "BACKGOUND", recited in part "A" as the past work which had been undertaken by Ambridge, this was work which in fact had been undertaken by Ambridge, with the knowledge of Baker and Voukidis.

277 Insofar as the non operative part of the agreement, described as "BACKGOUND", provided in general terms in part "B" for future obligations to be assumed by Ambridge, this work was also undertaken by Ambridge, with the knowledge of Baker and Voukidis. Ambridge engaged in management of the refurbishment;, management of tenancy issues which arose in relation to the building, and it managed legal issues which arose from time to time.

278 By the conduct of Voukidis and Baker in permitting Ambridge to undertake this work, terms of the agreement to the effect contained in the "BACKGROUND" part "B" are to be implied, even if the final text of the redraft comprised in the third draft joint venture agreement was never sighted by them until the provision of a later partly signed draft on 8 January 2002.

279 The conduct of Voukidis on or about 16 March 2000, in agreeing with the operative provisions of the second draft agreement on 21 February 2000, subject only to suggesting that the written agreement be amended to set out more fully in the non-operative preamble the role and responsibilities of Ambridge in the selection, development and management of the property, amounted to an admission against his interest that, by mid March 2000, there existed an agreement between the parties to the following effect:

(a) Ambridge was a party to the joint venture in its own right, and by reason of the credit given to it of $500,000 as described in the draft agreement, it held a 25% interest in the joint venture;

(b) Break Fast was to be the manager for the joint venture and would hold the Wellington Parade Property on behalf of the participating joint venturers as their trustee in accordance with the terms of the draft agreement;

(c) Baker and Voukidis between them held a 75% interest in the joint venture, which interest would be apportioned upon them nominating any additional joint venture party and upon them nominating corporate nominees to hold their interests and that of any additional joint venture party; and

(d) Otherwise the terms of the joint venture were those contained in the second draft agreement.

280 I am also satisfied that it was within the scope of the authority of Voukidis for him to approve or disapprove of the structure of the joint venture in relation to the Wellington Parade Property on Baker's behalf. Insofar as the Voukidis version of the conversation with Jacobs may be accepted, it amounts to a concession that Voukidis was in a position to speak on behalf of Baker in relation to the structure of the Wellington Parade Project, and approve or disapprove of what was put forward by Jacobs, and Ambridge's solicitors. Further, I find that Voukidis did not indicate in his conversation with Jacobs that he needed to refer to Baker for instructions on the matter.

281 Given that the admission was made by Voukidis in the context of organising the structure of the Wellington Parade Joint Venture, he had the implied authority of Baker to act on his behalf when he made it, and the subject of the admission was within the scope of his authority. As such, the conduct of Voukidis on or about 16 March 2000, which I have described, also amounted to an admission against the interest of Baker that the structure of the joint venture as discussed between Voukidis and Jacobs, was acceptable to Baker.

282 The existence of the agreement, as it had evolved to this point in mid March 2000, is consistent with the identification of the participating partners in the accounts of Break Fast which were recorded for this period. It will be recalled that the Break Fast balance sheet dated February 2000 described "Owners Equity" in the venture as being owned by "T Baker", "C Voukidis", and "Ambridge Investments Pty Ltd". The balance sheet for May 2000 was similar, save that the ownership interests of Baker and Voukidis were amalgamated. However, the ownership interest of Ambridge remained separately recorded.

283 The outstanding issue to be determined was the nomination by Baker and Voukidis of the corporate entities which would hold their respective interests in the remaining 75% of the venture, alongside the 25% interest of Ambridge. Jacobs pursued this information from Voukidis. On 5 April 2000 he wrote an email to Voukidis, which amongst other things said: "Please advise of the Joint Venture parties to enable completion of the JV Agreement".

284 By 6 April 2000, Stanley's company Ambridge, and Taylor's company Headland had executed a written joint venture agreement in respect of Ambridge's interest in what was described as the "176 Wellington Parade, East Melbourne" joint venture.[148] The stated objective of this joint venture agreement was to "Acquire 25% interest", and the "Participating Interest" of each was described as 50% each, which was a reference to the share in the Wellington Parade Joint Venture which Ambridge held. Ambridge was appointed the "Venture Manager" and was empowered to hold the venture assets in its name as "nominee for the Joint Venturers as beneficial owners to the extent of their respective Participating Interests". Terms relating to funding, dispute resolution, the disposition of interests and mutual duties were also provided for under the Ambridge and Headland joint venture agreement.

285 An oral offer had earlier been extended to Ganis to take a 10% interest. As has already been found, Ganis in the period leading to his resignation in about March 2000 did not have ready funds in the sum of $300,000 to invest. An oral offer for a 10% interest was extended to McGrouther, probably in late May 2000,[149] which he took up. McGrouther joined the enterprise on 9 June 2000 on payment of a cheque for $300,000. McGrouther then acquired a 10% interest in the Wellington Parade Property.

286 Three important issues arose as to McGrouther's interest. The first question is: whether the investment of McGrouther in the joint venture was agreed to between him and Baker and Voukidis on or before 23 November 1999, as the Defendants contend, or shortly prior to the time when he wrote out his cheque for $300,000 on 9 June 2000? The second question is when was it agreed that IMF would be the corporate entity which would hold McGrouther's interest on his behalf? The Defendants contended that this was also agreed to between the parties on or before 23 November 1999, while the Plaintiff submits that this did not occur until February 2001. The third question is what was the agreement, if any, as to how IMF's interest in the project would be held?

Timing of Agreement as to McGrouther's Investment

287 As noted, the Defendants advanced a case that McGrouther's involvement in the Wellington Parade Project was settled on 23 November 1999. I find against this submission. Not only do the facts which I have found in relation to the offer extended to Ganis to take up a 10% interest, which extended into at least January 2000, tell against it, other facts emerged in the trial which dispel the contention.

288 McGrouther said in his witness statement which he signed, dated February 2006 for these proceedings, that in 1999, he was contacted by either Baker or Voukidis, he could not recall which. He did not recall the specific words used by either Baker or Voukidis, however, one of them offered McGrouther, as he said "the opportunity to purchase a 10% interest, for $300,000, in a building they said they were proposing to purchase, and then refurbish, in Wellington Parade, East Melbourne". McGrouther could not recall if Baker or Voukidis told him about the structure that was to be used for this investment. Baker or Voukidis told him that there were three other investors in the project, Baker, Voukidis and Stanley; however he was not told of the percentage that each was to hold.

289 He said further that in another conversation with either Baker or Voukidis, he could not recall which, he said to one or other of them that "I agreed to pay $300,000 for a 10% interest in the Wellington Parade, East Melbourne Wellington Parade Property. Either Baker or Voukidis told me to write out a cheque for $300,000". McGrouther confirmed in his cross-examination that the further conversation took place shortly prior to him signing the cheque for $300,000 in June 2000. The cheque was in fact signed by McGrouther on 9 June 2000 and was payable to Break Fast, as evidenced by the cheque butt in respect of IMF's account with St George Bank Limited. The cheque amount was subsequently debited to this account on 16 June 2000.

290 When Break Fast settled on the purchase of the Wellington Parade Property on 29 February 2000, it did not have sufficient funds to pay the stamp duty on the transfer.[150] Baker was non-responsive when cross-examined on the matter in the following exchange:

Had Break Fast had available to it any agreement with Mr McGrouther to pay 300,000 for a 10 per cent interest, it would've asked Mr McGrouther to pay at settlement on 29 February 2000? --- I - I wasn't managing the affairs of Break Fast, so I - I can't respond to that.

See what I want to suggest to you is that it's not possible for you to have signed the documents at New Supplementary Court Book 40-42, the declaration of interest in shares, the notice of beneficial ownership, to give Mr McGrouther a ten per cent interest prior to the auction when that interest wasn't required until shortly before June 2000? --- I'm - I'm hearing what you're suggesting.

291 However, Voukidis in the course of his cross-examination confirmed that "If Tod [McGrouther] was agreeing to pay the $300,000 earlier, he would have given it at settlement [on 22 February 2000]" to enable the transfer to Break Fast to be registered at the Land Titles Office.[151]

292 I am satisfied that the investment of McGrouther in the joint venture was not agreed to between him and Baker and Voukidis until shortly prior to the time when he wrote out his cheque for $300,000 on 9 June 2000.

Timing of the Nomination of IMF as McGrouther's Corporate Entity

293 The evidence given by McGrouther as to when the interest in the venture was taken up by IMF in the joint venture, and the nature of that interest, was not reliable.

294 It is to be noted that there were a number of discrepancies between McGrouther's signed witness statement dated February 2006, which he appears to have signed at that time, and his witness statement dated 29 September 2009, which he swore to in the witness box in the course of giving his evidence at the trial. In particular, his previous uncertainty as to whether it was Baker or Voukidis with whom he had conducted his initial conversations in relation to his investment in the Wellington Parade Property evaporated. McGrouther became certain that all such conversations were conducted solely with Baker.

295 Baker said in his witness statement relied upon at the trial [152] that he notified Break Fast by letter that "I would be holding my shares in Break Fast for Careerpath and IMF Pty Ltd. The letter was prepared on my behalf by someone in the office of Mason Voukidis". The letter referred to by Baker in this passage was the notice of beneficial ownership signed by Baker dated 23 November 1999. Baker, in an earlier passage in his witness statement[153] refers to a conversation with McGrouther in which Baker invited McGrouther to invest in the Wellington Parade Property. It was notably brief and lacked any reference to which entity would be making the proposed investment on behalf of McGrouther. The essence of the conversation was:

I'm putting in about $1.5 million for 50%, you can have 20% of that. McGrouther replied "Ok cut me in for $300k". I replied "Ok Tod I'll arrange it. I'll come back to you when we require the funds".

No other conversation with McGrouther is noted by Baker in his witness statement in which he is informed by McGrouther that the entity which he wished to take his interest in the Wellington Parade Property was IMF. Similarly, McGrouther gave no evidence in his witness statement that he informed either Baker or Voukidis in or about November 1999 that his interest in the Wellington Parade Property was to be held by IMF.

296 An email dated 8 February 2001 written by Voukidis and sent to Baker and McGrouther sheds light on the matter. This email was written in the context of an application being made by Break Fast for the refinancing of the Wellington Parade Property with Colonial First State. Voukidis asked of both Baker and McGrouther:

Finally, I will require firm details of which entity or individual you would like to hold your interest in the Wellington Parade joint venture.

297 When it was put to him in cross-examination, Baker could not explain the email inquiry from Voukidis dated 8 February 2001, directed to him and to McGrouther, seeking details from them as to the entity or individual through which they would like to hold their interests in the Wellington Parade Property.[154]

298 Four days later on 12 February 2001, McGrouther replied to the email sent by Voukidis of 8 February. In his email sent to Voukidis, McGrouther said:

Chris, My interest in the joint venture is held by IMF Pty Limited. Address is 11 Dendrobium Crescent, Elanora Heights, NSW 2101. Direct[r]or is me. Please get the bank to call me re net asset position.

299 This was information was subsequently communicated to Jacobs on 12 February 2001 by an email from Voukidis, which forwarded the email he had sent to Baker and McGrouther on 8 February 2001, and McGrouther's reply.

300 I find that it was not until 12 February 2001 that McGrouther advised his joint venture partners that his interest in the joint venture would be held by IMF.

Agreement as to the Holding of IMF's Interest in the Project

301 In the course of the proceedings McGrouther discovered statements, cheque books and statements of account in relation to the payment of $300,000 by IMF in respect of its interest in the Wellington Parade Property. He described these documents as being "in respect of its [IMF's] interest in the property at Wellington Parade, East Melbourne, Victoria". McGrouther's handwritten note summarising IMF bank statement debits also recorded that on 6 June 2000 a cheque in the sum of $300,000 was paid. Beside this entry the handwritten note reads "the purchase of 10% of building in Melbourne, Break Fast Pty Ltd".

302 The entry describing the investment on the part of IMF in the building comprising the Wellington Parade Property was consistent with it taking up an interest in an unincorporated joint venture. However, the entry was also consistent with an interest of IMF being held in Baker's shares in Break Fast. McGrouther was not cross-examined on his handwritten note.

303 Although it was urged by Ambridge that I should place weight on the description used by McGrouther in his handwritten notes, as an admission against his case, in my opinion, the statements made by McGrouther which were relied upon, are equivocal. I do not accept them as an admission against his interest, or that of his company, IMF.

304 McGrouther said in evidence[155] that prior to making the investment:

I had a discussion with Baker. In that discussion, I said to Baker that I agreed to pay $300,000 for a 10% interest in the Property, East Melbourne development. Baker told me to write out a cheque for $300,000 made payable to Break Fast Investments Pty Ltd.

My 10 % interest is held in IMF. During the discussion I had with Baker referred to [above] he said to me that my interest in this investment would be held by him through his interest in Break Fast. I told him that this was fine by me.

305 The records show that the cheque was written out on 9 June 2000. McGrouther conceded in cross-examination that the discussion took place shortly prior to writing the cheque for $300,000 in June 2000.[156] I accept that it is therefore likely that the conversation described by McGrouther occurred about this time.

306 However, in an earlier witness statement signed by McGrouther dated 22 February 2006,[157] he described the conversation to which I have referred as taking place between himself, not with Baker, but with either Baker or Voukidis or both of them. He said:

A few weeks later, I had another discussion with either Baker or Voukidis, I cannot recall which. In that discussion, I said to either Baker or Voukidis that I agreed to pay $300,000 for a ten per cent interest in the Wellington Parade, East Melbourne property. Either Baker or Voukidis told me to write out a cheque for $300,000. Although I am not certain, I believe that Voukidis or baker told me to make the cheque payable to either Break Fast Investments Pty Ltd (Break Fast) or Career Path Pty Ltd.

My 10% interest is held in a company under my control, IMF Pty Ltd. Either during the discussion I had with Baker or Voukidis referred to [above] (if that discussion was with Baker,) or in a separate discussion with Baker around this time, he said to me that my 10% interest in this investment would be held in his name. I told him that this was fine by me.

307 There were two significant alterations in McGrouther's evidence given as his evidence in chief at the trial. The first was the change to say that it was with Baker, and not with Voukidis or with Voukidis in attendance, that the preliminary discussion took place. The second was the change in the description of the investment offered to McGrouther from it being his "10% interest in this investment would be held in his [Baker's] name" to his "interest in this investment would be held by him [Baker] through his interest in Break Fast". This change, in what purported to be a virtually verbatim recollection of a conversation, was a change of significance. It was an alteration from the very general description of McGrouther's proposed interest reflected in the 2006 statement, which was a description which could apply to the case advanced by either Ambridge or the Defendants, to a more specific description which aligns closely with the case now advanced by the Defendants.

308 By way of explanation for the changes in his signed witness statements, McGrouther said in cross-examination:

Well, I don't recollect the circumstances in 2006, but I do recollect the circumstances when I signed the current one, because it's more current.

309 I do not accept McGrouther's explanation for the changes in his signed witness statements. It is not likely that his memory improved with the passage of some three years and nine months between signing his earlier statement in February 2006 and giving evidence in chief at the trial.

310 As to the content of the conversations which occurred in June 2000 between McGrouther and Baker, or with Baker and Voukidis in which McGrouther was invited to participate in the project, I am left in considerable doubt. No notes or contemporaneous records of the conversations were made, which, at the time of the trial, occurred more than nine years ago. McGrouther's memory of the conversations has been demonstrated to be unreliable. I accept that the effect of the conversations was that, upon payment of $300,000, McGrouther or his nominated corporate entity would attain a 10% interest in the Wellington Parade Property, but I am not satisfied that McGrouther ever agreed with Baker that he would hold his two shares in Break Fast on behalf of himself or his company, Careerpath, as to 40% and as to McGrouther's or his company, IMF, as to 10%.

311 McGrouther produced financial reports for IMF for the years 2000-2003.[158] Under the heading "Current Assets" in the balance sheet for each of the years, a listing for Break Fast is recorded in each case. It says "Break Fast Investments $300,000". I do not accept the evidence of McGrouther in his witness statement when he said that this represented IMF's interest in the two shares Careerpath held in Break Fast because Baker held those shares on behalf of Careerpath and IMF, therefore IMF was not directly a shareholder itself in Break Fast and it was for this reason that it was not listed in the shares in the unlisted companies section.[159] Under the same heading in the IMF balance sheet for the years 2000, 2001, and 2002, beneath the same heading "Current Assets", appears a category described as "Shares in Unlisted Companies". In the notes to the financial statements in each case the "Shares in Unlisted Companies" are noted as "KTM Capital Pty Limited and Florco Pty Limited". Although McGrouther denied that he had distinguished the references in the balance sheet to "Break Fast Investments $300,000" from shares recorded in the unlisted companies when he signed the accounts,[160] I do not accept this denial. McGrouther, when first questioned on the matter in cross-examination took a defensive position saying: "I didn't record this, I didn't prepare this document, my accountant prepared it"; and repeated: "I didn't prepare it".[161] I am satisfied that this defensive position coloured his approach to answering the question which was put to him directly that in fact he had made the distinction when he signed the accounts. In responding to these questions, McGrouther did not once refer to the explanation which he gave in his witness statement to which I have referred. Although I accept that McGrouther's accountant had in fact prepared the accounts, by signing the accounts as the director of IMF, McGrouther adopted the accounts as fairly presenting his company's financial position.[162] Further, the accounts record that they were prepared "On the basis of information provided by the directors of IMF Pty Limited".[163] I am satisfied that the accounts of IMF were drawn up in relation to the Wellington Parade Property investment in a manner which did in fact draw a distinction between this investment and its other investments in shares in unlisted companies - a distinction which was designed to accommodate a range of structures for the investment, including an incorporated joint venture or in fact unincorporated joint venture.

312 I am satisfied that McGrouther did not pay much attention to his involvement with his investment in the Wellington Parade Property. He described it as a "passive investment".[164] He said that he had never been to the property and that he was "content to leave it to Baker and Voukidis to manage".[165] He never signed any document which recorded his interest, and never requested the preparation of such a document. I am satisfied that McGrouther did not have a good memory of the discussions he had with Baker or Voukidis prior to agreeing to invest in the project, and at the time he did not turn his mind to the detail of the structure of the joint venture he was entering into. For this reason the description of the investment in the IMF accounts was left deliberately vague.

313 II am satisfied that in early June 2000, McGrouther joined the Wellington Parade Joint Venture which had been operating in an agreed form by the existing joint venture partners since about 16 March 2000. By his conduct in joining the enterprise, by implication he too became bound by the terms of the joint venture which were then in place. Further, upon joining the joint venture, he delegated the management of his investment to Baker and Voukidis who thereafter acted on his behalf, and later on behalf of his company, IMF.

314 The Defendants placed reliance on the Break Fast company register which included notices of beneficial ownership and declarations of trust signed by Baker and Voukidis and dated 23 November 1999.

315 The notice of beneficial ownership dated 23 November 1999,[166] which was signed by Baker and filed in the Break Fast company register, is a document of significance. It purported to give notice that Baker held his shares in Break Fast on behalf of the entities detailed in the schedule to the notice. The schedule of beneficial owners listed Baker's company Careerpath Australia Pty Ltd as holding an 80% interest in Baker's two shares, and Mr McGrouther's company, IMF Pty Ltd ("IMF") as holding a 20% interest in Baker's two shares. The address of IMF was recorded as "11 Dendorobium Crescent, Elanora Heights, NSW, 2101". This shareholding structure translated into a holding of a 40% interest in the Wellington Parade Property on the part of Baker's company and a 10% interest on the part of McGrouther's company.

316 A further notice of beneficial ownership dated 23 November 1999, in this case signed by Voukidis, was filed in the Break Fast company register. It purported to give notice that Voukidis held his share in Break Fast on behalf of the entity detailed in the schedule to the notice. The schedule of beneficial owners listed the Voukidis company, C & O Voukidis Pty Ltd, as holding the interest in the Voukidis share in Break Fast.

317 There was no notice of beneficial ownership filed in the Break Fast company register in respect of the share held by Stanley in the company.

318 On its face, these documents strongly supported the case now advanced by the Defendants, that it was through the beneficial ownership of the shares in Break Fast that the parties held their interest in the Wellington Parade Property, and not by means of a joint venture in respect of which Break Fast held the Wellington Parade Property in trust.

319 However, I am satisfied that the notices of beneficial ownership filed in the Break Fast company register to which I have referred were backdated documents created well after 23 November 1999, and were false insofar as they purported to evidence a structure which existed on that date, or indeed at any other time.

320 Esquivel was not decisive in his recollection as to the time of creation of the notices. He said that "To the best of my recollection these documents were signed at the same time [in accordance with the date they each bore, 23 November 1999] as the other documents which required signature which required signature on incorporation ..."[167] However, he was not able to say from his own knowledge when these documents were signed, whether in 1999 or 2004[168]. He did not witness either Baker or Voukidis signing the documents. Further, he conceded in cross-examination that the documents were not signed on the date they each bore, namely 23 November 1999 "because that's the day that it [Break Fast] was incorporated"[169].

321 I am satisfied that no instructions were given to BH, the company engaged by Mason & Voukidis to incorporate Break Fast, to the effect that any of the shares in the new company were to be held beneficially on behalf of any third persons. Indeed, Esquivel conceded in cross-examination that when he prepared the order form for Break Fast to have the company incorporated by BH, he specified that the shares in the new company were to be held beneficially by the individual shareholders Baker, Voukidis and Stanley in their own right. Accordingly, when Break Fast was incorporated, the ASIC register recorded that all of its shares were beneficially held by the individual shareholders, and not as reflected in the notices of beneficial ownership.

322 I do not believe Voukidis when he said that prior to 23 November 1999, he had a conversation with Baker in which Baker told him that of the 2 shares to be issued to him, 80% of those shares would be held on behalf of Careerpath Australia Pty Ltd, a company controlled by Baker, and 20% on behalf of McGrouther's company, IMF Pty Ltd. Nor do I believe Voukidis when he said in his evidence that prior to the incorporation of Break Fast he gave instructions to his staff at his office to prepare a letter and declaration of trust dated 23 November 1999 which "were signed by Baker confirming the beneficial ownership of the 2 shares in Break Fast to be issued to Baker. Similarly, a letter and declaration of trust dated 23 November 1999 were prepared and signed by me confirming the beneficial ownership of the share to be issued to me". Nor do I believe his evidence when he said that the "nomination documents were signed by Baker and myself either later in November 1999 or early December 1999".

323 Nor do I believe Baker when he said that the nominations were made shortly after Break Fast was incorporated.[170]

324 The email exchange between Voukidis, McGrouther and Jacobs commencing 8 February and extending to 12 February 2001, to which I have already referred, is evidence of some significance in determining the present issue. It was by his email of 12 February 2001, in response to the inquiries of both Jacobs and Voukidis, that McGrouther informed them that the company which he had nominated to hold his interest was IMF.

325 If in fact the notice of beneficial ownership dated 23 November 1999 had been signed by Baker and was included in the Break Fast company register on or about that date, and if in fact Voukidis can now recall the conversation which he allegedly had with Baker prior to 23 November 1999 as to the beneficial ownership of his shares, and if in fact Voukidis gave the instructions to his staff which he can now recall as to the recording of the beneficial ownership of Baker's shares, there would have been no need for the enquiry made by Voukidis in his email of 8 February 2001, or McGrouther's reply of 12 February 2001.

326 Further, as I have already found, I am satisfied that the interest of McGrouther, and later that of his nominated company IMF, in the Wellington Parade Joint Venture, was never agreed to until well after 23 November 1999. Indeed, it was not until early June 2000 that McGrouther joined the joint venture upon payment of $300,000.

327 Stanley was never notified of the two notices of beneficial ownership filed in the Break Fast company register dated 23 November 1999, one in respect of Baker's two shares and the other in respect of the share of Voukidis, or the effect of these purported transactions. Nor was Stanley ever invited by either Baker or Voukidis to nominate any company or other person, whether Ambridge or some other entity, to hold his share in Break Fast.

328 I find that the notice of beneficial ownership signed by Baker and filed in the Break Fast company register dated 23 November 1999 was false in that it recorded IMF's beneficial interest in Break Fast as from that date, as it purported to do. I infer that the notice of beneficial ownership signed by Voukidis and filed in the Break Fast company register dated 23 November 1999, which was drawn in the same form as Baker's notice, was also false.

329 I find that the two notices of beneficial ownership filed in the Break Fast company register dated 23 November 1999, one in respect of Baker's two shares and the other in respect of the share of Voukidis, were prepared and signed well after this date. I do not accept the two notices as reliable evidence and they are discounted in my assessment. In particular, the notices did not reflect the ownership structure as it was in late 1999.

Joint Venture Agreement Development after July 2000

330 Following McGrouther joining the joint venture in early June 2000, the joint venture agreement underwent further evolution in 2000.

331 I refer again to the facsimile letter by Jacobs to Voukidis on 13 July 2000 in which Jacobs advised Voukidis that he would like to resolve, amongst other things "Joint venture details - parties, equity participation etc" and the "Ambridge capital adjustment contribution".[171] This facsimile is consistent with Jacobs' evidence that at this time he had not been advised of the corporate nominees for Baker and Voukidis. This further supports the position that these matters had not been settled as at 23 November 1999 as reflected in the company register of Break Fast, contrary to the contentions of the Defendants.

332 I further refer to the telephone conversation which took place on 14 July 2000 between Jacobs and Voukidis. Jacobs made notes of the conversation.[172] Voukidis also made a handwritten note of this conversation on the copy of the fax which had been sent to him by Jacobs dated 13 July 2000.[173] As has already been noted in a different context, Voukidis noted alongside his reference to "Details of Participants": "Tod 10%; Ambridge 25%; CV 25%; TB 40%". The references to the natural person participants were to McGrouther, Voukidis and Baker.

333 I accept Jacobs' evidence as to the substance of the conversation which was in accordance with his notes. They discussed the equity levels for the Wellington Parade Project and the need to raise a further $1 million by way of capital contributions to fund the redevelopment of the property. During this telephone conversation, Voukidis said to Jacobs words to the effect that: McGrouther would be the fourth joint venture partner with a 10% interest; McGrouther's 10% interest would come from the interests held by Voukidis and Baker; the interests of the four parties to the investment were as follows: McGrouther - 10%; Ambridge - 25%; Voukidis - 25%; and Baker - 40%; the capital contributions by the partners would be increased to $3 million and that each partner would need to increase its contribution to the joint venture in proportion to its interest; the increase in capital from $2,000,000 to $3,000,000 was in part to fund the refurbishment works on the building; Ambridge's capital contribution would need to be increased from $500,000 to $750,000; and the balance sheet of Break Fast should be amended to include a capital account for him of $850,000, which was to comprise the deposit payment of $600,000 and the $250,000 contributed by him at settlement; and Voukidis would send details to Jacobs of the companies which would be holding his, Baker's and McGrouther's interests in the Wellington Parade Project.

334 Following his conversation with Voukidis on 14 July 2000, in which he noted that Ambridge's capital contribution in the investment needed to be increased from $500,000 to $750,000, Jacobs proceeded to calculate its liability. The total capital contribution made by Ambridge to the joint venture as at 30 June 2000 was calculated by Jacobs to be $535,515. This comprised: the $500,000 fee initially payable to Ambridge for which a credit for its capital contribution was to be given in the accounts of Break Fast, together with a further sum of $35,515. That further sum comprised: payments to the architects AXIA in the amount of $24,269.50, paid by two cheques from Ambridge and Headland of $12,134.75 each on 13 April 2000; and other smaller payments made by Ambridge and Headland, calculated by Jacobs as expended in respect of the Wellington Parade Property. He therefore calculated that the amount required to be paid by Ambridge to Break Fast in order to bring Ambridge's capital contribution up to $750,000 was an amount of $214,484.50. On 14 August 2000, Ambridge deposited the amount of $214,484.50 in Break Fast's NAB account.

335 Jacobs also proceeded to prepare the balance sheet and profit and loss statement for Break Fast as at 30 June 2000.[174] The partner's equity contained in the balance sheet listed the capital contributions of Voukidis, Ambridge, McGrouther and Baker as $850,000, $535,515, $300,000 and $1,251,390, respectively. Jacobs obtained the information in respect of Voukidis, Baker and McGrouther from Voukidis himself.

336 On or about 15 August 2000, Baker requested Jacobs to send him a set of the Break Fast accounts. This Jacobs did on 15 August 2000, by email to Baker at his email address at Powerlan, attaching copies of the accounts for the Wellington Parade joint venture, including the balance sheet, profit and loss statement and general ledger for the year ending 30 June 2000 which he had prepared.[175]

337 On the afternoon of 15 August 2000, Jacobs attended a teleconference with Baker, Voukidis and Stanley. During that teleconference Baker and Voukidis said that the financial statements which Jacobs had prepared were correct and that he could submit them to NAB.

338 On 18 August 2000, Jacobs faxed to Mr Nelson at the NAB the management accounts for Break Fast.[176] At this time, Break Fast had a significant indebtedness to the NAB arising from the initial purchase of the Wellington Parade Property. These accounts were part of the same accounts which Jacobs had forwarded to Baker in his email to him dated 15 August 2000, which set out the equity of each of the joint venture partners.

339 A significant element of the Break Fast accounts prepared in the year 2000, was the reference to "Owners" or "Partners" equity.

340 These parts of the accounts not only demonstrate the identity of the joint venture participants from time to time during the year 2000, they also demonstrate the level of capital which each had contributed to the venture during this period. These capital contributions were broadly consistent with each party's proportional interest in the venture.

Further Development of the Joint Venture Agreement

341 On 12 February 2001, Jacobs received an email from Voukidis which in turn forwarded an email he had sent to Baker and Tod McGrouther on 8 February 2001 and McGrouther's reply.[177] In the Voukidis email of 8 February 2001, he asked Baker and McGrouther to provide him with "firm details of which entity or individual(s) you would like to hold your interest in the Wellington Parade joint venture". McGrouther emailed him back on 12 February 2001 and wrote that "my interest in the joint venture is held by IMF Pty Limited".

342 Voukidis had previously advised Jacobs by telephone that the Voukidis interest was to be held by his company C & O Voukidis and that of Baker by Careerpath Australia Pty Ltd, although Jacobs was not able to recall precisely when this had occurred.

343 However, I accept that by 12 February 2001 Jacobs had been notified of all of the nominated companies which were to hold the interests of the original natural person partners in the Wellington Parade Joint Venture. He had also been advised of the corporate nominee of the later introduced party, McGrouther. Therefore, by this stage there was agreement as to the identity of all of the nominated companies which would hold the interests of each of the natural person partners in the investment, namely: Ambridge; C & O Voukidis, holding Voukidis' interest; Careerpath, holding Baker's interest; and IMF, holding McGrouther's interest. Further, there was agreement as to the percentage interests which each was to hold, in accordance with the telephone conversation between Jacobs and Voukidis which took place on 14 July 2000.

344 I find that by 12 February 2001, there existed an agreement between the parties to the following effect:

(a) Ambridge was a party to the joint venture in its own right, and by reason of its capital contribution then calculated at $750,000, it held a 25% interest in the joint venture;

(b) Break Fast was to be the manager for the joint venture and would hold the Wellington Parade Property on behalf of the participating joint venturers as their nominee in accordance with the terms of the third draft agreement;

(c) The total capital contribution required of the partners at that time was $3 million;

(d) The other joint venture partners were C&O Voukidis, holding Voukidis' interest which was 25% in the investment; Careerpath, holding Baker's interest of 40%; and IMF, holding McGrouther's interest of 10% following its paid up capital contribution amounting to $300,000 in June 2000; and

(e) Otherwise the terms of the joint venture were those contained in the third draft agreement.

345 In late 2000 or early 2001, Break Fast made application to another lender, Colonial First State Investments Limited ("CFS"), to refinance and extend the loan provided by the NAB to enable refurbishment of the building to proceed. The CFS loan was negotiated through a broker, Ashe Morgan Winthrop. Part of the business of Ashe Morgan Winthrop was to arrange finance on behalf of investors in commercial properties. It had a range of financiers which it dealt with, including CFS.

346 On 6 February 2001 Break Fast received a letter of offer from the broker for an advance of $9,345.000 secured by a first mortgage over the Wellington Parade Property (the "CFS loan"). The CFS loan is currently on foot and Perpetual Nominees Ltd, on behalf of CFS, continues to hold a mortgage over the Wellington Parade Property.

347 As to capital contributions from the parties, this altered from time to time reflecting increased needs for capital for to project to meet expenses for such things as refurbishment of the building.

348 The Break Fast balance sheet for February 2000 showed a capital contribution from Baker of $1,351,390, from Voukidis of $250,000 and from Ambridge in the sum of $500,000, which represented a credit for its management fee.

349 By June 2000, the Break Fast balance sheet recorded that Baker's capital contribution at $1,251,390, that of Voukidis' had increased to $850,000, that of Ambridge's had increased to $535,515, and McGrouther was recorded as having contributed $300,000.

350 On 14 August 2000, Ambridge contributed a further $214,484.90 which brought its capital contribution to $750,000, representing a 25% interest in the joint venture.

351 Although there are discrepancies in the balance sheets produced from time to time as to the proportions of capital funds contributed by Baker and Voukidis, when compared with the percentage of the interests which had been agreed that they would take up, the capital contribution of Ambridge, at $750,000 did represent a 25% interest in the venture, and that contributed by McGrouther at $300,000 did represent a 10% interest in the venture, if it is accepted, as I do, that the total capital contribution of the partners was agreed at $3 million.

352 Mr Rohan Davis ("Davis") was called to give evidence on behalf of Ambridge. Davis worked as a director of Ashe Morgan Winthrop between approximately 1999 to June 2009. Mr Fink worked as a credit analyst under his supervision.

353 In 2001, after the CFS loan to Break Fast had been approved, and as part of the ongoing administration of the loan, Mr Fink of Ashe Morgan Winthrop received from Jacobs documents by facsimile which included a letter from Jacobs dated 13 September 2001, a draft balance sheet and draft profit and loss statement for Break Fast for the year ended June 2001. The letter was signed by Jacobs. The first sentence of the letter was in the following terms:

Attached are the draft management accounts for the abovenamed joint venture for the year ended 30th June 2001. [Emphasis by underlining added]

The draft balance sheet for Break Fast for the year ended June 2001 attached to the letter dated 13 September 2001 was dated "13/09/01" and designated with the time "10:17:19 AM". The draft balance sheet included the following:

354 In his evidence Davis recognised this facsimile. He said that, whilst the fax was marked to the attention of Mr Fink, he remembered receiving it because he arranged for it to be forwarded to AIS Insurance Brokers.[178] Davis was not cross-examined about this evidence, which I accept as correct.

355 In the course of this proceeding in 2005, Break Fast discovered the letter from Jacobs to Mr Fink of Ashe Morgan Winthrop dated 13 September 2001 and the draft balance sheet and draft profit and loss statement for Break Fast for the year ended June 2001 which were attached to the letter.

356 In September 2008, as part of the bundle of documents which included some of the falsified NAB statements, Break Fast discovered different documents relating to precisely the same subject matter, comprising the draft management accounts in respect of the Wellington Parade Property which included a balance sheet for Break Fast for the year ended June 2001. The documents also included a fax letter dated 13 September 2001 from Jacobs of Ambridge to Mr Anthony Fink of Ashe Morgan Winthrop. The letter was purported to have been signed by Jacobs and was in all respects identical to the first discovered letter, save that the first sentence of the letter was in the following terms:

Attached are the draft management accounts for the abovenamed company for the year ended 30th June 2001. [Emphasis by underlining added]

Also attached to the second discovered letter dated 13 September 2001 was what purported to be a draft balance sheet for Break Fast for the year ended June 2001. This document was also dated "13/09/01" and designated with the time "10:17:19 AM", and in all respects was identical to the first discovered draft balance sheet for the same period, save that the second discovered draft balance sheet included the following:

357 The differences between the two documents can be shortly stated: the words "joint venture" in the first discovered fax letter dated 13 September 2001 were altered to the word "company". The draft balance sheet was changed in its sub-heading beneath the word "Equity" from "Partners' Equity" to the words "Shareholders' Equity" and the references to "Ambridge Investments Pty Ltd" were deleted in favour of "Mark Stanley". The first discovered version of the documents accorded with the case advanced by Ambridge, while alterations reflected in the second discovered document aligned directly with the case now advanced by the Defendants.

358 The documents, were in all respects identical, save for the changes to which I have referred. The changes become all too plain on close inspection. If authentic, it was a remarkable triumph of engineering. It might even excite exploration of a new theory of quantum physics in space-time coordination. Two facsimile transmissions were sent from the same machine to the same addressee on the same date, both at 10:17:19 am precisely. The implausibility of this scenario is patent. One is driven to the conclusion that the second discovered documents are tainted with something a good deal more lowly - the malodorous aroma of eraser and ink pot.

359 I am satisfied that the second discovered letter dated 13 September 2001 and the second discovered draft balance sheet did not comprise the material sent by Jacobs to Mr Fink of Ashe Morgan Winthrop. The documents which were first discovered by Break Fast were positively identified by Davis in his evidence as having been received by him. I am satisfied that the documents discovered second in time were artful concoctions.

360 It was put to Voukidis in cross-examination that he had manufactured these documents, an allegation which he denied, saying that Stanley had given the documents to him at some earlier time. The cross-examination of Voukidis on the matter proceeded as follows:

Is it your evidence that you had this document from 2001 and following?---I think that's correct, yes.

Who gave it to you?---I can't recall, I think it was Mr Stanley that handed it to be directly.

Don't speculate, be careful?---Yes, sir.

Do you recall how you received it?---It was given to me by hand, I believe by Mr Stanley.

Was it in an envelope?---No.

It was just a hand passed over?---Absolutely.

So you must have carried it around before you filed it somewhere?---I don't recall the circumstances, whether he gave it to me while we were in the office environment, it was put somewhere directly, I don't know whether I carried it around.

Like all original documents that would be eight years old you would expect it to have a few dog ears and the like?---I can't help you with that, sir.

I'm just asking you [your] practice if you've got a document that you've kept on your file for eight years you'd expect it to be dog eared would you not?---If it's been filed and never referred to it's likely to have been compressed under the other paperwork.

361 I have difficulty accepting the explanation given by Voukidis in his cross-examination to which I have referred. The matter was never put to Stanley by the Defendants. The matter was not referred to by Voukidis in his witness statement or in his evidence in chief, and he did not volunteer any explanation in relation to it. Further, the vagueness of the explanation given by Voukidis in his cross-examination points to lack of candour on his part. The falsified documents were discovered by Voukidis on behalf of Break Fast in the same bundle of documents which included some of the falsified NAB statements. They were altered with the same level of skill as was applied to the altered NAB bank statements manufactured by Voukidis.

362 Nevertheless, I am not satisfied to the requisite degree that the further falsified documents were prepared by Voukidis or under his direction.

363 I arrive at this conclusion conscious of the approach laid down in Briginshaw v Briginshaw[179] where Dixon J said:[180]

But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences.

364 More recently, the majority (Mason CJ, Brennan, Deane & Gaudron JJ) in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd,[181] crystallized the Briginshaw approach in the following statement:[182]

[T]he strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove.

365 An allegation of falsification of documents is a serious matter. Amongst other possible breaches of the law, the offence of falsification of documents is an indictable offence in Victoria under s.83A Crimes Act 1958.

366 Further, in this case, the allegation if proven would have had potentially significant consequences for the case advanced by the Defendants. The falsified letter and statement of account, if it was proven to have been manufactured by Voukidis, would have been evidence from which it is possible to infer that Voukidis had the belief that the Defendants' case was not strong, and from that it may be inferred that their case lacked truth and merit.

367 Reference is made to the observations of Eames J in McCabe v British American Tobacco Australia Services Limited.[183] His Honour, after citing from the passage from the Privy Council in The Ophelia,[184] said in relation to the destruction of documents:

Wigmore identifies two distinct inferences which may be drawn from the destruction of a document. In the first place, the destruction of a document may be regarded as demonstrating a consciousness of the weakness of the party's cause, in general, and from that consciousness may be inferred the fact itself of the cause's lack of truth and merit. The second inference which may arise is that the specific document is unfavourable to the cause of the party who has destroyed it. For the latter inference to be raised there must be some evidence of the contents of the destroyed document.

368 The destruction of documents in the course of or in anticipation of litigation referred to by Eames J in McCabe is analogous to the position where an original document is altered. Whether or not one or both of the inferences referred to by Wigmore in the passage referred to may arise, will depend in significant part upon the deliberation with which the evidence is altered and the appreciation or likely appreciation of the party of its significance in the case.

369 However, in this case, I am not in a position to be satisfied to the requisite degree as to the identity of the author of the false documents or under whose direction this was done. It follows that I am not in a position to draw any inference as to who may have been conscious of the weakness of that party's cause, in general, or to draw the further inference that the party's cause lacks truth and merit.

370 Nevertheless, and without making any finding as to the mastermind behind the altered documents, or the circumstances of the creation of those documents, I conclude that the letter and the attached accounts which were discovered by Break Fast first in time were the authentic versions of the documents. They were subsequently altered. The altered documents should be rejected as untruthful evidence.

371 Beyond this, I make no other finding on the matter.

372 Rachel Lamport was a partner in a firm of accountants, Mason Carter.

373 She was known to both Voukidis and Baker. She was engaged to prepare the accounts and tax returns for Break Fast for the year ended 30 June 2000. These documents were very late and preparation of them had become urgent.

374 A chain of emails commenced on 10 July 2001 with the following from Rachel Lamport to Jacobs, with a copy sent to Voukidis:

We still have not prepared the company's accounts for the year ended 30th June 2000. When we last spoke you said that you would get a local accountant to resolve the issues such as term deposits etc. Has this been done?

When you are satisfied that the file is correct please email it to me.

These accounts & Tax return are very late and therefore the matter is urgent

375 Voukidis then raised a query about the form of the accounts. He wished to have it confirmed that they were being prepared for Break Fast on the basis that Break Fast acted as manager of a joint venture and not as an operating company. Voukidis (who is referred to as "Chris") wrote his email to Rachel Lamport, with a copy sent to Jacobs, in the following form:

Please confirm that the accounts have been prepared on the basis that Break Fast Investments Pty Ltd acts as manager of a joint venture and does not prepare accounts as an operating company.

376 Jacobs of Ambridge then confirmed to Voukidis that the accounts for Break Fast had been and were being prepared on the basis of an unincorporated joint venture with Break Fast as manager. Jacobs wrote in his email to Voukidis (who is referred to as "Chris"):

The accounts have/are being prepared on the basis of an unincorporated JV with BFI as manager.

377 Voukidis sought to explain away his email, which was the second in the chain to which I have referred, and he did so in a remarkable fashion. He denied that he wanted the accounts prepared on a basis that Break Fast acted as manager of a joint venture. He said:[185]

I wanted confirmation that Graeme Jacobs was providing accounts in that form, which would have been against my instructions to Graeme Jacobs.

378 I do not accept this explanation provided by Voukidis. Jacobs was copied into the email. Jacobs responded to Voukidis by saying that the accounts "have/are being prepared" on the basis of an unincorporated joint venture with Break Fast as the manager. Jacobs also copied Rachel Lamport into his email. In this way, Voukidis was informed directly as to the basis on which the accounts of Break Fast had been and were then being prepared. Voukidis was also informed that this email from Jacobs had been copied to Rachel Lamport, and was likely to have been construed by her as an instruction as to the basis on which the Break Fast accounts were to be prepared by her firm.

379 However, Voukidis did not provide any counter instruction to Rachel Lamport that the accounts of Break Fast had been prepared and were to be prepared on the basis which is now maintained by the Defendants, namely that Break Fast was the operating company.

380 As events unfolded, as will be seen, neither Rachel Lamport nor any member of the firm Mason Carter prepared the taxation return for Break Fast for the year ended 30 June 2000.

381 Nevertheless, and in spite of the evidence of the email exchange which took place on 10 July 2001 between Rachel Lamport, Voukidis, Jacobs and Stanley being significant, neither Rachel Lamport nor anybody from her firm was called to give evidence on this matter in support of the explanation proffered by Voukidis. There was no explanation for this failure. I draw the inference that if she had been called by the Defendants, she would not have offered any evidence which could have assisted the case which the Defendants now advance.

382 I find that Voukidis left the instruction to Rachel Lamport as it had been provided to her by Jacobs on behalf of Ambridge in the third of the emails in the chain, that is that the Break Fast accounts had been prepared and were to be prepared on the basis of an unincorporated joint venture with Break Fast as the manager.

383 Voukidis was a practising accountant and a director of Break Fast. I am satisfied that he never took issue with Jacobs, Stanley or Ambridge as to the manner in which the Break Fast accounts and taxation returns were prepared for the company. These accounting records consistently showed Ambridge as having a direct interest in the Wellington Parade Joint Venture and were prepared consistently with the structure of an unincorporated joint venture, with Break Fast as the registered proprietor of the land and manager of the enterprise on behalf of the joint venture.

384 I do not believe the evidence given by Voukidis which was to the effect that the Wellington Parade Property was held by Break Fast on behalf of its shareholders, and each shareholder, namely Baker, Voukidis and Stanley, held their interests in those shares on behalf of the companies nominated by them, and that Ambridge, not being a shareholder, had no interest in the joint venture.

385 Mr Nello Traficante ("Traficante") of the firm Stannards Accountants and Advisers ("Stannards") during the period 1999 to 2003 carried out accounting work again on the instructions of Ambridge.

386 In 2001, he was instructed by Ambridge to prepare financial statements for Break Fast. Stannards proceeded to prepare financial statements and tax returns for Break Fast for the financial year ended 30 June 2000. These were completed by 9 October 2001.

387 The tax return was prepared and lodged by Stannards as a partnership income tax return.[186] It declared that Break Fast was the manager of the joint venture/partnership and included the following references to the partners:[187]

Partners name and tax file number or postal address

C & O Voukidis Pty Ltd

Partners name and tax file number or postal address

Ambridge Investments Pty Ltd and

Headland Properties Pty Ltd Ptrship

Level 35 140 William Street

Partners name and tax file number or postal address

IMF Pty Ltd

Partners name and tax file number or postal address

Career Path Pty Ltd.

388 Partnership funds were also recorded in the names of the four corporate partners.[188]

389 An electronic lodgement declaration was signed by Stanley and provided to Stannards on 24 October 2001. On 5 November 2001, the partnership return for Break Fast was lodged electronically at the Australian Taxation Office.

390 The partnership income tax return was prepared by Traficante because, as he said, this was in accordance with the instructions he had received from Stanley. He said further, which I accept, that had he been instructed that Break Fast was an operating company in its own right, he would not have prepared a tax return which included distribution of income to the partners.

Baker Admission 30 June 2000 - Tax Deduction Claimed

391 Baker took advantage of the joint venture structure established by his accountant Voukidis for the ownership and management of the Wellington Parade Joint Venture.

392 The financial statements prepared for Break Fast by Stannards for the year ended 30 June 2000 showed net losses distributed to each of the corporate partners.[189] Baker's company Careerpath is recorded in the books of account of Break Fast as having made a loss of $71,239 in the venture in the financial year ending 30 June 2000.

393 Baker signed a tax return schedule for Careerpath which accompanied its taxation return for the year 1 July 1999 to 30 June 2000. He signed the taxation schedule as its public officer.[190] This return included a claim for a loss on a joint venture in the sum of $78,614, which was claimed as a deductible expense. This claim, although somewhat greater, was not all that different to the loss recorded in the Break Fast accounts for the same period which is noted as having been sustained by Careerpath in the sum of $71,239.

394 Further, in its return Careerpath stated that it owned or had a beneficial interest in land and/or buildings situated in Australia. The Wellington Parade Property was listed as the only asset of Careerpath in this category.[191] As conceded by Baker, it was not open for Careerpath to have claimed a loss on a joint venture if Careerpath's investment in the Wellington Parade Property was by way of a shareholding in Break Fast only.[192]

395 By his conduct in signing this Careerpath tax return for the year 2000, Baker made a clear admission against the case which he now seeks to advance. His conduct amounted to an admission that there existed at that time an unincorporated joint venture in respect of the Wellington Parade Property in which Careerpath held a direct interest. It was also an admission that Baker did not own shares in Break Fast through which the asset was held.

396 Mr Paul Lom ("Lom") was called as an expert accountant by Ambridge.

397 Lom in his evidence referred to s.286 Corporations Act, which he explained imposes an obligation on companies to keep written financial records which: correctly record and explain a company's transactions and financial position and performance; and would enable true and fair financial statements to e prepared and audited. The obligation to keep financial records of transactions extends to transactions undertaken as a trustee. Annual financial statements, he explained, are usually prepared by or on behalf of a company in order to enable income tax returns to be compiled. These financial statements include a balance sheet, a profit and loss statement, and notes attached thereto.

398 Having examined the Break Fast tax return for the year ended 30 June 2000, Lom concluded that the tax return was prepared on the basis of Break Fast acting as a joint venture vehicle.

399 Lom also examined the Break Fast profit and loss account for the year ended 30 June 2000. He said that this record showed that the loss for the year was distributed to the partners. He said this treatment was consistent with Break Fast being a joint venture vehicle and not acting on its own account. Significantly, he said that if Break Fast acted on its own account, being a limited liability company the loss could not be distributed to its shareholders but would be retained as accumulated losses.

400 Lom also examined the Break Fast balance sheet for the year ended 30 June 2000. He observed that this disclosed partnership funds and that note 6 to the account showed the movement in the capital account of each partner. He said that if Break Fast acted on its own account, the balance sheet would have disclosed in the equity section the paid in capital and the accumulated losses. He noted that Break Fast had only 4 shares on issue, with $1.00 paid in respect of each share. This meant that the equity of Break Fast, had it been a company operating in its own right, would have been a negative of $178,095, comprising $4.00 capital and accumulated losses of $178,099.

401 He concluded that the Break Fast financial statements for the year ended 30 June 2000 were prepared in accordance with all mandatory requirements and usual accounting practice for an entity acting as a joint venture vehicle.

402 The Defendants did not call any independent expert evidence with a view to challenging the evidence given by Mr Lom.

403 Having considered the matters put to him in cross-examination,[193] I accept the evidence of Mr Lom to which I have referred.

404 The position in terms of ownership structure reflected in the Break Fast accounts remained essentially the same in 2001, save for the substitution of the Voukidis owned company, C & O Voukidis Pty Ltd, in place of Voukidis personally, and the substitution of the Baker owned company, Careerpath Australia Pty Ltd, in place of Baker personally, as reflected in the following part of the draft Break Fast balance sheet prepared for June 2001:

405 This part of the Break Fast balance sheet for July 2001 was much the same as that for June 2001.

406 The substitution of IMF for McGrouther in the accounts appears to have occurred following further confirmation of the position, in which McGrouther advised Jacobs directly that his 10% interest was held by IMF.[194] It was after this confirmation that the partnership tax return for Break Fast was prepared by Stannards for the year ended 30 June 2000 which included IMF as an equity partner.

407 It is clear that Voukidis knew of the structure reflected in the accounts for Break Fast. This was demonstrated in the email exchange of 10 July 2001, in relation to preparation of the 2000 accounts for Break Fast, to which I have already referred.

408 Profit loss statements were prepared for Break Fast for the months of July 2001 and August 2001, and a balance sheet was prepared for Break Fast for July 2001. The balance sheet included the following record:

409 The balance sheet was drawn up, it appears by Jacobs of Ambridge, in a manner which was consistent with the ownership structure contended for by the Plaintiff and described by Jacobs in his email of 10 July 2001. In his cross-examination Voukidis denied receiving this balance sheet.[195] However, in his witness statement,[196] Voukidis said:

I have been shown Court Book 381 to 387. I note that 381 is a fax from Mr Ratensothy [Mr Ratensothy was the financial controller of Ambridge] to me, being three pages inclusive. I believe the other two pages sent to me were the profit and loss and balance sheet. [Inset added] [Underlining added for emphasis]

410 The fax cover sheet dated 12 September 2001 sent by Mr Ratensothy to Voukidis, which enclosed Break Fast accounts, made specific reference to the profit and loss accounts, but made no reference to a balance sheet. I accept that it is likely that the balance sheet was not in fact sent to Voukidis by Mr Ratensothy of Ambridge by his faxed letter dated 12 September 2001. However, I am satisfied that the Break Fast balance sheet as at July 2001 was prepared on a basis which Voukidis had been informed about by Jacobs in his email of 10 July 2001.

411 I find that, in spite of the clear statement from Jacobs in his email to Voukidis of 10 July 2001 as to how the Break Fast accounts were being prepared, Voukidis gave no instruction to Ambridge or Mason Carter or the accountants subsequently engaged, Stannards Accountants and Advisers, to prepare the Break Fast accounts on the basis that it acted as an operating company in its own right, and not a the manager of a joint venture. In his capacity as a serving director of Break Fast, the inaction of Voukidis in the face of the advice which he had received as to the basis on which the Break Fast accounts had been prepared and were being prepared, constituted an admission on his part as the ownership structure which was put in place for the Wellington Parade Property. This admission by conduct is directly against the case which he now seeks to advance.

Capital Contributions of the Partners - Year 2001

412 Again, a significant element of the Break Fast accounts prepared in the year 2001, were the references to "Partners" equity.

413 These parts of the accounts not only demonstrate the identity of the joint venture participants from time to time during 2001, they also demonstrate the level of capital which each had contributed to the venture during the period. Again, as was the case in 2000, these capital contributions were broadly consistent with each party's proportional interest in the venture.

414 C & O Voukidis Pty Ltd was the trustee of a number of trusts associated with the Voukidis family, including the Voukidis Family Trust. Voukidis was a director of the trustee company and a beneficiary of the Voukidis Family Trust.

415 In about July 2002, the accounting records for the Voukidis Family Trust recorded an interest in the Wellington Parade Property owned by the trust.[197] The interest was recorded as being an interest in the land comprised in 176 Wellington Parade, East Melbourne. The asset value was recorded as $1,250,000. The interest was not recorded as an interest in any share issued in any company. This was acknowledged by Voukidis in cross-examination.[198]

416 The same document recorded that the Voukidis Family Trust owned shares in listed Australian companies valued at $15,000; shares in Powerlan Ltd valued at $216,000; and shares in "Rhinosteel Group" worth $375,000.

417 Furthermore, Voukidis prepared this particular accounting record.[199] In cross-examination Voukidis said further, in response to questions from senior counsel from Ambridge:[200]

You drew a distinction between the assets of the Voukidis Family Trust that it held in Wellington Parade Property, and the assets it held in shares - or the share capital of a company? --- That is correct, yes.

Yes, alright, and as an accountant of course you're acutely aware of the difference between share capital and interests in Wellington Parade Property?--As an accountant I'm also acutely aware ---

Now Mr Voukidis --- ? --- Yes, I am.

418 I accept that the recording of the interest of the Voukidis Family Trust in these accounting records reflected an interest in the land comprising the Wellington Parade Property, rather than an interest in the share capital of Break Fast. It constituted an admission against Voukidis and C & O Voukidis. The record of the interest held by C & O Voukidis Pty Ltd was an admission that the interest in the Wellington Parade Property was held directly by C & O Voukidis and not by any shareholding in Break Fast.

419 On 8 October 2002 Ambridge sent by facsimile to Baker a copy of the joint venture agreement executed by Stanley on behalf of Break Fast and Ambridge.[201]

420 When he received it, Baker said that he "threw it in the bin".[202] By this time, as will be seen, relations between Baker and Stanley had broken down. Baker was attempting to seek payment of money which Stanley owed to him, with little apparent success.[203] Baker said that by this time he "certainly didn't trust him or like dealing with him".[204] I find it was for this reason that Baker rejected the partly executed joint venture agreement of 8 October 2002 and not because it failed to reflect the operative provisions of the agreement which had been achieved by mid July 2000.

421 The partly executed joint venture agreement was materially in the same form as the third draft prepared by Obst, save that the corporate nominees of the partners were all included and referred to as "the Joint Venturers". This document included all of the joint venture partners as they had then been agreed to that point, namely, Ambridge, Careerpath, C & O Voukidis, and IMF; and specified their respective holdings, namely 25%, 40%, 25% and 10%.

422 The terms were otherwise materially in the same form as the second draft joint venture agreement of 21 February 2000 which had been agreed to on about 16 March 2000, save that it included the amendments to the "Background" section with the addition of parts "A" and "B" as drawn up by Obst in his third draft joint venture agreement, pursuant to the suggestion made by Voukidis in his conversation with Jacobs on or about 16 March 2000, to define the role of Ambridge in more detail.[205] The definition of Ambridge's role accorded with the work which Ambridge had in fact undertaken and was continuing to undertake for the joint venture.

423 Thereafter, no further attempt was made by any party to draw up a written agreement to formalise the arrangement between the parties in the Wellington Parade Project.

424 It was contended by Ambridge that the 8 October 2002 document constituted a sufficient note or memorandum recording the agreement pursuant to which Break Fast held the Wellington Parade Property. To this issue, I will return.

425 Stanley, through his company Ambridge, was appointed by Baker and Voukidis to the role of administering the Wellington Parade Joint Venture. As part of his duties, Stanley was responsible for managing the finances of Break Fast and the preparation of its accounts. Stanley made all of the day to day decisions as to how Break Fast funds were to be used.

426 However, Break Fast was dishonestly managed by Stanley.

427 Baker and Voukidis pressed Stanley for a full statement of the Break Fast accounts in respect of the joint venture. These were not forthcoming.

428 Further, Stanley misappropriated funds from Break Fast, using Break Fast funds for his own purposes. I accept the evidence of Jacobs given in cross-examination in the following exchange:[206]

If Mr Stanley were to say that no money was taken out of Break Fast for use in connection with investments that were not Break Fast investments, he would be lying, would he not?---Yes, he would be.

429 Stanley concealed these misappropriations from Baker, Voukidis and McGrouther. He became recalcitrant in the face of demands for the production of the Break Fast accounts.

430 By December 2002, Stanley owed a considerable sum of money to Baker. By that time, Stanley had misappropriated $651,000 from Baker, being a GST refund due to Baker arising from a property venture in St Leonards, New South Wales. Baker and Voukidis were pressing Stanley to repay this money. In fact by December 2002, Stanley admitted that his company Ambridge owed Baker $1.167 million.

431 Further, an issue arose between Voukidis and Stanley as to whether Ambridge's capital account was overdrawn. Voukidis alleged that it was overdrawn by $581,000. Although this was denied by Stanley, a discussion did take place with Voukidis as to how Stanley would repay the money "if that sum was adopted" as owing.

432 By December 2002, Baker and Voukidis had also discovered that Stanley had borrowed monies under the Tauber Loan Agreement for his own use and had mortgaged both the St Leonard's property and his share in Break Fast for this purpose, without the prior knowledge or consent of the other partners in the St Leonard's joint venture, which included Baker and Voukidis.

433 The failure to provide accounts resulted in a loss of confidence in Stanley's administration on the part of Baker and Voukidis.

434 In December 2002 Voukidis collected the Break Fast records from the Melbourne office of Ambridge and asked Stanley to resign from his position as a director. By that time, as was conceded by Jacobs, it was necessary to do a full reconstruction of the Break Fast accounts in order to gain a true picture as to its position.[207]

435 Taylor also became concerned about the accounting for the Wellington Parade Joint Venture. He made numerous requests of Stanley and Jacobs to be provided with the Break Fast accounts. Taylor commenced writing to Stanley about his concerns in May 2001. However, Stanley directed Jacobs not to provide accounts to Taylor.

436 In December 2002, Taylor supported the removal of Stanley as a director of Break Fast. Stanley resigned as a director of Break Fast on 12 December 2002.

437 After Stanley's departure, Taylor became more directly involved in the administration of the Wellington Parade project. On 19 December 2002 Taylor sent a letter to Voukidis which included consent by Taylor to act as a director and secretary of Break Fast. Taylor also sent to Stanley standard transfer forms for the transfer of Stanley's share in Break Fast to him. These transactions are denied by Voukidis who said that he never received Taylor's consent to act as a director and secretary of Break Fast, that the transfer forms in relation to Stanley's share in Break Fast were never executed and that Oxley remains the registered owner of Stanley's share in Break Fast by reason of its purchase of the Tauber mortgage. However, for the purpose of these proceedings, it is not presently necessary to resolve the issue as to the directorship of Break Fast or the ownership of Stanley's share in the company.

The Position of Baker and Voukidis in December 2002

438 Accordingly, by late 2002 relations between Stanley on the one part and Baker and Voukidis on the other had soured, and for good reason. Stanley had been exposed for dishonesty in his administration of Break Fast. Baker said in his evidence:[208]

On 3 December 2002 I was concerned to ensure that the proceeds of any sale of the Wellington Parade Property would not be available for misappropriation by Stanley. I discussed this with Voukidis. He told me that he had a similar concern. Voukidis told me that he would prepare a minute which would overcome this concern.

On 3 December 2002, I received an email from Voukidis attaching the draft minute in relation to the sale of the Wellington Parade Property. I did not want to sell the Wellington Parade Property but by this time it was obvious that Stanley was unable to meet his obligations or to pay me back the monies he had taken. The only way it appeared that Stanley would be able to repay any money was if we were able to realise his share in Break Fast. By this time I was very keen to be repaid and have nothing further to do with Stanley.

439 The draft minute of Break Fast prepared by forwarded by him to Baker and Stanley in relation to the sale of the Wellington Parade Property of 3 December 2002 said:[209]

Attached is a draft minute relating to the sale of Wellington Pde. Please review and forward any comments by Friday. Regards, Chris.

440 The draft minute included the following resolution:[210]

IT WAS RESOLVED THAT the company in its capacity as Manager of the Break Fast Joint Venture proceed with the sale of the property at 176 Wellington Parade, East Melbourne.

441 Baker said in his evidence that he recalled reading the minute and thinking that there had been no agreement for an unincorporated joint venture for the Wellington Parade Property.[211] Baker gave evidence that he wrote a letter to Stanley by email dated 10 December 2002, which he copied to Voukidis.[212] Baker purportedly said in his email:

From: Theo Baker [mailto:TBaker@powerlan.com.au

Cc: Chris Voukidis (voukidis@topthis.com.au); Theo Baker

Subject: Solicitor instructions for Break Fast Investments

As requested, I have forwarded the minute for Break Fast Investments. I assume that the reference to "Joint Venture" in the first paragraph relates to your new structure for the acquisition of the Wellington Parade Property. If not, please delete the words "... in its capacity as Manager of the Break Fast Joint Venture ..." because as you are aware, we have not yet resolved to implement any such structure.

442 In a responding email, Stanley purportedly replied to Baker's email of 10 December 2002 on the same day with: "I will make the amendment before forwarding".[213]

443 This correspondence for the first time in writing referred to the structure for the Wellington Parade Joint Venture Property in the terms which are now contended for by the Defendants.

444 During the trial Ambridge questioned the authenticity of the emails purportedly sent by Baker to Stanley dated 10 December 2002, and Stanley's reply of the same date. When challenged on the matter, Baker was unable to produce any record of his email of 10 December 2002, saying that his emails had been deleted from his laptop computer. Voukidis, who purportedly also received a copy of the email, was also unable to provide an electronic copy of this email from his own records. There were a number of other aspects surrounding the creation of this email and the subsequent loss of all copies retained on the computers used by Baker and Voukidis which give rise to considerable unease.

445 However, the most damning evidence against the Defendants on this question was the fact that the resolution was actually signed by Baker, Voukidis and Stanley in its original form, as a "true and correct record". The document as signed included the very words allegedly complained about by Baker "... in its capacity as Manager of the Break Fast Joint Venture ...".[214]

446 Further, on 10 December 2002, Voukidis sent a copy of the executed resolution by facsimile to Mr Rodney Saw, a solicitor with Meerkin & Apel, who was engaged to act on behalf of Break Fast in the proposed sale of the Wellington Parade Property.[215] Baker was sent a copy of this fax.

447 For what it is worth, Stanley said in his evidence that on 3 December 2002, he received from Voukidis an email which was also sent to Baker in which Voukidis attached a draft minute relating to the proposed sale of the building. He said that he signed the minutes of Break Fast which were attached to that email from Voukidis in his capacity as a director of Break Fast and provided his signed minutes to Voukidis. Voukidis told Stanley that he intended to send a copy of the minutes when signed by himself, Baker and Stanley, to Rodney Saw of Meerkin & Apel, who was named in the minutes. This evidence is corroborated by the signatures of all directors which appear on the Break Fast resolution prepared by Voukidis and the Voukidis facsimile to Mr Saw dated 10 December 2002.

448 Mr Rodney Saw ("Saw") of Meerkin & Apel was called by Ambridge to give evidence. The Defendants declined to cross-examine Saw, and his evidence was admitted without challenge.

In late 2002, he was retained by Break Fast, on the instructions of Stanley and Jacobs, to act for Break Fast in a proposed sale of the Wellington Parade Property to a new company which was in the process of being incorporated, which was named Wellington Property Investments Pty Ltd.

450 In the course of his retainer he received a facsimile from Voukidis on 10 December 2002 at 11.54 am which enclosed a one page document being minutes of meeting of directors of Break Fast held on 10 December 2002 at Level 5, 255 George Street, Sydney, and signed by Baker, Stanley and Voukidis as a true and correct record.[216] The handwritten facsimile page read, in part, as follows:

Rod,

Any queries please call on 0413 944 344.

Regards

Chris Voukidis.

IT WAS RESOLVED THAT the company in its capacity as manager of the Break Fast Joint Venture proceed with the sale of the property at 176 Wellington Parade, East Melbourne.

IT WAS RESOLVED THAT Mr Mark Stanley continued to give Instructions to the solicitor acting on behalf of the company, Mr Rodney Saw of Meerkin & Apel, only in relation to matters that relate to the preparation of contracts of sale.

IT WAS RESOLVED THAT Mr Mark Stanley provide updates on the progress of the transaction at least every second day to all Directors simultaneously.

...

It was stated on the front page of the facsimile that it was copied to Baker at fax number 9955 9799.

451 After receiving the facsimile on 10 December 2002 from Voukidis, he received a telephone call from Voukidis in which Chris Voukidis asked whether he had received the facsimile dated 10 December 2002 and the minute attached to it. He informed Voukidis that he had received it. Saw produced a file note which recorded this conversation, which took place on 11 December 2002.[217] At no time did Voukidis or Baker advise Saw that the minutes set out in the document signed by Baker, Voukidis and Stanley were in any way incorrect.

452 In further support of the position of Ambridge on the issue, no document was produced in the nature of a resolution signed by the directors of Break Fast, or even any unexecuted version of the same, which made the amendment in accordance with Baker's purported request.

453 Further, after 10 December 2002, the accounts of Break Fast continued to be prepared on the basis of an unincorporated joint venture as alleged by Ambridge, with Break Fast noted in headings to the accounts: "As manager for Wellington parade Joint Venture".

454 This assumes particular importance because, in or about December 2002, Voukidis advised Traficante of Stannards that management of the finances and accounts of Break Fast were to be transferred to him (Voukidis). On 9 January 2003 Traficante forwarded to Voukidis a facsimile attaching the financial statements and income tax return for Break Fast which had been prepared for the year ended 30 June 2000. Traficante advised Voukidis that the year 2000 tax return had been lodged, but that the financial statements and income tax return for the year ended 30 June 2001 were yet to be completed. He also advised Voukidis at a meeting on 19 March 2003, that the Break Fast tax return for the year 2002 had not then been lodged.

455 Accordingly, after December 2002, Voukidis personally assumed responsibility for preparation of the Break Fast accounts. At this time, Esquivel was asked by Voukidis to assist him in the preparation of the accounts for Break Fast by providing bookkeeping services for the company. He has continued to provide those services for Break Fast since that time.

456 In spite of the direct involvement of Voukidis in the preparation of the Break Fast accounts since December 2002, the accounts were drawn up thereafter consistently on a basis which was directly inconsistent with the instructions purportedly given by Baker in his 10 December 2002 email, which had been purportedly copied to Voukidis.

457 From time to time, after December 2002, the accounts prepared in relation to Break Fast included headings describing Break Fast as the manager of the Wellington Parade Joint Venture. For example, on 6 February 2003 Esquivel provided to Jacobs by facsimile two Break Fast accounts described as "MYOB Account Transaction Reports".[218] The accounts were drawn up to 28 February 2003 and were headed as follows:

458 Another example occurred on 1 May 2003 when Voukidis wrote a facsimile letter to Taylor in the following terms:

Attached are copies of draft accounts for Break Fast Investments Pty Ltd with some supporting general ledger print outs for your review.

459 The facsimile letter to Taylor included a summary of the Break Fast balance sheets with entries under the following headings:

460 If in fact Baker's position as reflected in his email of 10 December 2002, had been adopted by him at that time, it is unlikely that he would have permitted his accountant, Voukidis, to continue to prepare the accounts of Break Fast in the way they were drawn. Being a director of Break Fast and the holder of 50% of the shares in Break Fast, and having his accountant Voukidis being another director and owning another 25% of the shares, it was well within the power of Baker to direct how the accounts of Break Fast should continue to be prepared. This he manifestly failed to do.

461 Further, given that Voukidis had purportedly been copied into Baker's email of 10 December 2002, it is implausible that he would not have corrected the accounts to comply with Baker's instruction, if in fact the instruction had been given.

462 Bearing in mind the principles of Briginshaw to which I have already referred, I am satisfied that the email purportedly sent by Baker to Stanley dated 10 December 2002, and Stanley's reply email of the same date, were not authentic. They were fabricated after the event to support the case now advanced by the Defendants and were known by both Baker and Voukidis to have been so fabricated when they gave their evidence.

463 I am further satisfied that each of Baker, Stanley and Voukidis signed the resolution in its original draft form, confirming that it was signed "as a true and correct record". Voukidis then sent the signed resolution to Saw at the office of Meerkin & Apel, the solicitor acting on behalf of Break Fast who was also instructed by the resolution to disburse the proceeds of any sale only upon the written direction of at least two of the directors of Break Fast.

464 By this document, both Baker and Voukidis admitted, against the case which they now seek to put, that Break Fast in fact acted as the manager of the Wellington Parade Joint Venture, as contended for by Ambridge.

465 Further, their reliance on Baker's email of 10 December 2002, which I have found to be a fabricated document and known by them to be such, allows me to draw the inference that when they gave their evidence, they were conscious of the weakness of their case, and to draw the further inference that their cause lacks truth and merit.

466 On 10 December 2002, at about 6.00 pm, Taylor met up unexpectedly with Voukidis at Cosi, a restaurant close to his office. Prior to meeting Voukidis on that occasion, Taylor had met him on several other prior occasions. Voukidis was initially accompanied by Jacobs, who left some time after arriving at the restaurant. Taylor and Voukidis had a conversation which lasted approximately two hours. During that discussion, they discussed, among other matters the following things:

Voukidis said that he did not know the full extent of the time Taylor had expended on and my involvement in the Break Fast joint venture. Taylor told Voukidis that he had spent a total of about half a year working for the joint venture and had not rendered any accounts in relation to that work.

Voukidis said that he knew that Taylor's company Headland had done business with Ambridge.

Voukidis told Taylor that some Break Fast joint venture funds might be missing. They discussed what effect if any missing money might have on Headland's interest.

Taylor told Voukidis that Ambridge held Headland's interest on trust for Headland and that it could not therefore be affected by anything Stanley may have done.

The two had a detailed discussion about the Break Fast joint venture during which Voukidis frequently referred to that joint venture. At no time did Voukidis say anything to doubt that Ambridge had an interest as joint venturer.

Voukidis told Taylor that he ought to be appointed a director of Break Fast as Ambridge's representative in place of Stanley. He said words to the effect that this was necessary because Taylor was the only one in Melbourne and because Taylor had a comprehensive knowledge of the project.

Towards the end of the meeting, Taylor invited Voukidis to look at the documents which Taylor had in his office relating to the Break Fast joint venture. Voukidis said that he was very keen to do that and said that he would come to Taylor's office the following day, with his assistant Esquivel to examine the documents in Taylor's possession, which he had obtained from Ambridge.

467 On 11 December 2002, the day after Taylor's meeting with Voukidis at Cosi restaurant; Voukidis and Esquivel came to Taylor's office and spent the day examining the Break Fast records that Taylor had in his possession. They spent much of that day discussing various matters, including the Break Fast joint venture involving the Wellington Parade Property. In those discussions, Voukidis made constant reference to the "joint venture" concerning the Property, to the role of Break Fast as the "joint venture manager" and to Ambridge as "our joint venture partner". At no time did he suggest to Taylor that there was no joint venture agreement on foot involving the Wellington Parade Property or that Ambridge was not a party to such joint venture.

468 On 12 December 2002 at the registered office of Break Fast at Level 35, 140 William Street, Melbourne 3000 a meeting took place between Stanley and Voukidis, who were then both directors of the company, and Taylor. Taylor was informed by them that the meeting was a directors' meeting of the company Break Fast. At that meeting, a decision was made to appoint Taylor as a director of the company as appointee of Ambridge in place of Stanley. Taylor consented to this appointment. Stanley then resigned as a director of the company. Taylor advised that he would attend to lodging the appropriate notice to the Australian Securities & Investment Commission, which subsequently occurred. A copy of the notice was provided to Voukidis.

469 The ASIC historical extract for the company Break Fast dated 21 November 2003[219] shows the directors to be Voukidis (appointed 23 November 1999), Baker (appointed 23 November 1999) and Taylor (appointed 12 December 2002). Stanley is shown as a former director (appointed 23 November 1999) who ceased his appointment on 12 December 2002.

470 However, since 18 May 2004, Baker and Voukidis have taken the position that Taylor was never appointed as a director of Break Fast.

471 Taylor wrote a letter to Baker and Voukidis on 11 May 2004 which said:

I am writing to you as my fellow directors of Break Fast Investments Pty Limited. I note that you have been undertaking the management of this company without keeping me informed or notifying me of your actions. Further, I have sought information from you concerning the company on a number of previous occasions without any adequate response from you. As a director of the company, I am entitled to be fully informed about all aspects of the company and the joint venture which it manages, including all financial information.

Accordingly, I formally now write to you requesting that you provide me with copies of or, alternatively, access to all of the books and records of the company, the minute book of the company, and documents which evidence the history of and the current asset holdings of the company. I request your response in the affirmative to my request within 7 days. I require this information to enable me to discharge my duties and obligations as a director.

I also request that you inform me of any issues concerning the company, whether financial or otherwise, of which as a director I ought to know. I will also communicate with you shortly in order to request that a Board meeting be called in the near future.

Should you have any queries please contact me. Otherwise I look forward to your response.

472 Baker and Voukidis responded to Taylor with a facsimile letter dated 18 May 2004 in the following terms:

I refer to your letter of 11 May 2004.

As you will be aware, the Constitution of Break Fast Investments Pty Limited requires the appointment of a director of the Company to be made by resolution of the directors or shareholders of the Company.

The files of Break Fast Investments Pty Limited in our possession and in the possession of the Company's accountants contain no record of any such directors or shareholders resolution. We have been directors of the Company since it was incorporated and have no recollection of any such resolution being effected.

We are presently investigating with ASIC the rectification of the ASIC records to correctly reflect the position concerning the appointment of officers of the Company.

473 Taylor replied with a letter on 24 May 2004 as follows:

I acknowledge receipt of your fax dated 18 May 2004.

I advise that I attended what was agreed at the time was a directors' meeting of Break Fast Investments Pty Ltd on 12/12/02 at the registered office at Level 35, 140 William Street, Melbourne 3000. Mr Mark Stanley and Mr Chris Voukidis, both directors of the company, were in attendance at that meeting and I was informed by them that the meeting was a directors' meeting of the company. At that meeting, a decision was made to appoint me as a director of the company as appointee of Ambridge Investments Pty Ltd in place of Mr Mark Stanley, which occurred and to which I consented, and then Mr Mark Stanley resigned as a director of the company. I advised that I would attend to lodging the appropriate notice to the Australian Securities & Investment Commission, which subsequently occurred, a copy of which was provided to Mr Chris Voukidis.

Since my appointment I have acted as a director with the knowledge certainly of Mr Chris Voukidis, with no objection.

The fact that the company has no written record of my appointment as a director in the minute book is perhaps an indication of the poor record keeping by the company, but is not determinative of whether or not I was appointed.

I repeat my request made in my letter dated 11 May 2004. Further, I wish to view the minute book of the company as soon as possible. Please advise where the books, records and accounts of the company are maintained. I will be visiting Sydney shortly and, therefore, if they are in Sydney I will request an opportunity to inspect them at that time.

474 Thereafter, Baker and Voukidis have refused to acknowledge that Taylor is a director of Break Fast.

475 Draft accounts were prepared for Break Fast though to 31 March 2003 which referred to the four corporate partners, C & O Voukidis, Ambridge, IMF and Careerpath.[220] These were supplied by Voukidis to Taylor on 1 May 2003.[221]

476 In these draft accounts, Voukidis specifically acknowledged that there were four corporate partners in the joint venture, including Ambridge.

477 The first genuine turning point in the position of the Defendants with regard to Ambridge was reflected in a facsimile letter from Baker and Voukidis to Taylor dated 26 May 2004.[222]

478 In that letter, which was signed by both Baker and Voukidis and was written beneath the letterhead of Break Fast, they said, inter alia:

Additionally, neither the ASIC records not the records of the Company record Ambridge investments Pty Ltd as a shareholder of the Company.

479 The considerable delay in the Defendants asserting this position, points to their present case as being an invention devised late in the day.

480 Stanley signed a deed of acknowledgment[223] on about 8 July 2004[224] (the "Deed of Acknowledgement") acknowledging the structure of the joint venture as the Defendants would now have it.

481 Although the Deed of Acknowledgement was not pleaded by the Defendants in their defence, as it was the subject of oral evidence, I should deal with the cogency of the document as evidence.

482 The Deed of Acknowledgement came into existence after a dispute arose between Stanley, Baker and Voukidis and serious claims were on foot between the parties including an ongoing claim by Careerpath that Stanley's company FBN was indebted to it in the sum of $1,325,394 in respect of the St Leonards Joint Venture.[225] On 5 May 2003 St Leonards appointed a receiver and manager to FBN.[226] Litigation ensued about the appointment of this receiver in the Federal Court of Australia commencing on or about 18 November 2003.[227] Although these proceedings were subsequently dismissed by consent,[228] as at 7 March 2005, it was still claimed by St Leonards that FBN owed the loan amount to it, together with accrued interest.[229] I accept that, as at the time of the signing of the Deed of Acknowledgment, Stanley was being placed under considerable pressure by Voukidis and Baker.

483 The Deed of Acknowledgment was professionally drawn by Watson Mangioni, corporate and commercial lawyers in Sydney, who acted for Voukidis, Baker and St Leonards.[230]

484 The Deed is inconsistent with 4½ years of prior conduct on behalf of the parties to the Wellington Parade Joint Venture, as I have found it to be. For example, the Deed of Acknowledgement is inconsistent with the financial accounts prepared for Break Fast to which I have referred, and the draft joint venture agreements discussed by the parties and by their conduct adopted by them in the course of administering the Wellington Parade Joint Venture.

485 Being signed by Stanley, I do not accept the document as accurately recording the true state of affairs at the time. Nor do I accept it as an admission against the interest of Ambridge upon which I can place any credence.

486 In the circumstances, I do not give any weight to the Deed of Acknowledgement as reliable evidence of the truth of its contents. It was not an accurate account of the joint venture structure established for the Wellington Parade Joint Venture.

487 It is convenient to analyse the evolution of the Wellington Parade Joint Venture form the inception of the commercial relationship in November 1999 in stages.

488 The first stage may be described as the "Preliminary Joint Venture Negotiation Phase". This occurred during the period commencing in November 1999 when the Wellington Parade Property was identified as a possible investment, was selected, and purchased at auction on 24 November 1999. The parties during this stage were negotiating towards a joint venture. The negotiating parties were Baker, Voukidis and Ambridge. Ganis was also considered as a possible joint venture partner and was offered a 10% interest in the venture.

489 During this nascent period of the commercial relationship between Baker, Voukidis and Ambridge it was agreed between them that:

(a) The parties would attempt to purchase the Wellington Parade Property at auction;

(b) The company Break Fast would be incorporated with four shares, two of which would be issued to Baker, with one each to Voukidis and Stanley. The total paid up capital for the company would be $4.00. Each of Baker, Voukidis and Stanley would be directors of the company. If the parties were successful at the auction, Break Fast would be the purchasing entity, would become the registered proprietor of the property and would thereafter be the manager of the joint venture;

(c) The initial partners to the joint venture would be Baker, Voukidis and Ambridge. However, at some stage another partner would be nominated by Baker and Voukidis to join the joint venture and take up a 10% interest derived from the initial holdings of Baker and Voukidis or one of them. On this basis initially Ganis would be invited to join the joint venture;

(d) Ambridge would hold a 25% interest in return for its fee of $500,000 which it would earn for its part in finding the Wellington Parade Property and thereafter undertaking a management role in Melbourne for the Wellington Parade Project, including managing legal matters, tenancy matters and the refurbishment works for the property;

(e) Voukidis and Baker between them would initially take a 75 % interest in the venture and in due course they would nominate the persons or entities who would hold their respective interests and the precise percentages of the interests the new persons or entities would take up.

490 It was pleaded by Ambridge in its statement of claim that Break Fast would purchase the Wellington Parade Property as trustee for, and in its capacity as manager of a joint venture between, Baker, Voukidis (or their corporate nominees) and Ambridge.

491 It has long been held that a court cannot hold that an express trust exists unless it is satisfied that there was the intention to create such a trust. The question will be whether there is language or conduct which shows a sufficiently clear intention to create such a trust.[231] As is said in Jacobs Law of Trusts in Australia:[232]

The overall question is whether in the circumstances of the case, and on the true construction of what was said and written, a sufficient intention to create a trust has been manifested. It is not necessary that the creator of the trust should know that the particular relationship intended to be created is in law a trust. A trust will be created, whether or not the creator thereof is precisely aware of so doing, provided that in substance the creator intends that his or her actions should have the legal effect of creating the relationship which is known in law as a trust. If the language is such that an intention to create such a legal effect is manifested, then a trust will be created whether the words 'trust' or 'trustee' are used, or not. On the other hand the use of those words will not necessarily manifest an intention to create a trust if it appears that there was no intention to create a relationship properly so described.

492 I am satisfied that an express trust of the kind I have described was created in this case. I refer to the principal components of conduct giving rise to the implied contract of joint venture coming into being which give rise to this conclusion. In particular, the intention of Ambridge (through Baker), Voukidis and Stanley in incorporating Break Fast to be the purchaser at the auction and subsequently settling the contract of sale to enable it to become the registered proprietor, the financial contributions made by the parties to the purchase price and the loan liabilities they incurred for this purpose, the work in furthering the joint venture undertaken by Ambridge in lieu of a monetary capital contribution, the nomination of corporate entities to take up the interests of Baker and Voukidis, and the nomination of McGrouther and then IMF to take up 10% of the interest of Baker, is conduct which all points to the trust which I have identified. Further, if words are needed, the terms of the draft joint venture agreement, which was approved by Voukidis on or about 16 March 2000, points to an intention to create an express trust for the Wellington Parade Property with Break Fast as the trustee on behalf of the joint venture partners, as they were from time to time.

493 I am satisfied that, as the purchaser, and later the registered proprietor of the Wellington Parade Property, Break Fast indeed held the property on an express trust for the partners of the joint venture as they were from time to time. The express trust arose from the conduct of the parties in relation to Break Fast and the Wellington Parade Property. Initially the beneficiaries and partners of the joint venture were Baker, Voukidis and Ambridge. However, by implication, Break Fast was also conferred with a special power of appointment[233] to appoint beneficiaries in place of Baker and Voukidis as to the whole or part of their interests, upon nominations being provided by one or other of those persons. Ambridge was and continued to be a beneficiary under the express trust from its inception.

494 The relationship between the parties during this period also assumed a fiduciary character.

495 However, the preliminary joint venture negotiations could not be legally binding and enforceable as a contract because terms which were essential for the formation of a binding joint venture agreement, namely the parties to the venture and the proportions which each of them were to hold, had not been agreed. The composition of the joint venture partners and the precise allocation of their interests, other than the membership and interest of Ambridge, was left for further development and agreement.

496 By 16 March 2000 the joint venture entered a new phase, with the detailed operative terms for the joint venture settled. I will call this the "Informal Joint Venture Agreement Phase."

497 The agreement as it had been negotiated to this point was reflected in the second draft joint venture agreement which had been prepared by Break Fast's solicitor, Obst, on 4 February 2000. A copy of this document was initially provided to Jacobs of Ambridge. Jacobs in turn supplied a copy to Voukidis. Subject to one matter, being a more specific definition of the role of Ambridge in the preamble, the structure of the joint venture reflected in the operating sections of the document was agreed to by Voukidis on behalf of himself and Baker, and by Jacobs on behalf of Ambridge. This occurred in the telephone conversation between them which occurred on or about 16 March 2000 which I have earlier described.

498 The detailed terms of the binding joint venture agreement were contained in what was described as the "Operative Part" of the draft prepared by Obst of 4 February 2000. The reference in the draft agreement to the party described as "X Pty Ltd", was a fictional entity which described the combined interests of Baker and Voukidis, and any party invited by them to join the joint venture, who together would hold a "Participating Interest" in the joint venture of 75%. Ambridge was to hold the other 25%. The use of the fictional entity "X Pty Ltd" in the draft agreement at this time was designed to facilitate negotiation of a more precise definition as to which parties were to hold the 75% interest, and in what proportions.

499 Further, and importantly, under clause 5 of the draft joint venture agreement, Break Fast was appointed as the manager of the "Joint Venture to act on behalf of, and in the name of, the Joint Venturers, and, ... is an agent of the Joint Venturers". By the same clause, Break Fast was empowered to "hold assets of the Joint Venture in its name in which case it does so as nominee for the Joint Venturers as beneficial owners to the extent of their respective Participating Interests".

500 At this time, although there had been little specific negotiation of the agreement, the essential structure of the joint venture had been settled, consistently with the negotiations which had taken place in the Informal Joint Venture Negotiation Phase.

501 The relationship of the joint venture between the parties from this time continued to assume a fiduciary character.

502 The matter which was left open in relation to the text of the preamble, namely a more precise definition of the role of Ambridge in the section entitled "Background", was adequately defined by the work which Ambridge actually had done and subsequently undertook for the joint venture, and the implications which are open to be drawn from that conduct, and should be drawn.

503 However, following the discussion which occurred on 16 March 2000 there still remained the question as to who would be the parties to the joint venture and the proportions which each was to hold. This remained the missing element for the creation of a binding agreement of joint venture and was the subject of further evolution. Until agreement on this issue had been achieved, there existed merely an agreement to agree.

504 It was not until mid July 2000 that the parties and the percentage interests which each was to hold was defined. It was at this point that a binding joint venture agreement was concluded. I will call this the "Binding Joint Venture Agreement Phase."

505 The binding joint venture agreement was evidenced by the conversation held on 14 July 2000 between Jacobs on behalf of Ambridge, and Voukidis on behalf of Baker and McGrouther, which has been described earlier. In the course of this conversation it was confirmed that the joint venture parties were McGrouther who would hold a 10% interest, Ambridge who would hold a 25% interest, Voukidis who would hold a 25% interest and Baker who would hold a 40% interest. Notes taken at the time of the conversation by both Jacobs[234] and Voukidis[235] listed these parties and the percentage interest which each was to hold. Agreement on the parties to the joint venture is also evidenced by the balance sheets drawn up for Break Fast for June 2000[236] and December 2000[237] which shows the same parties noted as the persons holding "Partners' Equity" in the enterprise.

506 In terms of the express trust, upon the nomination of McGrouther by Baker to take up 10% of his interest, Break Fast appointed McGrouther to hold a 10% beneficial interest in the Wellington Parade Property.

Corporate Representative Joint Venture Agreement Phase

507 In what may be called the "Nomination of Corporate Representatives Phase", Baker and Voukidis nominated their corporate entities, Careerpath and C & O Voukidis to take up their respective shares, and McGrouther nominated IMF for this purpose.

508 Pursuant to the binding joint venture agreement which operated from mid July 2000, there existed an implied mechanism for the appointment of substitute parties by a process of nomination on the part of Baker, Voukidis and McGrouther in respect of their respective interests. The mechanism is to be implied from the conduct of the parties in undertaking this very process under the management of both Voukidis[238] and Jacobs.[239]

509 Pursuant to this nomination mechanism, between December 2000 and mid February 2001 the parties to the joint venture, other than Ambridge, proceeded to nominate the corporate entities which were to hold the respective interests of Baker, Voukidis and McGrouther in the Wellington Parade Joint Venture. Careerpath was nominated by Baker to hold his 40% interest and C & O Voukidis was nominated by Voukidis to hold his 25 % interest. This was done in communications with Jacobs prior to mid February 2001. Then in an exchange of emails between 8 and 12 February 2001. McGrouther nominated IMF to hold his 10% interest, and Voukidis advised Jacobs of the nomination.[240]

510 This did not give rise to any new or substitute agreement, or any variation of the binding joint venture agreement. The nomination of these corporate representatives was undertaken pursuant to a contractual mechanism which existed by implication under the binding joint venture agreement, as I have found it to be.

511 As to the effect of nomination clauses in a contract, I refer to the statement of Phillips JA in Salter & Ors v Gilbertson & Ors [241] where it was said:

As has been pointed out often enough, although it must be so if the contract so demands, it is a strong thing to regard the words "or nominee" as authorising [the named purchaser], unilaterally and in his or her own absolute discretion, to nominate a purchaser to stand in the place of [the named purchaser], with all the attendant consequences for [the seller]. For such a construction "compelling language" is required ...

512 Reference should also be made to the observations of Nettle J in Commissioner of State Revenue v Politis[242] that the effect of most nomination clauses is no more than to confer a power in the purchaser to require the vendor to complete the contract by transfer of the land to the purchaser's nominee. In this regard his Honour said:

Plainly, however, under most nomination clauses the nominee would not acquire any rights as against the vendor, let alone the rights of the purchaser; for most nomination clauses constitute no more than a power in the purchaser to require the vendor to complete the contract by transfer of the land to the purchaser's nominee ... But the nominee does not acquire any rights as against the vendor, because the nominee is not privy to the contract. And for the same reason, the nominee has no standing in equity to obtain an order for specific performance of the contract. He must sue in the name of the purchaser or join the purchaser as a defendant. Therefore, such if any interest as the nominee may have in the land is one which derives from the purchaser, and relevantly the most that can be said is that the nominee may acquire an interest in the land equivalent to that which the purchaser had or would have had under the contract of sale.

513 Applying these principles to the present case, I am satisfied that the implementation of the nomination mechanism did not result in a novation such that a new or varied joint venture agreement was made in place of the original agreement. There was no demonstrated intention by the parties that some new or varied contract was to be entered into in substitution for the earlier contract of mid July 2000. On the contrary, upon reviewing the evidence as a whole there was demonstrated, to my mind, a positive intention on the part of the parties to substitute the nominated corporate parties in place of the natural person partners which had previously held their interests in the joint venture. I come to this view, mindful of the character of the contract of joint venture in this case, which was unlike the common position of a vendor and purchaser in a sale contract. Here the parties were already tied by a contract of joint venture which provided, as I have found, for a mechanism to substitute corporate entities in place of the natural person partners. The corporate entities were to be appointed to represent and hold the interests of the natural person partners. As such, there were not likely to be any adverse attendant consequences for the remaining partners upon the nominations being effected. Alternatively, if there were to be any conceivable adverse consequences, it is to be inferred that the risk of this occurring was accepted by the other parties.

514 Accordingly, by mid February 2001 all of the corporate entities representing the participating partners had been nominated pursuant to the nomination mechanism implied into the binding joint venture agreement. The draft balance sheet prepared for Break Fast for June 2001 showed "Partners' Equity" held by C & O Voukidis, Ambridge, Careerpath and McGrouther.[243] Following further confirmation of the position, in which McGrouther advised Jacobs directly that his 10% interest was held by IMF,[244] a partnership tax return for Break Fast was prepared by Stannards, which was subsequently lodged electronically with the Australian taxation Office in the second half of 2001 some time after 9 October 2001.[245] The documents prepared by Stannards included a "Partners Declaration" to be signed on behalf of the four corporate partners, C & O Voukidis, Ambridge, IMF and Careerpath,[246] and a taxation return which also named the same parties as "Partners".[247] Further, in the financial statements prepared for Break Fast by Stannards for the year ended 30 June 2000, net losses were distributed to each of these corporate partners. Partnership funds were also recorded in the names of these four corporate partners.[248] Draft accounts were subsequently prepared for Break Fast though to 31 March 2003 which were in a similar form.[249] These were supplied by Voukidis to Taylor on 1 May 2003.[250]

515 In this case no agreement was brought about by the process of offer and acceptance. Nevertheless, by conducting the Wellington Parade Joint Venture consistently with the terms of the binding joint venture agreement which coalesced in mid July 2000, and following the nominations of Careerpath, C & O Voukidis and IMF by mid February 2001, consistently with the terms of that structure as it had been settled at that point, a contract of joint venture came into being. The principal components of conduct which point to this conclusion are:

(a) After the purchase of the Wellington Parade Property at auction on 24 November 1999, the arrangements between the parties had passed far beyond the stage of mere negotiation. Indeed by 16 March 2000, the initial parties, Ambridge, Baker and Voukidis had reached agreement on all of the essentials for a joint venture, subject only to the nomination of corporate entities to hold the interests of Baker and Voukidis, the identity of any further party to join the joint venture, and the precise percentage interests, other than Ambridge's 25% which had been agreed, which the other parties were to take up;

(b) The Wellington Parade Property was purchased and developed;

(c) Ambridge provided services to the joint venture prior to the auction, in the nature of legal advice and the AXIA Property Report. It also provided substantial services to the joint venture by way of management of the building and its refurbishment, at no cost to the joint venture, other than what was included in its initial fee of $500,000;

(d) Ambridge was allowed a fee of $500,000 for finding the Wellington Parade Property and for its ongoing work in managing the project and refurbishment of the building;

(e) Each party accepted as a participant in the joint venture worked collaboratively with the others to develop the Wellington Parade Property. For example, each participated in the raising of finance and the re-financing of the Wellington Parade Project, as required from time to time;

(f) It was intended by each of the participants in the joint venture that Break Fast would act on behalf of the joint venturers in relation to the purchase and development of the Property and as trustee of it, which it did;

(g) Each of the participants in the joint venture (save Break Fast as manager) made financial contributions towards the costs of the purchase and development of the Wellington Parade Property;

(h) Accounts were drawn up for Break Fast and adopted by the directors of the company which identified the joint venture partners as they were from time to time and recorded the "capital" entitlements of the participants in the joint venture to the equity in the asset held by Break Fast which included the Wellington Parade Property. The accounts were never queried by the directors of Break Fast and were either in some cases expressly, and other cases impliedly, accepted by them as a true and fair account of the financial position of the company;

(i) The accounts for Break Fast on and after 30 June 2000 to at least March 2003 were consistently drawn in a manner which reflected the partnership interests of first Ambridge, Voukidis, Baker and McGrouther and then, upon the nomination of the other corporate entities, Ambridge, C & O Voukidis, Careerpath and IMF;

(j) McGrouther, in joining the Wellington Parade Joint Venture and contributing IMF's capital of $300,000 for a 10% interest, impliedly accepted, on behalf of himself and his company, the structure which had been set in place by the other partners in the joint venture to that time and by his conduct in never questioning the position thereafter, continued to accept the structure which I have found; and

(k) The joint venture agreement signed by Break Fast and Ambridge and provided on 8 October 2002, and all of the draft joint venture agreements which preceded it, set out the essential terms of the Wellington Parade Joint Venture, and there was never any departure from this structure reflected in any other draft agreement.

516 I find that the terms of the draft joint venture agreement provided by Stanley to Baker on 8 October 2002,[251] which was executed by Ambridge and Break Fast, happens to record all of the terms of the binding joint venture agreement, the parties and their designated partnership interests, upon which the parties conducted their joint venture since mid July 2000, as it was developed by adding the corporate representatives for Baker, Voukidis and McGrouther in mid February 2001 pursuant to the contractual mechanism in place. The contract of joint venture continues in this form to this day.

517 In terms of the express trust, upon the nominations of Baker and Voukidis, Break Fast appointed Careerpath, C & O Voukidis and IMF to hold the interests of Baker, Voukidis and McGrouther, alongside that of Ambridge, in the Wellington Parade Property.

WHETHER THE AGREEMENTS WERE UNENFORCEABLE BY REASON OF THE STATUTE OF FRAUDS

518 The Defendants say that if there was a joint venture agreement of the kind alleged by Ambridge, the joint venture agreement was entered into after Break Fast purchased the Wellington Parade Property beneficially, or alternatively after it purchased the property on behalf of Baker, Voukidis and Stanley. If the joint venture agreement was in the form alleged by Ambridge, with the parties to it consisting of Break Fast and the participant partners, Careerpath on behalf of Baker, C & O Voukidis on behalf of Voukidis, Ambridge on behalf of Stanley and IMF on behalf of McGrouther, the joint venture agreement necessarily required the disposition of an interest in the land in accordance with s.126(1) Instruments Act 1958 (Vic).

519 Section 126(1) Instruments Act 1958 (Vic) relevantly provides:

126. Certain agreements to be in writing

(1) An action must not be brought to charge a person upon a contract for the sale or other disposition of an interest in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note.

520 The section is based on the 1677 Statute of Frauds (UK) which was concerned to prevent fraudulent claims by persons asserting rights to property in post civil war England.[252] The protection has remained to this day.[253]

521 The Defendants say that, as there was no memorandum or note of the joint venture agreement as alleged by Ambridge in writing, which was signed by Break Fast or any of the Defendants, the joint venture agreement is unenforceable.

(a) For s.126 of the Instruments Act 1958 to have application, there must be a relevant disposition. Break Fast at no time disposed of any interest in the property to Ambridge;

(b) Further, Break Fast did not "own" the property prior to settlement. At best, it had an equity to enforce the sale of contract once it had arranged its finances and was ready, willing and able to settle;

(c) Further and in the alternative, there was a note or memorandum signed by Break Fast sufficient to satisfy the statutory requirement;

(d) Further and in the alternative, Break Fast is (in addition to its contractual obligation) under an obligation in equity to hold (and if necessary convey) a 25% interest in the Property for or to Ambridge. Insofar as Break Fast is under any obligation in equity, s.126 of the Instruments Act 1958 has no application;

(e) Further and in the alternative, Ambridge is not precluded from enforcing the joint venture agreement by reason of its acts of part performance. Ambridge engaged in acts of part performance of the joint venture agreement which are unequivocal and in their own nature referable to the alleged agreement; and

(f) Further and in the alternative, Ambridge says that the Defendants are estopped from relying on s.126 of the Instruments Act 1958 in seeking to defeat Ambridge's claim.

523 For s.126 of the Instruments Act 1958 to have application, there must be a relevant disposition. I accept that Ambridge at no time acquired or disposed of any interest in the Wellington Parade Property within the meaning of the Statute of Frauds, and was not obliged by the joint venture agreement to do so.

524 As to the acquisition of the Wellington Parade Property prior to its purchase at auction on 24 November 1999, there was no agreement between the parties which came within the terms of the Statute of Frauds. This is so because the agreement, such that it was, was not an agreement to purchase in the relevant sense. Insofar as agreement was achieved at that time it was an agreement to endeavour to purchase the property and the broad terms upon which the parties would proceed if they were to be successful.

525 An agreement pursuant to which a number of persons enter into a venture, whether it is a partnership or a joint venture, to purchase land with the object of resale, is not within the Statute of Frauds. [254] Two colourful gold mining cases, one arising from a joint venture agreement and one from a partnership, illustrate the point.

526 In Brown v Robertson[255], the parties met in the Empire Hotel in Sydney of 27 July 1889 to buy a goldmine called "Homeward Bound". The Full Court on a reference from the trial Judge was called upon to decide whether the contract as found fell within the Statute of Frauds. The Court[256] held that it did not. Williams J expressed his conclusion in the following terms:

The decision of Vice-Chancellor Wigram in Dale v Hamilton decides the point. That decision has never been questioned, and has been upheld both in England and by the judges in this Court more than once. That point is this, that where a number of persons make an agreement together to endeavour to acquire property, to purchase land, or a mine, or anything else, none of the parties to the agreement having an interest in the property to be acquired, that is an agreement that does not fall within the purview of the section. That is this case. The persons who entered into this agreement agreed together to endeavour to purchase the mine, if they approved of it, upon certain terms and conditions, if the person who owned the mine could be induced to sell the Defendant any interest whatever in the mine. The persons having an interest in the mine were not in any way affected by the agreement. It was not an agreement to purchase at all; it is an agreement to endeavour to purchase if they can.

527 Kennedy v Currie[257] was to similar effect. There, Owen CJ in Eq. summarised the facts and his conclusions upon it in the following passage:

In this case the question is whether an agreement to enter into partnership is required to be in writing, because the subject matter of the partnership might include an interest in land, viz., a mine in Western Australia. It is evident from the agreement for partnership which I have already referred to, that until a mine was discovered there was no interest in land the subject matter of the partnership. All that the signatories to the agreement agreed to do was to provide funds to send two men to Western Australia to prospect for gold, and it was provided that when a mine was found it would belong to the company; but until a mine was taken up the partnership had no interest in land, and supposing no mine was ever discovered the partnership would none the less have been in existence, but would never have possessed an interest in land.

528 These cases may be contrasted with the position where, for example, a partnership agreement involves the transfer of an interest in land. To be enforceable, the agreement must comply with the statute. Gray v Smith[258] was one such case. There, an agreement by a partner to retire from his partnership and assign his share of the partnership assets, which included land, was held to be an agreement to assign an interest in land and must be evidenced by a sufficient memorandum in writing within the Statute of Frauds.

529 In this case, at the time of arriving at their agreement prior to the auction, none of the parties then had any interest in the property to be acquired. The party having an interest in the property at that time, namely the vendor of the Wellington Parade Property, was not affected by the nascent joint venture agreement which then existed between the present parties. The inchoate joint venture agreement such that it was at this time, was not required to comply with the Statute of Frauds, and could not be rendered unenforceable for this reason.

530 The interest of Ambridge in the Wellington Parade Property crystallized upon the purchase of the property at auction and the subsequent settlement of the sale on 29 February 2000. At settlement, Break Fast became entitled to be registered as the registered proprietor of the property and as such gained an interest in the land which was the subject of the purchase. Thereafter it was registered as the registered proprietor of the property and remains so registered to this day.

531 However, as I have earlier found, Break Fast did not acquire the property beneficially, but rather as trustee for and as manager of the Wellington Parade joint venture pursuant to the express trust which I have described. The beneficiaries initially were the partners who were then identified as the participating joint venture partners, namely: Baker, Voukidis and Ambridge. The trustee, Break Fast, held the Wellington Parade Property with the power of appointment of additional or replacement beneficiaries as to the respective interests of Baker and Voukidis upon them exercising their nominations as I have earlier described.

532 From the outset, Ambridge therefore held a beneficial interest as to 25% in the Wellington Parade Property pursuant to both the joint venture agreement, and the trust established under it. The interest it held never altered, and as I have found, remains to this day.

533 The joint venture agreement did not provide for any disposition of either Break Fast's or Ambridge's interest in the land.

534 The purpose of the joint venture agreed upon in Clause D of the third draft joint venture agreement of 22 March 2000 was "completion of the purchase and the development and management of the Property ("the Objectives")".[259] The obligation purportedly assumed by Break Fast to undertake the "completion of the purchase" of the property, was merely a record of what had already been effected. The purchase of the property was completed on settlement which occurred on 29 February 2000. In this respect, Clause D was not the assumption of a new and binding obligation. Past consideration is no consideration.[260] Consequently, it was only the development and management of the property which remained to be undertaken as a binding obligation under Clause D the joint venture agreement.

535 Further, the joint venture agreement did not make any provision for the disposition of the Wellington Parade Property or any part of it by the trustee, Break Fast or by any of the beneficiary participants in the joint venture. Under the terms of the joint venture agreement, no provision required the property or any part of it or any interest in it to be sold, disposed of, transferred or encumbered by Break Fast. Although the joint venture agreement did provide a mechanism for a joint venturer to first offer its interest to remaining joint venturers if it wished to dispose of its interest in the property,[261] no joint venture partner was required to dispose of its interest, or any part of its interest in the property, and assumed no obligation to do so.

536 The joint venture agreement, in relation to the enforcement of Ambridge's interest in the Wellington Parade Property, therefore did not need to comply with the Statute of Frauds in order to be actionable

537 In my opinion, this analysis is sufficient to dispose of the Statute of Frauds point.

538 However, if contrary to my finding that the Statute of Frauds has no application to the joint venture agreements found in this case, and s.126 Instruments Act 1958 should not be put to one side, I find in any event, that there were sufficient acts of part performance on the part of the parties to the transaction such that the operation of s.126 is neutralized. The acts of part performance consist of the conduct which I have found which gives rise to the implied agreements of joint venture.

539 However, in addition to the contractual rights of Ambridge under the joint venture agreement, or in the alternative to those contractual rights arising, if Break Fast is under an obligation in equity to hold, and if necessary convey, a 25% interest in the Wellington Parade Property for or to Ambridge, insofar as Break Fast is under such an obligation in equity, s.126 of the Instruments Act 1958 will have no application.

540 In Waltons Stores (Interstate) Ltd v Maher ("Waltons Stores"),[262] Brennan J stated:

The Statute of Frauds and similar provisions prescribing formalities affecting proof of contracts have never stood in the way of a decree to enforce a proprietary estoppel (see Crook v Corporation of Seaford (1870) LR 10 Eq 678) and, in principle, there is no reason why such provisions should apply when any other equity is created by estoppel. The action to enforce an equity created by estoppel is not brought "upon any contract", for the equity arises out of the circumstances. This is not to say that there is an equity which precludes the application of the statute. It is to say that the statute has no application to the equity.

541 In Agius v Sage[263] Byrne J made the following observation in reference to the judgment of Deane J[264] in Waltons Stores:

Deane J in the passage referred to made it clear that the Statute of Frauds had nothing to do with the case because the proposed lessee was bound by equity and not by contract. His Honour goes on to say that the Statute of Frauds does not apply to assumed agreements. See, too, per Brennan, J[1988] HCA 7; , 164 CLR 387 at 433. The passage to which I was referred supports the proposition that the Statute of Frauds will not operate to defeat an obligation to convey land where this obligation arises in equity.

542 Accordingly, if Break Fast is under an obligation in equity to convey to Ambridge a 25% interest in the joint venture property, s.126 of the Instruments Act 1958 will not stand in the way of Ambridge enforcing that obligation against Break Fast.

543 A case is formulated in equity by the Plaintiff in the event that it fails upon its primary contention that a binding contract of joint venture arose. Ambridge says that the parties, in any event, were bound by fiduciary obligations between them which are enforceable in equity.

544 The distinguishing obligation of a fiduciary is the obligation of loyalty: Bristol and West Building Society v Mothew.[265] The Full Court in Gibson Motorsport Merchandise Pty Ltd v Forbes[266] analysed the obligation in the following terms:

It is accepted in this country that a fiduciary's duty of loyalty is essentially proscriptive in character: Breen v Williams [1995] HCA 63; (1996) 186 CLR 71 at 113; Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at [74]; and embodies the twin themes of precluding undisclosed conflict of duty and interest (or of duty and duty), and of prohibiting misuse of fiduciary position: see Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 at 198-199. Put compendiously the duty of loyalty can be said to oblige a fiduciary to act in the interests of the other party to the relationship or, in the case of a partnership or a joint venture having fiduciary incidents, in their joint interests to the exclusion of his or her own interests: see Breen v Williams, above, at 113; Bristol and West Building Society v Mothew, above, at 18. If there be trust and confidence present in a business relationship and if it be claimed that that trust and confidence is a building block in establishing that the relationship was a fiduciary one: cf News Limited v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410 at 538-545; it must be shown that that trust was given, that that confidence was reposed, in a context which was capable of attracting, and did attract, a duty of loyalty. In a setting such as the present this would necessitate it being shown that, having regard in particular to what had been agreed and done and to what in consequence each party could properly anticipate would be done, their relationship was such that each could reasonably expect the others to act in their mutual interest to the exclusion of each's own several interest in relation to at least a part or parts of the race team enterprise: Arklow Investments Ltd v Maclean, above, at 598; Woodson (Sales) Pty Ltd v Woodson (Australia) Ltd (1996) 7 BPR 14,685. Put shortly, if trust and confidence in another is to be relevant, it must relate to a reasonable expectation of loyalty: cf Dal Pont and Chalmers, Equity and Trusts in Australia, 94 (3rd ed, 2004).

545 However, in Gibson Motorsport Merchandise Pty Ltd v Forbes,[267] the Full Court found on the facts of that case involving a business enterprise, that there was nothing fiduciary about the relationships between the parties, concluding that:[268]

The relationships they actually sought to establish in exploiting the business opportunity were ones based on severally owned assets, individual contracts and distinct business structures which served the several interests of the contractors. They may well have reposed a trust and confidence in each other reflecting an expectation that they could bring to an acceptable finalisation the various arrangements they had in contemplation. But that trust and confidence, if it was there, was not directed to the subordination of self interest to joint interest.

546 I am satisfied in this case that, even if and contrary to my finding that an enforceable joint venture agreement did arise, the relationship between the parties during each of the periods I have considered, was fiduciary in character. Indeed, from the outset of the relationship between Stanley, Voukidis and Baker, as it was immediately prior to the auction when they agreed to proceed with the purchase of the Wellington Parade, their relationship assumed a distinctly fiduciary character. As their relationship progressed and took shape with the addition of McGrouther's interest, the nomination of the corporate entities, the definition of the participants' precise interests in the venture, and the provision of more capital, the fiduciary character of their mutual relationship remained entrenched.

547 In Muschinski v Dodds,[269] Deane J,[270] with whom Mason J agreed, pointed out that equity, through the constructive trust, might operate to supplement the incomplete agreement of the parties to mutual relationships. His Honour observed:

Both common law and equity recognize that, where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame, it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie, as a matter of law, at the time of the failure. Where there are express or implied contractual provisions specially dealing with the consequences of failure of the joint relationship or endeavour, they will ordinarily apply in law and equity to regulate the rights and duties of the parties between themselves and the prima facie legal position will accordingly prevail. Where, however, there are no applicable contractual provisions or the only applicable provisions were not framed to meet the contingency of premature failure of the enterprise or relationship, other rules or principles will commonly be called into play. If, in the last mentioned case, the relevant relationship is merely contractual and the contract has been frustrated without fault on either side, the present tendency of the common law is that contributions made should be refunded at least if there has been a complete failure of consideration in performance. If the relevant relationship is a partnership, the prima facie rule of equity on premature dissolution is, as in the case of an ordinary dissolution that the parties are, after the discharge of partnership debts, entitled to be repaid their respective capital contributions. More important for present purposes, if a premium has been paid by a fixed term partner who is not to be held responsible for the premature dissolution, an equity court will order a refund or partial refund of the premium to the extent that its retention by the other partner would be unconscionable. If the relevant relationship is not a partnership but takes the form of a contractual joint venture for the pursuit of some commercial advantage, a similar prima facie rule of equity applies in the event of the premature collapse of the joint venture and the consequent preclusion of the attainment of the commercial advantage, namely, that, to the extent that the joint funds allow, the joint venturers are entitled to the proportionate repayment of their capital contributions to the abortive joint venture. This is so notwithstanding that it was the common understanding or agreement that the funds advanced were to be applied for the purposes of the joint venture and that the return from them would take the form, not of a repayment of capital contributed but of a share in the proceeds of the joint venture when it was carried to fruition. [Citations omitted]

548 Further, if a fiduciary relationship arises between the parties to a joint venture, the fiduciary obligation of loyalty applies. A range of discretionary and flexible equitable remedies, including the declaration of a constructive trust and the taking of accounts, will then become available.[271]

549 As observed by the Full Court in Gibson Motorsport Merchandise Pty Ltd v Forbes:[272]

A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached, and who may never reach, agreement upon the consensual terms which are to govern the arrangement between them. In particular, a fiduciary relationship with attendant fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled. Indeed, in such circumstances, the mutual confidence and trust which underlie most consensual fiduciary relationships are likely to be more readily apparent than in the case where mutual rights and obligations have been expressly defined in some formal agreement. Likewise, the relationship between prospective partners or participants in a proposed partnership to carry out a single joint undertaking or endeavour will ordinarily be fiduciary if the prospective partners have reached an informal arrangement to assume such a relationship and have proceeded to take steps involved in its establishment or implementation.

550 The analysis which I propose to adopt will be to determine first whether the facts and circumstances warrant the finding that a fiduciary relationship exists; and second, if such a relationship arises, what duties are imposed on the fiduciary parties.

551 In Hospital Products v United States Surgical Corporation[273] Gibbs CJ observed:

The fact that the agreement between the parties was of a purely commercial kind and that they dealt at arm's length and on an equal footing has consistently been regarded by this court as important, if not decisive, in indicating that no fiduciary duty arose.

552 However, a common enterprise or undertaking, which is the hallmark of many if not most joint ventures, is not unlike the relationship established by a partnership. Mutual collaboration directed to a common commercial purpose is central to the relationship in both cases. Mutual trust and confidence on the part of the participants is essential for a successful outcome. In Birtchnell v Equity Trustees Executors and Agency Co Ltd,[274] Dixon J made the observation that "a stronger case of fiduciary relationship cannot be conceived than that which exists between partners". The theme was echoed by Hutley JA in relation to joint ventures in Brian Pty Ltd v United Dominions Corporation Ltd, where his Honour said:[275]

That joint venturers have fiduciary relations, inter se, seems to be essential for the efficacy of the device.

553 The High Court considered the issue further in United Dominions Corporation Limited v Brian Pty Limited.[276] Gibbs CJ favoured the principle that an intending partner, like a partner, owes a duty of the utmost good faith. After considering the authorities cited in Lindley on Partnership,[277] which were said to stand for the proposition that the "obligation to perfect fairness and good faith" is not confined to persons who actually are partners, but "extends to persons negotiating for a partnership, but between whom no partnership as yet exists ... ", his Honour proceeded as follows:[278]

Other authorities, cited by Lindley, concerned promoters of companies, but there is an analogy between the position of company promoters and that of persons who invite others to join in a partnership. The principle was stated generally in Directors, etc. of Central Railway Co of Venezuela v Kisch (1867) LR 2 HL 99, at p 113:

"It cannot be too frequently or too strongly impressed upon those who, having projected any undertaking, are desirous of obtaining the co-operation of persons who have no other information on the subject than that which they choose to convey, that the utmost candour and honesty ought to characterize their published statements".

Although not cited by Lindley, appears to support his proposition ...

554 In the same case, Mason, Brennan and Deane JJ said:[279]

The most that can be said is that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken. If the joint venture takes the form of a partnership, the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint venturers from being a fiduciary one. In such a case, the joint venturers will be under fiduciary duties to one another, including fiduciary duties in relation to property the subject of the joint venture, which are the ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship (see, generally, Birtchnell v. Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; [1929] HCA 24; (1929) 42 CLR 384, at pp 407-409).

555 The matter was taken up by the Full Federal Court in News Ltd v Australian Rugby Football League Ltd, where it was said:[280]

UDC v Brian clearly demonstrates that undertakings described as "joint ventures" may attract fiduciary duties. And this is so; notwithstanding the reluctance of the majority in Hospital Products v USSC ... Business relationships (leaving aside partnerships) clearly attract fiduciary duties.

556 In this case it is open to enforce in equity the fiduciary duties imposed on the parties while they were negotiating towards a joint venture, and on their relationship once a contractual joint venture had been entered into.

557 Further, equity will come to the aid of enforcing the express trust which I have found in the event that its terms have been breached.

Whether in This Case a Fiduciary Relationship Exists Outside any Contractual Relationship

558 In this part, consideration is given to the existence of fiduciary duties on the assumption that no binding contract of joint venture was ever concluded between the parties.

559 Break Fast assumed the role as the registered proprietor of the Wellington Parade Property and as of trustee of the property on behalf of the beneficiaries, Baker, Voukidis and Ambridge, on the terms of the express trust which I have found. Thereafter those parties owed to one another fiduciary duties which arose in equity pursuant to the express trust.

560 I find that even if the express trust which I have found was not created, a fiduciary relationship between Ambridge and Break Fast, Baker and Voukidis and later Careerpath, C & O Voukidis and McGrouther and later IMF arose principally from the following facts:

(a) I am satisfied that upon the parties, Baker, Voukidis and Ambridge, agreeing to proceed to bid for the Wellington Parade Property on behalf of Break Fast at auction on 24 November 1999, and upon Break Fast acquiring the property at the auction, these parties agreed by implication to combine in a joint venture and to proceed to structure the joint venture between them as an unincorporated joint venture, which included Ambridge as a participating party.

(b) After the purchase of the Wellington Parade Property at auction on 24 November 1999, the arrangements between them had passed far beyond the stage of mere negotiation. Indeed by 16 March 2000, the initial parties, Ambridge, Baker and Voukidis had reached agreement on all of the essentials for a joint venture, subject only to the nomination of corporate entities to hold the interests of Baker and Voukidis, the identity of any further party to join the joint venture, and the precise percentage interests, other than Ambridge's 25% which had been agreed, which the other parties were to take up;

(c) The Wellington Parade Property was purchased and developed;

(d) Ambridge provided services to the joint venture prior to the auction, in the nature of legal advice and the AXIA Property Report. It also provided substantial services to the joint venture by way of management of the building and its refurbishment, at no cost to the joint venture, other than what was included in its initial fee of $500,000;

(e) Each party accepted as a participant in the joint venture worked collaboratively with the others to develop the Wellington Parade Property. For example, each participated in the raising of finance and the re-financing of the Wellington Parade Project, as required from time to time;

(f) It was intended by each of the participants in the joint venture that Break Fast would act on behalf of the joint venturers in relation to the purchase and development of the Property and as trustee of it, which it did;

(g) Each of the participants in the joint venture (save Break Fast as manager) made financial contributions towards the costs of the purchase and development of the Wellington Parade Property;

(h) Accounts were drawn up between the parties to reveal the "capital" entitlements of the participants in the joint venture to the equity in Break Fast's assets (including the Wellington Parade Property); and

(i) The joint venture agreement signed by Break Fast and Ambridge and provided on 8 October 2002, and all of the draft joint venture agreements which preceded it, assumed a fiduciary relationship.

561 By way of summary, the parties were clearly associated for a common end, namely, following its initial acquisition, to develop and hold the Wellington Parade Property. In the absence of any binding contract or express trust, the relationship between the parties was in any event based upon a mutual confidence and trust.

562 Further, following the admission of McGrouther to the joint venture, and later the corporate nominees for Baker, Voukidis and the McGrouther, namely Careerpath, C & O Voukidis and IMF, reciprocal fiduciary duties were in turn imposed on those parties as between themselves inter se and as between those parties and Ambridge.

What Duties are Imposed on the Fiduciary Parties?

563 Moulding the fiduciary duties to the character of the Wellington Parade Joint Venture, I accept that each of the relevant parties, from the time of their active involvement with the Wellington Parade Project, incurred the following minimum fiduciary obligations:

(a) A duty to act in good faith in their dealings with each other in respect of the Wellington Parade Property and the Wellington Parade Joint Venture;

(b) A duty not to use the property for a purpose not related to advancing the interests of the parties to the joint venture;

(d) A duty not to deny to any party his or its interest in the Wellington Parade Joint Venture.

564 There may be other fiduciary duties of a more specific nature which fall under the umbrella of the principal duties which I have found. However, it is unnecessary for me to deal with any such further specific duties at this stage of the proceeding.

565 The Defendants have denied that Ambridge has any interest in the Wellington Parade Joint Venture or in the Wellington Parade Property.

566 However, I have found that from the outset of the Wellington Parade Project, prior to the auction on 24 November 1999, Ambridge was a participating partner in the Wellington Parade Joint Venture and remains such to this day. Further, I have found that its interest to the extent of 25% in the joint venture was agreed between Jacobs on behalf of Ambridge and Voukidis on behalf of himself and Baker in a telephone conversation on 16 March 2000.

567 In these circumstances, it would be unconscionable for the Defendants to deny the 25% interest of Ambridge in the Wellington Parade Joint Venture and in the Wellington Parade Property. The conduct amounts to a breach of their duty to act in good faith in their dealings with their co-joint venturer.

568 The declaration that Break Fast holds a 25% interest in the Wellington Parade Property on constructive trust for Ambridge would be an appropriate remedy, and I would declare such if it had been necessary to do so in the absence of my finding as to Ambridge's entitlement to a declaration by reason of the contract of joint venture and the express trust which I have found.

569 Stanley met with Michael Czarny ("Czarny") a solicitor of Meerkin & Apel on 20 November 2000. Stanley was seeking a loan of $750,000 to be advanced to a company in which he had an interest, St Leonards Wellington Parade Property Pty Ltd ("St Leonards"), for a period of six months. Stanley told Czarny, as was the case, that he was the sole director and shareholder of St Leonards, and that the loan was needed urgently for the imminent settlement of a purchase of a property at 28-34 Clarke Street, St Leonards ("the St Leonards Property"). The St Leonards Property was purchased by St Leonards on behalf or four joint venturers, namely Careerpath which held its interest for Baker, FBN Investments Pty Ltd, which held its interest for Stanley, Koombari Pty Ltd, which held it interest for Voukidis and a Mr Nick Anastasopoulos. The joint venture was called the St Leonard's Joint Venture.

570 Stanley was a client of the firm Meerkin & Apel, as was Taylor. Czarny proceeded to arrange for the loan.

571 On or about 23 November 2001 the loan (the "Tauber Loan") was provided by George Tauber Management Pty Ltd ("Tauber") to St Leonards pursuant to a loan agreement dated on that date (the "Tauber Loan Agreement").

572 The securities provided for the Tauber Loan consisted of a registered second mortgage over the St Leonards Property, a joint and several guarantee provided by the guarantors which included Stanley and his company, the Plaintiff, Ambridge, a cross deed of covenant and, importantly, a mortgage of one ordinary fully paid share held by Stanley in Break Fast. I accept what Czarny said in cross-examination the "the principal security and the most important part of the transaction was the Wellington Parade Property in New South Wales ..." [281]

573 As to the additional security offered by Stanley, being the mortgage over his share in Break Fast, Stanley advised Czarny that fifty per cent of his share in Break Fast was held by himself and the other fifty per cent was held by him on behalf of Taylor. For this reason, Tauber agreed under the Tauber Loan Agreement to pay half of all distributions it received in respect of the Stanley share in Break Fast to Taylor should it ever be realised as a security. Stanley advised Czarny that the net return due to him on his share was worth about $650,000.

574 In so doing, I accept that Stanley represented to Tauber, through its solicitor Czarny, that his share in Break Fast was an asset of realisable value. I accept that Stanley also represented to Czarny that the Wellington Parade Property was held by Break Fast beneficially (rather than in an unincorporated joint venture) and that Stanley himself (and not Ambridge) held an interest in the Wellington Parade Property by means of his shareholding in Break Fast. I also accept that on the basis of these representations, Czarny prepared loan and security documentation, which was executed by Stanley, to give effect to the Tauber Loan to St Leonards, which included as an additional security the mortgage of Stanley's share in Break Fast as part of the security for that loan. The mortgage of the share was executed by Stanley on 23 November 2001.

575 The loan was duly settled, with the sum of $840,000 being advanced to St Leonards. An interest rate of 21% per annum was agreed, with a higher default rate settled at 26%.

576 The Tauber Loan was accounted for in the St Leonards Joint Venture as Stanley's personal equity contribution to that joint venture. Accordingly, Stanley assumed liability for the loan as between his co-joint venturers.

577 Sometime thereafter, Stanley defaulted under the Tauber Loan. On 2 July 2004 the lender, George Tauber Management Pty Ltd, assigned to the Seventh Defendant, Oxley Group Finance Pty Ltd ("Oxley"), its rights under the Tauber Loan Agreement, Deed of Guarantee and share Mortgage for the sum of $1,054,155.31, which was the debt owing under the Tauber Loan at the time. Oxley was incorporated on 16 January 2004 and has been at all times since then under the control of Voukidis, who remains as its sole director. The shareholders of Oxley are the parties to the St Leonard's Joint Venture, which include Baker, Voukidis, Mr Anastasopoulos and a Mr John Crotti.

578 By the deed of assignment between Tauber and Oxley of 2 July 2004, the Tauber mortgage was transferred to Oxley on that date. Tauber therefore obtained the beneficial interest in the Stanley share with a right to register the legal interest with the Australian Securities and Investment Commission (ASIC), leaving Stanley with an equity of redemption. The transfer was perfected when Oxley subsequently registered its legal ownership of the share in Break Fast with ASIC. In this way, Oxley, which was under the control of Voukidis, became the legal owner of Stanley's share in Break Fast, subject to Stanley's equity of redemption under the Tauber mortgage.

579 However, it was not with a view to gaining further control of the Wellington Parade Property through acquisition of the mortgage of Stanley's share in Break Fast that Voukidis and Baker, through Oxley, proceeded to take the assignment of the Tauber Loan Agreement and its securities on 2 July 2004. Their purpose was altogether different. Mr Voukidis' evidence in re-examination explained Oxley's position. It was as follows:[282]

MR BICK: On that last topic, Mr Voukidis, why did Oxley pay out Tauber? ---Mr Tauber was agitating and threatening. It would have - it ultimately would have created - Mr Tauber's demands for repayment were quite forceful and it was creating a breach of our debt covenants with CFS.

Yes?---There was a demand issued by Mr Tauber for repayment as well.

Thank you. And I'll take you to another topic.

580 It was submitted by the Defendants that as Ambridge was Stanley's company and Stanley was the sole shareholder, a director, and the controlling mind of Ambridge at the time the Tauber loan and mortgage were entered into, Ambridge is to be taken to have knowledge of, and to have consented to, the representations made by Stanley to Tauber (through Czarny) and to his entering into the Tauber loan and mortgage. Even if this was not the case, it was submitted that, as Ambridge itself had provided a guarantee in respect of the Tauber Loan, it must be taken to have knowledge of the representations made.

581 It was further submitted that to permit Ambridge to now deny that Break Fast held the Wellington Parade Property beneficially would undermine the security obtained by Tauber and then Oxley for value. In the result, it would be against equity and good conscience to allow Ambridge to now deny the same representations it was a party to previously. Ambridge, so it was submitted, is therefore estopped from denying the truth of the representation made by Stanley that the Wellington Parade Property was held beneficially and that Stanley's interest was held by means of his shareholding in Break Fast.

582 In consequence, it was further submitted by the Defendants that the effect of the Tauber Loan Agreement and the mortgage of the Stanley share under it, is that Ambridge is unable to make any claim in respect of any interest in the Wellington Parade Property.

583 In order to succeed in the defence, Oxley would need to establish the alleged estoppel in its favour. The estoppel could arise directly in favour of Oxley, or indirectly by it having taken an assignment of the Tauber Loan Agreement from its predecessor in title Tauber which was the subject of the alleged misrepresentation by Stanley as to the value of his Break Fast share.

584 In the light of the ultimate finding which is made as to the structure of the ownership of the interests of the parties in the Wellington Parade Property, I am satisfied that the representation made by Stanley to Czarny as to the intrinsic value of his share in Break Fast was indeed a misrepresentation. It was plainly untrue. As such, the conduct reflects poorly on the credit of Stanley.

585 However, I am not satisfied that Tauber relied upon the representation in entering into the Tauber Loan Agreement. No one from George Tauber Management Pty Ltd was called to give evidence. There was no evidence that the Tauber Loan would not have proceeded, had the mortgage of the Stanley share not been included. Further, there is no evidence that the loan provided by Tauber was not well secured at the time the Tauber Loan Agreement was entered into, even if the Stanley share in Break Fast was not included in the suite of securities.

586 Further, there is no evidence that Tauber suffered any detriment in entering into the loan transaction in the event that a finding is made that the Stanley share in Break Fast had no intrinsic sale value.

587 I am also satisfied that Oxley did not rely upon Stanley's representation or any value placed on the security provided by the mortgage of his share in Break Fast in taking an assignment of the Tauber Loan Agreement on 2 July 2004. When it took the assignment of the Tauber Loan Agreement, Oxley, through Voukidis who was its sole director, must be taken to have had full knowledge of the fact, as I have found it to be, that Ambridge, and not Stanley, held an interest in the joint venture. The evidence is that, at least from the time when Jacobs of Ambridge advised Voukidis as to the basis upon which the accounts of Break Fast had been and were being prepared, by his email of 10 July 2001, Voukidis knew of the position taken by Ambridge as to the structure of the ownership of the Wellington Parade Property. Oxley could not therefore have placed any credible reliance upon any representation made by Stanley as to the value of his share in Break Fast or placed any value on the mortgage of Stanley's share in Break Fast, at the time when it took the assignment of the Tauber Loan Agreement on 2 July 2004.

588 Further, I am not satisfied that Oxley's purchase of the debt owed by St Leonards was other than the purchase of a valuable asset. Oxley now has an interest in the principal security provided under the Tauber Loan Agreement, namely the mortgage over the St Leonards Wellington Parade Property. There is no evidence that this security is not sufficient to meet whatever may be outstanding under the Tauber Loan or that it will not continue to provide adequate security for the loan. Accordingly, there is no evidence that Oxley will now or in the future suffer any detriment.

589 Indeed there is positive evidence that the Tauber Loan at all times was, and remains, well secured. It is apparent from the balance sheet of the balance sheet of the St Leonards Unit Trust, which apparently now owns the St Leonards Wellington Parade Property, that St Leonards has had net assets of almost $2 million or more since 2002 after taking into account secured loans to Perpetual Nominees and Tauber (later Oxley). It now has net assets of approximately $1.9 million. Furthermore, the St Leonards Wellington Parade Property has grown in value from 2002, when it was valued in the sum of $11 million, to a value of approximately $21.6 million as at 30 June 2009. Further, the balance sheet of Oxley shows that the secured loan to St Leonards is carried at the full value of its current principal, namely $3,961,403.98. There is no provision for doubtful debts indicating any likelihood of non-payment. On the basis of the evidence, the transaction entered into by Tauber, as assigned to Oxley was and remains fully secured, without any need to resort to the Stanley share in Break Fast.

590 No estoppel, as alleged by Oxley, therefore arose on application of the principles in Waltons Stores (Interstate) v Maher.[283]

591 Secondly, the submission made by the Defendants that by reason of the Tauber Loan Agreement, and Stanley's misrepresentation made in the course of its implementation, Ambridge is unable to make any claim in respect of any interest in the Wellington Parade Property, must be balanced by considering what is proportionate between the remedy sought and the detriment which is alleged to have been suffered. A court of equity is to go no further than is necessary to provide a remedy for the wrong committed.

592 As was said by Mason CJ in Commonwealth v Verwayen[284], in relation to the doctrine of equitable estoppel, in the following two passages:

Equity was concerned, not to make good the assumption, but to do what was necessary to prevent the suffering of detriment. To do more would sit uncomfortably with the general principle whose underlying foundation was the concept of unconscionability ... equitable estoppel entitled the party only to that relief which was necessary to prevent unconscionable conduct and to do justice between the parties ... the court should determine what was the minimum equity to do justice to the Plaintiff ... Holding the representor to his representation is merely one way of doing justice between the parties.

In these circumstances, it would confound principle and common sense to maintain that estoppel by conduct occupies a special field which has as its hallmark function the making good of assumptions. There is no longer any purpose to be served in recognising an evidentiary form of estoppel operating in the same circumstances as the emergent rules of substantive estoppel. The result is that it should be accepted that there is but one doctrine of estoppel, which provides that a court of common law or equity may do what is required, but not more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs (including a legal state of affairs), which assumption the party estopped has induced him to hold, from suffering detriment in reliance upon the assumption as a result of the denial of its correctness. A central element of that doctrine is that there must be proportionality between the remedy and the detriment which is its purpose to avoid. It would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption.

593 Deane J in Verwayen was of the same opinion when he said that ultimately:[285]

The question whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted.

594 In my opinion, the relief sought by Oxley is wholly disproportionate to the detriment suffered. Oxley seeks to deny Ambridge's claim to its interest in the property of the Wellington Street Joint Venture. Yet its detriment, in accordance with my findings, is non existent. On the evidence, it is presently and has been at all times since taking the assignment of the Tauber Loan Agreement on 2 July 2004, well secured in relation to it. In these circumstances, the relief sought by Oxley would be inequitably harsh.

595 It was further submitted by the Defendants that even if a finding is made that the structure of ownership of the Wellington Parade Property was an unincorporated joint venture which included Ambridge, Ambridge's conduct arising from it having relevant knowledge of the Stanley misrepresentation though its controlling mind, Stanley, and thereafter effectively acquiescing in the making of those representations was sufficient to give rise to an equitable assignment of Ambridge's interest in the Wellington Street joint venture, so as to make good the representations made by Stanley.

596 I do not accept this submission. No such assignment arose, nor should any remedial assignment be ordered in equity.

597 In the first place, Ambridge gained nothing by the making of the Stanley misrepresentation. Its part in the Tauber Loan Agreement was to assume the liability of a guarantor of the Tauber loan. It was not a party to the St Leonards Joint Venture, and stood to gain nothing from the investment. Stanley invested in this joint venture through another company under his control, FBN Investments Pty Ltd.[286]

598 It was submitted by Oxley that even if the Court finds the agreement in question was an unincorporated joint venture, Ambridge's conduct in relation to the Tauber Loan, by its operative Stanley, is sufficient to give rise to an equitable assignment of its interest to it, so as to make good the representations made by Stanley and acquiesced in by Ambridge.

599 In my opinion, for the reasons already stated, the relief sought by Oxley in the nature of an equitable assignment of Ambridge's interest in the Wellington Parade Joint Venture is wholly disproportionate to the detriment suffered by it.

600 I make the following further findings in relation to the Tauber Loan Agreement in respect of Taylor:

(a) Taylor, on behalf of Headland, did not have any knowledge of the Tauber Loan Agreement or of Stanley's mortgage of his share in Break Fast as a security for the loan, at the time that these documents were executed by Stanley; and

(b) Taylor first learned on 23 January 2003 that Stanley had mortgaged his share in Break Fast as collateral security for the Tauber loan. At that time, he did not appreciate the significance of the mortgage of the Stanley share.

601 The Defendants also relied upon a deed of guarantee dated 26 November 2001[287] (the "Guarantee"). Pursuant to the Guarantee, Ambridge, Glenrowan Corporation Pty Ltd (Glenrowan) and Stanley guaranteed the Tauber loan. The Guarantee was executed by Stanley for and on behalf of Ambridge.

602 It was submitted that by operation of Clause 1 of the Guarantee, Oxley was entitled to recover from Ambridge the moneys payable by Stanley (or St Leonards) under the Tauber loan agreement to the value of Ambridge's claim. Mine & Quarry Equipment International Ltd v McIntosh (as liquidator of) Mine & Quarry Equipment Pty Ltd (in liq)[288] was relied upon.

603 It was further submitted that in the event that the interests are held by way of shares in Break Fast pursuant to the incorporated Joint venture contended for by the Defendants, then:

(a) Clause 5 provides that: "This Guarantee shall be considered to be additional to any other Guarantee or security either from the Borrower or any other person which the Lender now has or may hereafter take for the due performance of the covenants, conditions and stipulations of the Primary Security and the Guarantor shall not in any way claim the benefit or seek the transfer of any such security or any part thereof";

(b) Clause 8 provides that: "Until the lender shall have received in full all monies owing or payable to the Lender by the Borrower under the Primary Security and until the Borrower has complied in full with all conditions stipulations and covenants on his part to be complied with or observed under the Primary Security the Guarantor is not entitled to on any ground whatsoever to claim the benefit of any security now or hereafter held by the Lender for the payment of the said moneys or compliance with the said conditions stipulations or covenants or either directly or indirectly to claim or receive the benefit of any dividend or payment out of the assets of the Borrower or of any person who may be co-guarantor or who may be liable under any security negotiable or otherwise now or hereafter held by the Lander as security for any such monies or the observance of such conditions stipulations and covenants ..." The clause further provides that the Guarantor cannot prove in the bankruptcy of the borrower in competition with the Lender.

604 In the alternative, the Defendants contended that even if, contrary to their submissions, the Court were to find that the interests were held by way of an unincorporated joint venture, Clause 20 of the Guarantee provides that:

To further secure the obligations of the Guarantor hereunder the Guarantor hereby charges in favour of the Lender all its rights, title and interest in any freehold property that it now has in the State of Victoria or New South Wales or that it may after the execution of this Deed of Guarantee acquire and the Guarantor hereby acknowledges that the Charge created shall give the lender a caveatable interest in all such freehold property.

The Guarantor further agrees to do all things reasonably required of them an execute all further documents in order to convert the Charge hereby created into a registered Mortgage or Mortgages and for such purpose it hereby irrevocably appoints the Lender, any Director of the Lender or Solicitor for the Lender from time to time to be its lawful attorney to sign on its behalf all documents required and to do all things required to convert the said Charge into a registered Mortgage or Mortgages.

605 Further, and in either case, the Defendant submitted Clause 11 provides that "the Guarantor hereby waives and relinquishes all rights of ownership inconsistent with the provisions of this Guarantee".

606 The Defendants concluded their submission with the contention that the intention of these clauses collectively is to preclude Ambridge from asserting any interest in the assets of the joint venture that would rank ahead of the lender (now Oxley), until such a time as the Tauber loan has been repaid.

607 The Defendants' submission on the Guarantee may be disposed of in short compass.

608 In the light of my findings that there existed an unincorporated joint venture, the only clause of the Guarantee relied upon by the Defendants was Clause 20. This clause of the Guarantee does not preclude Ambridge from doing anything. It merely gives Oxley a charge over Ambridge's assets, which charge will be dealt with according to the priority of Ambridge's creditors, including secured creditors. Oxley cannot rank ahead of a secured creditor such as the CBA or H2O.

609 Further, the clause is not intended to deny to Ambridge any asset in property which might be made the subject of a charge. On the contrary, the purpose of Clause 20 is to enable Oxley to charge Ambridge's property to better secure the Tauber Loan. The underlying commercial intent of the clause is to enhance the effectiveness of the Guarantee as a security. This purpose is best served by preserving, rather than diminishing, the portfolio of assets of the guarantor Ambridge, to which a charge might attach.

610 It was common ground that Stanley was bankrupted pursuant to a sequestration order made against him on or about 17 May 2005.

611 Accordingly, on the case of the Defendants, any interest retained by him in his share in Break Fast, vested in his trustee in bankruptcy.

612 This may be technically correct. However, a consequence of my finding that there was no incorporated joint venture is that the share is worth no more than the paid up capital of $2.00 which is represents. The share gives no entitlement to any interest in the Wellington Parade Property, and cannot be valued on the basis that it does.

613 By reason that he mortgaged his share in Break Fast to Tauber, which subsequently assigned its interest in the mortgaged share to Oxley, the Defendants claim that Oxley now holds the legal interest in the share and holds that interest in priority to Stanley's trustee in bankruptcy.

614 This again may be technically correct. However, by reason of my finding that there was no incorporated joint venture the share is worth $2.00 and gives no entitlement to any interest in the Wellington Parade Property, and cannot be valued on the basis that it does.

615 I accept that, at all relevant times Stanley was the sole shareholder, a director and the controlling mind of Ambridge.

616 The Defendants contended that, at all times, their dealings with Stanley were on his own behalf and that Ambridge was no more than the vehicle through which Stanley discharged his personal obligations.

617 The Defendants submitted further that if, contrary to their case, the Court finds that Ambridge and not Stanley, was the party to the joint venture agreement, then the necessary consequence is that Stanley's only relationship with the joint venture was as an officer, shareholder and agent of Ambridge. In the premises, it was submitted, Ambridge is necessarily bound - in equity - by Stanley's (or its own) conduct including:

(a) Mortgaging his share in Break Fast to George Tauber Management for value;

(b) Representing to financiers in applications from credit and the accounts of Break Fast that Break Fast was an operating company that had assets and liabilities, income and expenses and held the Property in its own right in order to obtain finance; and

(c) Misappropriating funds from Break Fast both directly and through Ambridge.

619 In the first place, Stanley was a director of the managing entity of the Wellington Parade Joint Venture, Break Fast, until his resignation on 12 December 2002. As such he owed duties in that capacity to Break Fast, and through it, to the joint venture.

620 Secondly, Ambridge gained no benefit itself from the conduct of Stanley relied upon by the Defendants. Either Stanley personally, or other entities under his control, as in the case of FBN Investments Pty Ltd in relation to the St Leonards Joint Venture, profited from Stanley's transgressions.

621 I find in these circumstances, that the conduct relied upon by the Defendants was not conduct undertaken by Stanley on behalf of Ambridge, but conduct undertaken either on his own behalf or that of his other companies, including FBN Investments Pty Ltd.

622 No estoppel of the kind contended for, therefore arises against Ambridge by reason of this conduct.

623 In any event, even if it did, I would find that the remedy sought by the Defendants, namely denial of Ambridge's interest in the Wellington Parade Joint Venture, would be out of all proportion to Ambridge's alleged involvement in the transgressions perpetrated by Stanley.

(a) It is declared that the Plaintiff holds a 25% interest in the Wellington Parade Joint Venture under the terms of an enforceable contract of joint venture between the Plaintiff, Ambridge Investments Pty Ltd ("Ambridge"), the Third Defendant ("Careerpath"), Fourth Defendant ("IMF"), the Fifth Defendant ("C & O Voukidis") and the Sixth Defendant ("Break Fast") in the terms of the written joint venture agreement executed by Break Fast and Ambridge and provided to the First Defendant on 8 October 2002.

(b) It is further declared that the Plaintiff holds a 25% beneficial interest in the Wellington Parade Property pursuant to an express trust of which the Sixth Defendant ("Break Fast") is the trustee.

625 It has been conceded by the Defendants that all parties are entitled to the taking of accounts between them.

626 I will adjourn the proceeding to deal with further orders and directions which ought to be made to dispose of the balance of the proceeding.

[1] 2 Henry IV 4.5.64-6, Henry to Gloucester and Clarence.

[2] See: Fisher, S. "Formation and Structure" Chapter 4 in Duncan "Joint Ventures Law in Australia" 2nd edition at 146-148 [4.2.2].

[5] See: Fisher, S. "Formation and Structure" Chapter 4 in Duncan "Joint Ventures Law in Australia" 2nd edition at 148-154 [4.2.3].

[6] Fifth Further Amended Statement of Claim paragraphs 1-13 (inclusive), and 15-20 (inclusive) and the defences thereto.

[7] Fifth Further Amended Statement of Claim paragraphs 31, 32, 33(a) and (d), and 35 and the defences thereto.

[8] Third Further Amended Defence and Counterclaim paragraphs 37-49 (inclusive) and the reply thereto.

[9] Third Further Amended Defence and Counterclaim paragraphs 50-56 (inclusive) and the reply thereto.

[10] Third Further Amended Defence and Counterclaim paragraphs 79-84 (inclusive) and the reply thereto.

[11] To the effect alleged in paragraphs 7, 9 and 18 of the Fifth Further Amended Statement of Claim dated 13 October 2009 (the "SOC").

[12] [1985] HCA 49; (1985) 157 CLR 1 per Mason, Brennan and Deane JJ at page 10.

[14] See: Fisher, S. "Formation and Structure" Chapter 4 in Duncan "Joint Ventures Law in Australia" 2nd edition at 146-148 [4.2.3].

[15] See: Fisher, S. "Formation and Structure" Chapter 4 in Duncan "Joint Ventures Law in Australia" 2nd edition at 146-148 [4.2.2].

[16] See: Gibson Motor Sport Merchandise Pty Ltd & Ors v Robert James Forbes & Ors [2005] FCA 749 per Crennan J at [74].

[17] [2005] FCA 749 per Crennan J at [80- 81].

[18] (1985) BPR 11,110 at 11,117. In Gibson Motor Sport, Crennan J found that no joint venture agreement was concluded between the parties, their commercial relationship not proceeding beyond negotiations.

[19] Break Fast constitution clause 63(2); New Supplementary Court Book p.11.

[20] Break Fast constitution clause 79; New Supplementary Court Book p.12.

[21] [1964] HCA 41; (1964) 112 CLR 597 at 607 per Menzies J, with Owen J agreeing.

[22] [2001] FCA 1876 at [246].

[28] Being one or other of the declarations sought in paragraphs A-C of the prayer for relief in the SOC.

[29] Being the Third Further Amended Defence and Counterclaim dated 9 November 2009.

[30] See: r.13.02 Supreme Court (Civil Procedure) Rules 2005.

[31] [1992] HCA 10; (1992) 175 CLR 564 at 581-582.

[32] Citing Forster v Jododex Aust. Pty Ltd [1972] HCA 61; (1972) 127 CLR 421 per Gibbs J at 437.

[33] [1972] HCA 61; (1972) 127 CLR 421 per Gibbs J at 437.

[35] Justice of the Federal Court of Australia, as he then was; now Chief Justice of the High Court of Australia.

[36] University of Western Australia - Faculty of Law - Perspectives on Declaratory Relief, 30 November 2007 p.2.

[38] Ibid at p.2 See Young PW, Declaratory Orders (2nd ed, Butterworths, 1984) p 214.

[43] Ibid, Justice French , Perspectives on Declaratory Relief at p.4.

[44] See too: Supreme Court Act 1970 (NSW) s.75; Supreme Court Act 1995 (Qld) s.128; Supreme Court Act 1935 (SA) s.31; Supreme Court Act 1935 (WA) s.25(6); Supreme Court Rules 2000 (Tas); Supreme Court Act 1979 (NT) s.18. The declaratory remedy is also well entrenched in the Federal judicial system.

[47] Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 4th ed, [3-135] at 102; See too: Lodge v National Union Investment Co Ltd [1907] 1 Ch 300; Ansford v Plymouth Finance Co Ltd [1933] NZLR 209; Re Gilbert (1946) 46 SR (NSW) 318; Tito v Wadell (No 2) [1977] Ch 106; Mayfair Trading Co Pty Ltd v Dreyer [1958] HCA 55; (1958) 101 CLR 428 at 450-6 cf. Hordern-Richmond Ltd v Duncan [1947] 1 KB 545 per Cassels J at 552; and Re Emery's Investment Trusts [1959] Ch 410 per Wynn-Parry J at 422.

[48] [2006] FCA 913; (2006) 233 ALR 453 at [45] and [46].

[49] [1913] HCA 50; [1913] 17 CLR 90 at pp.93-94 per Barton ACJ.

[50] [1985] HCA 78; (1985) 160 CLR 583 at pp.614; 616-7. See too the discussion in M. Cope Constructive Trusts (1992) Law Book Company at pp.15-17.

[53] Dering v Earl of Winchelsea (1787) 29 ER 1184 at p.1185; cited in Spry Equitable Remedies 7th ed. at p.169.

[54] Supra, Equitable Remedies 7th ed. at p.169.

[56] [1913] HCA 50; (1913) 17 CLR 90 per Isaacs J at pp.123-124.

[59] Supra, Equitable Remedies 7th ed. at p.494.

[60] Moody v Cox [1917] 2 Ch 71 at [87]-[88].

[61] Meyers v Casey [1913] HCA 50; (1913) 17 CLR 90 at 124.

[62] See: sections 471, 471A, 471B, 477(1)(c) and 477(2)(a) Corporations Act 2001.

[63] [2009] HCA 27.

[67] Court Book Volume 9A Part C p.585.

[79] 18 NSWLR 540, 550-551.

[80] Grey v Australian Motorists and General Insurance Co Pty Ltd [1976] 1 NSWLR 669, at 684, per Mahoney JA; FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] VicRp 76; 1993] 2 VR 343 at 351 per Brooking J.

[81] [1993] VicRp 76; [1993] 2 VR 343 at 351.

[82] [2009] VSCA 238 at [44].

[83] [1929] HCA 34; (1929) 43 CLR 310 at 327.

[84] [2009] VSCA 238 at [45].

[86] [2009] VSCA 238 at [45].

[88] McGrouther witness statement paragraph 11.

[89] McGrouther witness statement paragraph 18.

[90] In Chapter 2M, Part 2M.2 Corporations Act 2001.

[91] See: section 588E(4) Corporations Act 2001.

[92] See: section 1317E Corporations Act 2001.

[93] Section 286 is a Part 2M.2 provision.

[94] See: sections 289(1) , 318, 289(8) and 298 Corporations Act 1989.

[95] [1994] VicRp 53; [1994] 2 VR 32 at 80.

[96] As observed by the Court of Appeal in Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (recs and mgrs apptd) 2009] VSCA 238 at [34].

[97] [1994] VicRp 53; [1994] 2 VR 32 at 81.

[98] (1879) 4 App Cas 311 at 316.

[99] Supra at 489; See too: Vroon BV v Foster's Brewing [1994] VicRp 53; (1994) 2 VR 32 at 82, citing Meates v Attorney-General [1983] NZLR 308, 377 (Cooke J), and see Ormwave Pty Ltd v Smith [2007] NSWCA 210 [70]-[76] (Beazley JA).

[100] PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd [2007] VSCA 310; (2007) 20 VR 487 at 502.

[101] (1877) 2 App Cas 666.