Australian Executor Trustees Limited v Lanmar Pty Ltd & Ors

LEGISLATION CITED : Contracts Review Act 1980 ss 7, 9 Uniform Civil Procedure Rules 2005 Pt 13.1

Cohen v McWilliam & Anor (1995) 38 NSWLR 476 Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 Elko Fairi v Permanent Trustee Co Limited (2002) 11 BPR 20,841 CASES CITED : Esanda Finance Corp Limited v Tong (1997) 41 NSWLR 482 Garcia v National Bank Limited (1998) 194 CLR 395 St George Commercial Credit Corporation Limited v Collins Wallace Properties Pty Limited (unreported, NSWSC, 17 & 18 August 1998, 21 August 1998) St George Bank Limited v Domenica Trimarchi & Anor [2004] NSWCA 120 West v AGC (Advances) Limited (1986) 5 NSWLR 610

Australian Executor Trustees Limited (Plaintiff) PARTIES : Lanmar Pty Limited (First defendant) Jacek Kazmierski (Second defendant) Jihad Assi (Third defendant)

COUNSEL : Mr T D Castle (Plaintiff/Respondent) Ms L Paraska (Solicitor) (Third Defendant/Applicant)

SOLICITORS : Gadens Lawyers (Plaintiff/Respondent) Youth & Enterprise Legal Centre (Third Defendant/Applicant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

12225/07 AUSTRALIAN EXECUTOR TRUSTEES LIMITED ACN 007 869 794 v LANMAR PTY LIMITED & ORS ACN 097 953 887

JUDGMENT 1 HIS HONOUR: On 4 May 2007 the plaintiff, Australian Executor Trustees Limited, filed a statement of claim against Lanmar Pty Limited, Mr Jacek Kazmierski and Jihad Assi claiming possession of two properties in Carey Bay. Also claimed was judgment in the amount of almost $2.8 million plus interest, charges and expenses alleged to be owing as a debt under a credit agreement and a guarantee. 2 The particulars in the statement of claim made the following allegations. Lanmar obtained credit from the plaintiff under a credit agreement containing the usual term that, upon default in payment, the plaintiff was able to require repayment in full of all moneys owing under it. Lanmar defaulted by failing to make repayments in January and February 2007 and, accordingly, the plaintiff required Lanmar to pay the money owed under the agreement. The plaintiff also alleges that Mr Kazmierski and Mr Assi (respectively the second and third defendants and the directors of Lanmar) unconditionally guaranteed the initial payment by Lanmar to the plaintiff of the moneys owed from time to time under the agreement. The plaintiff demanded payment of the debt from Mr Kazmierski and Mr Assi but no moneys were paid. In respect of the properties at Carey Bay of which possession was claimed, the claim relied on registered mortgages in favour of the plaintiff. No defence having been earlier filed by any defendant, the plaintiff by notice of motion filed 4 September 2007 sought judgment against the defendants in the sum of something over $2.8 million plus interest. On 19 October 2007, again no defence having been filed, judgment was entered against the defendants in the sum of $2,975,692.26. 3 On 3 December 2007 Mr Assi by notice of motion sought orders that the proceedings against him be stayed, that the default judgment against him be set aside and permitting him to file and serve a defence and cross-claim within a specified period. This matter came on for hearing before me, by leave. For its part, the plaintiff filed in Court a notice of motion seeking an order that, should the default judgment against Mr Assi be set aside, summary judgment be entered against him pursuant to Part 13.1 of the Uniform Civil Procedure Rules. In support of his motion, Mr Assi relied on two affidavits, both affirmed on 3 December 2007. The first affidavit attached a draft defence that in substance denied that Mr Assi was a party to the loan in any sense but gave no particulars. He also stated in the affidavit that he proposed to commence proceedings by way of cross-claim against the plaintiff and an Ian Lazar (together with other named possible defendants) seeking to have the guarantee set aside under the Contracts Review Act 1980. No basis for such a cross-claim was specified but, I think, the matters relied on were those stated in the second affidavit. 4 In substance, Mr Assi admitted that he had executed the guarantee as alleged by the plaintiff but denied that he was or should be bound by it and claimed that it should be set aside against him. Mr Assi said that he was a director of Lanmar from 15 February 2006 until his resignation on 24 November 2006 but denied that any demand for payment of the debt had been made against him and asserted that he only became aware of the proceedings in this Court when he was served with a bankruptcy notice on 16 November 2007. (I deal below with other facts asserted in the affidavit explaining why Mr Assi maintains he should not be bound by his guarantee.) 5 So far as service of the statement of claim was concerned, the plaintiff relied on the affidavit of one Kris Sabatino sworn 26 February 2008. Ms Sabatino deposed that she is a licensed process server who, on 4 May 2007 was instructed by the plaintiff's solicitors to serve, amongst other things, sealed copies of the statement of claim filed in these proceedings. She was provided with a mobile telephone number for Mr Kazmierski and, on 14 May 2007, telephoned him. In that conversation Ms Sabatino introduced herself and informed Mr Kazmierski that she had been requested by the plaintiff's solicitors to hand some documents to him and Mr Assi. Mr Kazmierski made an appointment with Ms Sabatino to meet him and Mr Assi at 12 noon at the premises of Business Services Australia at 2/11 Rangers Road, Neutral Bay. When Ms Sabatino pressed the intercom button, a man who introduced himself as Mr Kazmierski invited her inside. Ms Sabatino then showed him the statement of claim and pointed to his name on the document. Mr Kazmierski told her that he was the person named and took the document which was then handed to him. Ms Sabatino asked whether Mr Assi was present. Mr Kazmierski told her that he was not but that there was no need for her to see Mr Assi he could take the documents on his behalf. Ms Sabatino said that this was unsatisfactory and Mr Kazmierski suggested that she could come back later that afternoon when Mr Assi would be there. When Ms Sabatino returned she saw Mr Kazmierski with another man who identified himself as Mr Assi. Ms Sabatino handed the statement of claim to Mr Assi which he held and started reading. The following conversation then took place - "Mr Kazmierski: It is the same document as the one I received. We are not legally responsible for this. We are directors on paper only. We do not have anything to do with the day to day running of the company. Mr Assi: We are refinancing and Tony told us that they have a valuation and finance approval for $5 million for the three units. I don't understand why my name is on the claim. I am only a director of the company. Ms Sabatino: I'm sorry I have no say in the matter. I am just a process server and have no influence in the matter. I will make a note of what you said but you should get legal advice."

Ms Sabatino then left the building. 6 Mr Assi claimed in his affidavit that he was not served with the statement of claim "on 24 May 2007" (I think this is just a typographical error for 15 May 2007; it was never suggested that the statement of claim was served on 24 May 2007). Mr Assi said that in April 2007 he left the Neutral Bay office to which the process server referred and never returned. He claimed that he did not see the statement of claim until after he was issued with the bankruptcy notice on 16 November 2007. Under cross-examination by Mr Castle of counsel for the plaintiff he agreed, in substance, that his assertion that he did not receive the statement of claim was based upon his reconstructed recollection that he was not in the office on 15 May 2007. He agreed that if he were mistaken about when he left the office it was entirely possible that he did receive the statement of claim but said that, in that event, he would not have understood what it was about, and would passed it directly to Mr Lazar or Ms Nils (the accountant) as he had been directed to do with all legal documents. It was put to him that he was indeed served with the statement of claim on 15 May 2007. He said "I can't recall being served on that particular matter. I was under stress that day". When he was asked "On what day?" he said - "When I came back from overseas I was under stress from the whole situation because of everything, all the threats from Ian Lazar, all the pressure he puts you on. That's why I left, I was under, mentally I wasn't even right because of all the stress he giving me and all the lies and all the fraud. So the way he, after this time, I knew later on after this incident I knew I had been investigated by ASIC and he defrauded hundreds of people of everything, almost similar situation so he has been under, I think now there is a court between Tony Fairclough and Ian Lazar regarding this matter as well because he took it under fraud, the way he ought the property, he didn't mention his name. All handled in his office, all the legal advice in his office. Carlie Nils, Bill Redmond, even the broker, Roscar, all in his name. I had the impression Seiza, that is the direct dealing with Lazar."

This answer was not atypical of the way Mr Assi gave evidence. 7 During an adjournment in the hearing Mr Assi went outside the courtroom and there recognised Ms Sabatino as a person who had served him with documents. Since the only occasion upon which this could have happened was 15 May 2007 when the statement of claim was served, it was conceded on the part of Mr Assi that it was indeed served. He said he gave it to Mr Lazar, in accordance with the arrangement that any documents which were served on him should be passed on to Mr Lazar. In his evidence he said that, when he received the statement of claim he did not understand what it was about. He could see that Lanmar Pty Limited, his co-director Mr Kazmierski and he were being sued personally but beyond that he "was a bit vague as to detail".

8 Mr Assi's affidavit describes, somewhat incoherently, his dealings with Mr Lazar, whom he met through a friend in early 2004. At that time, Mr Assi said that he had $300,000 in savings, a home and an investment property. He had a degree in computer science, he had "worked in retail shops" he only had very little experience with no qualifications or experience in finance or loans. He said that he did some IT work for Mr Lazar, supplying him with $60,000 worth of equipment for his office. Although he forwarded an invoice he was not paid for work done or for the equipment supplied. Mr Lazar told him early on in 2004 he worked on construction projects, and Mr Assi told him of two such projects in Neutral bay that he was "thinking of assisting Mr Lazar's company, BACF Pty Limited to develop". Mr Lazar said that the projects were good ones, that he would fund the projects and they would be managed by Mr Assi and as a director of a company he would receive a percentage of the profits. Mr Assi said that he gave Mr Lazar $20,000.00 "to kick start the project". He "was resigned from the company seven day's later" (sic). 9 Mr Assi said that he had no independent advice and Mr Lazar "appeared to be so charming and so capable that I went along with it in the vain hope that one day all moneys would be refunded to me". He said that, except for the first four months or so he received no wages and never received any profits from the construction projects. When he complained, Mr Lazar would either promise him that the money was coming soon, or "would persuade me to appoint myself as director of more companies telling me in words to the following effect: 'Sign this now Jihad. If the companies work out, you can have your wages but not until then.'" 10 The lack of any real detail or order in this account makes it difficult to understand what the arrangements Mr Assi made with Mr Lazar actually were or when they were made. Regrettably, the entire affidavit reflects this problem. 11 Mr Assi said that he did not know "what all the companies did at all times [but] they were all controlled by Mr Lazar including Lanmar". He said that between 2005 and 2007 Mr Lazar "assigned me as a director of more than seven companies, always promising me wages, bonuses and company cars" but that he never received any of the wages he promised. The affidavit gave details of signing paper work relating to a company car after Mr Lazar had been "screaming at me down the telephone in words to the following effect: 'Why don't you want to sign? Don't you trust me? If you do not sign, you will not see any of your wages ever and I will stop all work on your deals and give it to someone else. This is all for my company. When you get back to the office, I'll explain why you had to sign it.' 12 Mr Assi said that he signed the documents but he did not get a chance to understand them and, at all events, he was too upset and distressed to even try. Mr Lazar later told him that the car was a company car and he would pay all moneys due in respect of it. 13 It was on 15 February 2006, Mr Assi claimed, that Mr Lazar "appointed me as director of Lanmar Pty Limited". He became the director of other companies at the instance of Mr Lazar, the details of which do not presently matter. Mr Assi said that on several occasions throughout 2006 Mr Lazar had told him to sign a document where it said "personal guarantee" saying he "was signing as a director for the company, it was a loan for that company". Mr Assi said that some of these documents mentioned Lanmar. Mr Assi said that Mr Lazar would often make the following statements to him - "If you do not sign, I will ruin you. I will bankrupt you and take your family home and your five little ones will have nowhere to live." 14 At other times, Mr Lazar promised Mr Assi that he (Mr Lazar) would cover the repayments. Mr Lazar also promised Mr Assi, at the outset of their dealings, that he would pay $100,000.00 for every $5 million worth of guarantees and at various times promised to bring Mr Assi's unpaid wages up to date. 15 After the first few months, Mr Assi said, he started to receive notices from the various companies from which loans had been obtained. He said that Mr Lazar never paid him his wages, denying sometimes that anything was owed or saying that he would pay later. 16 Mr Assi said that Mr Lazar had appointed an in-house solicitor, Mr William Redmond with whom, he said, all "deals" must be discussed. On one occasion when Mr Assi made an appointment to see an independent solicitor he was abused by Mr Lazar and told to obtain advice from Mr Redmond. Mr Assi said that he was instructed by Mr Lazar to forward all documents he received to him or Ms Nils to deal with. Mr Assi said that he complied with this direction. He said that, by the end of 2006, he realised from the demands that he was still personally receiving that Mr Lazar was not going to make any payments and that he was being held liable for all the agreements that Mr Lazar had, as he claimed, made him sign. From that time on, Mr Assi said, whenever he wished to talk to Mr Lazar about his employment, he was never available. 17 Mr Assi deposed that, whilst he did not have a specific recollection of having signed the personal guarantee which is the subject of these proceedings, "I must have done so under the pressures described … ". 18 He said that he had never been advised on any documentation "received from Seiza Mortgages", the plaintiff's agent (see below), and he knew nothing about the Carey Bay properties except that he was shown the location and told their price by Mr Lazar in about August 2006. He said that he derived no benefit from having guaranteed any debts in relation to them. 19 Mr Assi said that he began to suffer from anxiety and depression from about March 2007 and consulted his general practitioner for counselling and treatment. In April he decided to leave Mr Lazar, resign from the companies and refused to sign any more guarantees. 20 It is clear enough that Mr Assi claims that Lanmar was controlled by Mr Lazar, that he had no access to its funds and that, in substance, his interest was as an employee hoping to obtain past unpaid wages and future employment and an indeterminate share in the profits of projects operated by Lanmar. It seems implicit also that he claims that Mr Lazar had dishonestly given assurances about payment and the reality of future employment prospects and by cajolery and threats had induced him to become a director of Lanmar and execute the guarantee. 21 (In November 2007 he was told by a developer something about how the transactions involving the properties at Carey Bay occurred and how he was involved. But it does not seem to me that any of these conversations are presently relevant.) 22 The plaintiff relied also on the affidavit of Michael John Linton who is an employee of Seiza Capital Pty Limited, which manages the mortgage on behalf of the plaintiff and the loan that are the subject of the proceedings. That affidavit deals only with documentary matters and does not deal at all with the circumstances under which the loan was negotiated. There was no evidence from any employee of the plaintiff. 23 In his affidavit Mr Linton deposed that on 9 March 2007 the plaintiff offered to lend the sum of $2.6 million to Lanmar. This letter of offer was executed by Lanmar and Mr Kazmierski. It was an express term of the loan agreement that Mr Kazmierski and Mr Assi jointly and severally guaranteed the debt. At the time they were directors of Lanmar. The guarantee is dated 5 May 2006 and was signed by Mr Kazmierski and Mr Assi. Their signatures were witnessed by a Mr Tony Fairclough. Attached to the guarantee is the document dated 4 April 2006 signed by Mr Assi which states that he "acknowledged that - "1. I have instructed Mr Bill Redmond … to give me legal advice concerning the following loan and security documents: (i) Loan Agreement/Offer of Loan between Australian Executor Trustees (the lender) and Lanmar Pty Limited (the borrower). (ii) Mortgage over property … (iii) Memorandum Registered No …. (iv) Charge over Lanmar Pty Limited. 2. I produced to my solicitor the following evidence as to my identity: (a) … (b) Driving Licence [Number given] (c) … (d) Credit Card American Express [Number given] (e) Rate Notice (f) Other - Visa Card Commonwealth Bank 3. The advice given to me by my solicitor included that (i) If the borrower fails to make any payment on time, I as the guarantor will be liable to remedy that failure, and that could involve me in payment to the lender of all moneys owed by the borrower to the lender including principal, interest, default interest and the lender's costs of rectifying the default. [Other relevant disclosures about the extent of liability] 5. After receiving the above advice I freely and voluntarily signed the loan documents. DATE: 4-04-06 SIGNED: [Mr Assi]" 24 It appears from an Internet search that Mr Redmond holds a Practising Certificate from the Queensland Law Society. It is clear that Mr Assi asserts that Mr Redmond was not his solicitor, but was Mr Lazar's or Lanmar's or both. If this be true then Mr Redmond was not independent and it was wrong of him to create a document that suggested otherwise. 25 On 5 April 2006 Mr Robert Bell, a partner of Vouris & Bell, Chartered Accountants, wrote to the plaintiff to inform it that the firm had been instructed by Mr Assi and that "the financial and commercial risk inherent in entering into" the guarantee was explained to him, certifying also that to the best of Mr Bell's knowledge, information and belief Mr Assi has "understood the financial and commercial risks" in entering into the transaction. Vouris & Bell also certified that they did not act for the plaintiff. Additionally, Mr Assi made a statutory declaration, witnessed by Mr Redmond, stating that he had received independent legal advice regarding the loan and the security documents which are the subject of this litigation and "after receiving that advice I have freely and voluntarily signed" the guarantee. 26 The loan funds were advanced on 5 May 2006. 27 Mr Linton deposed that Lanmar defaulted under the loan agreement and mortgage by failing to make repayments in December 2006 and January 2007 and a default notice was in due course issued which was not complied with. 28 In his affidavit, Mr Assi said that sometime after November 2007 he was told by Mr Fairclough as follows - 'I made a deal with Michael Linton from Seiza Mortgages regarding these apartments. I went to a meeting at Gadens office and we made a deal that the apartments could be sold, and once a fair price was obtained, you and Jacek [Mr Kazmierski] would be personally free from the debt. Everyone knows its got nothing to do with you personally.' 29 Mr Linton deposed that he did not reach any agreement at the meeting with Mr Fairclough or at any other time to waive the plaintiff's rights to enforce the guarantee against Mr Assi. Having regard to the hearsay nature of the evidence about communications between Mr Fairclough and Mr Linton, I do not think that I can act upon the basis of what Mr Assi claims Mr Fairclough told him. At all events, what Mr Linton was reported to have said did not amount to a release of the obligations created by the guarantee. At the most, it was an undertaking to exercise the power of sale under the mortgages before executing against Mr Assi and Mr Kazmierski. 30 One of the difficulties facing Mr Assi when the matter came on for hearing before me was there was no proposed defence or cross-claim that clearly articulated the basis upon which Mr Assi sought to litigate the question of his liability. It emerged that Mr Assi was relying on the Contract Review Act but the basis upon which a claim under that Act could be litigated was not clear, although there were matters that came out of Mr Assi's evidence which suggested potential grounds. 31 In due course, the solicitors for Mr Assi filed further submissions to which was attached a draft statement of cross-claim verified under oath by Mr Assi. The cross-claimant is identified as Mr Assi, the first cross-defendant is the plaintiff and the second cross-defendant is Seiza Capital. Other cross-defendants are Ian Lazar, Anthony Fairclough, William Redmond and Robert Bell. 32 The cross-claim alleges amongst other things that Mr Assi signed the guarantee by reason of the following: "(a) Unconscionable conduct, undue influence, misrepresentation and duress on the part of Lazar and Fairclough [of which brief particulars are later given]; and (b) a lack of both independent legal advice and independent financial advice notwithstanding the written representations made to the contrary by Redmond and Bell." 33 The cross-claim, in respect of the first and second cross-defendants is in the following terms - "The first and second cross-defendants engaged in unconscionable conduct, knowingly or recklessly, in accepting the Cross-Claimant's guarantee without due inquiry, and in circumstances where the Cross-Claimant was a volunteer to the transaction, as to the following: (a) whether or not the Cross-Claimant had obtained independent advice; (b) whether or not the Cross-Claimant understood the subject documentation; (c) whether or not the Cross-Claimant had any active role in relation to the development the subject of the proceedings; (d) whether or not the Power of Attorney given to Fairclough by the Cross-Claimant was appropriately and correctly obtained." 34 It is difficult to see how sub-paragraph (d) is relevant to the present question. 35 So far as Mr Redmond is concerned, the cross-claim alleges that he never in fact provided advice to the cross-claimant regarding the guarantee documentation and did not advise him as to the purport of the effect of the guarantee. Certain other allegations are made which amount, according to the cross-claim, to unconscionable conduct and breach of fiduciary duty to Mr Assi. Mr Assi alleges that Mr Bell did not in fact advise him about the guarantee documents but merely sent him a declaration to the effect that he had received that advice asking for his signature. Mr Assi alleges in the cross-claim that he signed the declaration and sent it back "under pressure from Lazar and Fairclough" though he had not, in fact, received independent financial advice. He claimed that he never spoke personally to Mr Bell. Mr Assi claimed that Mr Bell was in a breach of his fiduciary relationship with him by failing to advise him not to enter into the guarantee. 36 As I have already mentioned, Mr Assi gave evidence in the hearing which was confused and difficult to follow but the sense of it is that Mr Lazar and Mr Fairclough were in business together to develop certain properties, that Mr Assi was working with or employed by Mr Lazar who had procured Mr Assi's signature on various documents, including the guarantee in question here by placing Mr Assi under undue pressure. Following is the theme of Mr Assi's evidence - "Q. No, I am sorry I don't understand. You signed the documents? A. I sign the documents because he put me under pressure, either sign it or you lose your job.

Q. So you signed the documents to keep your job? A. To keep my job. He told me of this agreement, he scream at me, shouted at me, put me under pressure, under stress the same thing in the office. I only work there for a short period and that document I signed would be the first one I signed off which I refused to communicate. Actually it's a purchase between him and another party, it has nothing to do with it. He bought the property from Tony Fairclough and when I spoke to Tony in fact most of the time he said he has been negotiating with Seiza about it with Ian Lazar that's why I had the impression they were all under the same loop. Even now with communicating with Seiza about it but I wasn't even aware of it, they are making a deal with each other. I was told more than one time they are going to proceed with the guarantor which was Jihad which has got nothing to do with it.

Q. Who said that? A. Tony Fairclough told me a few times. … Q. So what did you understand the documents were? A. He said I am there for a short period. They going to do transaction. Even if they are he can't put under his own name because he is being investigated by ASIC for most of the time, probably for five or six years. He said I can't put anything under my name, I have to put you there for a short period. He said you do this transaction and you get your wages out of it and you are out of the company and that's why he was on me straight away.

Q. And you agreed to be the front man for Mr Lazar? A. I wasn't, I was employed by him.

Q. He agreed to pay you $100,000 every time your name is put on one of these guarantees? A. He said I pay you certain wages if you sign this guarantee. Once I did I didn't get a cent out of this.

Q. Your real complaint is that Mr Lazar hasn't honoured any of his agreements with you, is that correct? A. Yeah, but I didn't signed to do the purchase under my own name, I didn't buy nothing from him." 37 When he was asked about the extent of his understanding of the guarantee, he said that he was signing a mortgage document and "I didn't understand it as a guarantee 100 percent". "Q. What did you understand? A. I understand it's like a business transaction. He said don't worry we make all the payments and I will do everything for you, you make nothing, you are not liable for anything at all because once you are off the company you are off the guarantee.

Q. So you were aware, were you, that whilst your name was there you were guaranteeing the debts of the company? A. The debts of the company, that's right, yeah.

Q. And you trusted him that he will pay those debts? A. That's right." 38 I understood from Mr Assi's evidence that he did not dispute that the driver's licence number and his credit card numbers are indeed correctly noted in the acknowledgement of legal advice document. He said that although it was his signature on the second page of the document, he did not read it "properly…because the solicitor told me to sign it and I signed it". Concerning this document Mr Assi's evidence went on - "Q. … this says you freely and voluntarily signed the loan document, do you see that? A. Yes.

Q. Is that true? A. It's, I am not sure how we can explain that, I was under duress on the office. I was under duress. He told me to sign document I sign it otherwise.

Q. Otherwise what would happen to you? A. They put you under pressure, you don't get wages. They pursue you later on, you lose your job.

Q. How did they pursue you later on? A. It's the way they put you under stress the way they screaming and the amount of stress they put you, and the threat they put you under in the office.

Q. What threat? A. They give us a lot of stress. They always, more than one time they say if you don't sign document I make sure you don't work this country any more, I cut your throat and they give you lot of threats.

Q. Cut your throat? A. Yes, he said that. I have got two witnesses he said that in the office. He said I cut your throat if you ever speak to anybody in the office or speak to any legal advisors.

Q. Was that one of the reasons you signed the document? A. That's one of the reasons." 39 He agreed that he had not earlier mentioned that there was a threat to cut his throat. Mr Assi said that Mr Lazar said - "Q. … I'll destroy you financially, I make sure you don't work in this country any more that's the kind of threats.

Q. But the fact is it's true, is it not, that you did sign the loan documentation freely and voluntarily because you expected to be paid money by Mr Lazar including a $100,000 for every $5 million worth of guarantees, correct? A. I was expecting to get wages, again I only sign document under duress to get wages.

Q. What was the $100,000, was that a wage? A. He said I give you wages for certain jobs. The way I was employed there he say you are going to supervise the management, anything up to $5 million you are going to supervise the project, you get wages out of it.

… A. He said the loan agreement, he said if he in control of project up to $5 million, you get a $100,000 fee out of it." 40 In relation to the declaration Mr Assi said, "They told me to sign a document under same stress, same duress and I sign it". 41 At the conclusion of his cross-examination the following exchange occurred - "Q. I suggest that the problem that brings you here today is the fact that you were prepared to sign documents as part of the arrangements that you had with Mr Lazar without giving any thought to the consequences of signing those documents? A. Oh, I only signed them because he put me under duress, under pressure. Almost like putting a gun to your head, 'if you don't sign this document you are finished financially'. He make sure you lose your property, you lose your house, you lose your wife."

42 On 8 November 2007 the plaintiff issued a bankruptcy notice to Mr Assi in respect of the judgment debt. Following service, Mr Assi telephoned Mr Fairclough who assured him that he need not worry and that the debt had nothing to do with him. Because of his concern, however, Mr Assi sought advice from his present solicitors, the Youth and Enterprise Legal Centre who, on 15 November 2007 wrote to the plaintiff's solicitors to obtain a copy of the statement of claim. This was sent on 21 November 2007 and, on 4 December 2007 the notice of motion was filed seeking to set aside the default judgment. 43 Despite Mr Assi's insistence that he was not given any legal advice about the guarantee, I think it is obvious that he understood full well that it created an obligation to make good any failure by Lanmar or Lazar to pay the debt. That is why he was reluctant to sign it. I accept that he may well be telling the truth that he only signed the document because he was pressured into doing so by Mr Lazar. Not only was he under economic pressure to comply with Mr Lazar's demand, there were other threats concerning his ability to stay in Australia. For present purposes only I think I should also accept that Mr Assi was not given any advice by Mr Redmond (who, at all events, was Lanmar's solicitor according to Mr Assi) or Mr Bell. It is important to note that I make no adverse findings so far as Mr Remond and Mr Bell are concerned. They have not given evidence before me. I do not have to finally determine whether Mr Assi's statements about what happened so far as these persons are concerned is true. If true, however, Mr Assi was not given the benefit of either legal or commercial advice. 44 Although Mr Assi's evidence was confused, I think it is clear, at least, that he appreciated there were real risks for him in signing the guarantee and that he did so only because of Mr Lazar's combination of blandishments and threats. The status of the agreement with Mr Lazar that Mr Assi would receive $100,000 for $5 million guaranteed is uncertain. I gather from Mr Assi's evidence that the $100,000 at that time represented at all events what he believed he was owed by Mr Lazar. This offer, however, may well have contributed to the matters that induced Mr Assi to sign the guarantee but I am minded to think, alone, it would not have been sufficient. Rather, it is one of the allegedly dishonest blandishments which formed part of what was Mr Lazar's modus operandi in overcoming Mr Assi's reluctance to enter into the obligations constituted by guarantees. 45 I am mindful that, on one view of his evidence, Mr Assi's execution of the guarantee and the accompanying declaration was part of his overall commercial relationship with Mr Lazar and Mr Fairclough, the status of which seems never to have been formalised. There is, however, I think, an evidentiary basis for concluding, if believed, that Mr Assi in fact signed the guarantee as a volunteer whose reluctance to do so was overborne by unconscionable conduct on the part at least of Mr Lazar and, possibly, Mr Redmond, Mr Bell and Mr Fairclough. I repeat that I make no finding against any of these persons. On the state of the evidence and having regard to the issues that I need to determine, I cannot and do not do so.

The course of proceedings 46 It will not usually be either necessary or desirable, in an application of this kind, that a putative defendant should give evidence about the proposed defence. It should appear from the draft pleadings that there is an arguable defence on the merits. In an application to set aside a default judgment, no final determination can be made - unless the circumstances are extraordinary - of the validity of the defence that, on its face, is a good one if accepted. It is not surprising, in the circumstances here, that Mr Assi was required to attend for cross-examination because the plaintiff wished to demonstrate that his allegation that he had not been served with the statement of claim was wrong. Of course, if he had not been served, that would have made setting aside the default judgment virtually inevitable. I also permitted evidence to be given as to what appeared to be the basis of the proposed cross-claim since the plaintiff sought an order for summary judgment in the event that I set aside the default judgment. 47 On reflection, I am far from certain that I should have permitted this to be done. The starting point was that the basis of the proposed cross-claim was contained (in an incoherent form, certainly) in an affidavit rather than a proposed pleading and it seemed consistent with usual practice to permit cross-examination of the deponent upon his affidavit. However, it was sufficient for Mr Assi to satisfactorily explain why he did not defend in time and to establish that he had an arguable defence on the merits by production of a verified defence and/or a cross-claim which disclosed this. If I had been satisfied as to both these matters then the default judgment should have been set aside. It would then have been for the plaintiff to establish that it should have summary judgment and for that purpose to call relevant evidence. Since it confined its evidence to the documentation - which was at all events significantly incomplete (as I discuss below) - there was no prospect that, on its case, it could have demonstrated that Mr Assi's claim under the Contracts Review Act was so completely devoid of merit that it should have been summarily dismissed. This follows from the simple fact that Mr Assi's claim concerned the manner in which the documents came into existence. At all events, the fact that a defendant has a defence which, if proved, is answer to the claim must be a death blow to an application for summary judgment unless the plaintiff establishes that the defence is incapable of proof. Such a case must be very rare and is certainly not this case. In short, so far as the plaintiff's documentary case went, it was realistically never in a position to obtain summary judgment. It could only have done so by completely destroying Mr Assi's credibility. 48 I do not go so far as to say that a plaintiff with a default judgment is not in any circumstances entitled to cross-examine a defendant upon the legitimacy of a proposed defence, for example, where it seeks to argue that the proposed defence is a sham or a fraud and the application to set aside the default judgment is an abuse of process. But, in circumstances such as the present, final acceptance or rejection of the allegations in a defence or cross-claim obviously cannot be the subject of determination in an application to set aside the default judgment. The question is not whether the defence or cross-claim will succeed but whether it might and justice requires that the defendant should be permitted to litigate. 49 At all events, I am far from satisfied that Mr Assi was not telling the truth about the central features of his case. 50 The parties approached the matter by dealing with the proposed cross-claim as (incoherently) particularised in the affidavit and evidence of Mr Assi and arguing about whether the composite material disclosed a good defence. Although it is both unorthodox and inappropriate to examine the bona fides of his defence by considering the evidence of Mr Assi - the issue should have been capable of determination by reference to the proposed pleading alone - it seems to me that I should nevertheless deal with the contending applications along the lines adopted by both counsel.

The relevant principles 51 These are not in dispute. It is I think conceded that, to adopt the language of Priestley JA (which whom Sheller JA agreed) in Cohen v McWilliam & Anor (1995) 38 NSWLR 476 at 482), "The primary emphasis is on the question whether there is an arguable case to be tried on the merits". It is submitted on Mr Assi's behalf that the guarantee should be set aside by virtue of the Contracts Review Act 1980, and that the evidence - although presently perhaps not as clear as it should be for the purposes of a trial on the merits - discloses that there is an arguable case that the application of the Act in the circumstances would result in the guarantee being set aside or, at least, some relief being granted. 52 So far as is presently relevant, the Contracts Review Act provides - "7 Principal relief 1 Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following:

(a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, … 9 Matters to be considered by Court

(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made."

The terms of s 9(1)(j) appear to be particularly apposite to Mr Assi's case. 53 For the purposes of considering whether, on the evidence of Mr Assi and the allegations in the proposed Cross-Claim, relief under the Contracts Review Act might be obtained, it seems to me that there is evidence of the following matters -

(2) Mr Assi's interest in the guarantee was no more, as a practical matter, than that, if the finance was provided for which the guarantee was essential, Mr Assi might benefit in some way from his business involvement with Mr Lazar from the continuation of his employment, the payment of a substantial sum in unpaid wages and possible involvement in managing the projects; he also relied on Mr Lazar's promise to pay him $100,000 for every $5 million worth of guarantees. There is no evidence as to how the funds were in fact used. In all the circumstances, as I gather from Mr Assi's evidence, the promises made by Mr Lazar were always empty and mere devices for stringing him along. He certainly was not to obtain any part of the loan funds nor were those funds to be made available to him or expended in projects in which he had any legal right to profit.

(2) The plaintiff was aware that by signing the guarantee he was undertaking a personal liability to repay the debt if Lanmar or Lazar did not pay it, though he believed or at least hoped that it would be of short duration and was reluctant to execute the documents but did so because of a combination of Mr Lazar's fraudulent blandishments and threats.

(3) Mr Assi did not in fact receive legal advice from any independent solicitor nor commercial advice from any accountant but signed declarations that he had received such advice. He did not read those declarations before signing them.

(4) Mr Assi had not been involved in any of the negotiations leading to the loan and guarantee and did not meet with or discuss the proposal with the plaintiff or any agent for the plaintiff. Mr Assi was not asked for and did not provide a statement of his means. 54 So far as the plaintiff is concerned, it does not appear that it was aware of any misconduct or unconscionable conduct directed at Mr Assi by Mr Lazar or any other person and was not placed on notice, whether actual or constructive, that Mr Assi had not received the independent advice to which the certificates signed by Mr Redmond and Mr Bell referred. Nor is there evidence that it had notice of the fact that Mr Assi was or might be a volunteer in respect of the loan. In this respect, he was a director of the borrowing company. The mere fact that he was not a shareholder did not, to my mind, suggest that he was a mere volunteer. The shareholders are two companies, the shareholders in which are not disclosed in the evidence. On Mr Assi's case, of course, he could not be aware of what transpired between the plaintiff and Mr Lazar or whomever it was who negotiated the loan. 55 There are some strange aspects of the loan transaction. It seems apparent that Mr Assi had not joined in the application for the loan in any sense; nor is there any evidence that he was involved in any of the negotiations that led to the loan. The inevitable implication of Mr Assi's evidence is that he was not. It seems strange that a lender to a small private company would not communicate with its directors in connection with a proposed loan of well over $2.5 million. The letter of offer states in cl 2.1 that the facility limit is the lesser of $2.6 million and 80% of the lender's valuation of the mortgaged property. I think it also follows from Mr Assi's evidence that he knew little, if anything, about the valuations of the mortgaged property. Furthermore, although he was a guarantor of the mortgage, it seems evident that he did not supply and I would infer, was not asked, for any information about his assets and liabilities that would demonstrate to the plaintiff or to Seiza that he was a person of substance. The fact that he was not involved in any relevant negotiations and had not provided any documents which, in any sensible commercial sense, should have been obtained from him justifies the conclusion that his agreeing to guarantee the loan was of formal rather than substantial interest to the plaintiff. It indicates, furthermore, that it could not have relied in any seriously commercial way upon the guarantee which he executed. It is difficult to see how, in the real world, the plaintiff could have intended to take the guarantee seriously in the absence of any information about Mr Assi's means. This is not to say, of course, that the plaintiff was not entitled to rely on Mr Assi's execution of the document as an assumption of a guarantor's obligations. Moreover, it is entitled to rely upon the declarations made both by a solicitor and an accountant for the purpose of satisfying themselves that indeed Mr Assi had been informed of both the legal and commercial issues attendant upon his becoming a guarantor of the debt. However, the circumstances of Mr Assi's exclusion from the loop, which must have been known to those negotiating the loan on behalf of the plaintiff, raises in my mind the distinct possibility that there may have been constructive notice of his true situation. 56 Actual or constructive notice to the lender of the risk of unconscionable conduct tainting the contract is essential under the general law: Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447. Counsel for Mr Assi relied on Garcia v National Bank Limited (1998) 194 CLR 395 (in which Mrs Garcia guaranteed the debts of her husband's company as a volunteer not fully understanding the effect of guarantees) as authority for the contention that notice was not necessary. In Garcia, the bank officer, in whose presence and at whose indication Mrs Garcia signed the relevant documents, gave no explanation about the nature of the guarantee. Gaudron, McHugh, Gummow and Haine JJ distinguished Amadio as being a case where there was "actual misconduct on the part of the son of the respondents which affected their entry into the mortgage and guarantee and the bank was on notice of that misconduct" ([30]). Their Honours then went on to say - "[31] The principles applied in Yerkey v Jones do not depend upon the creditor having, at the time the guarantee is taken, notice of some unconscionable dealing between the husband as borrower and the wife as surety. Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee. It holds … that to enforce that voluntary transaction against her when in fact she did not bring a free will to its execution would be unconscionable. It holds further … that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger. And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that: (a) in fact the surety did not understand the purport and effect of the transaction; (b) the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed); (c) the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet (d) the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her." 57 Here, it seems to me that Mr Assi did indeed understand the purport and effect of the guarantee. It was because of that very understanding that he was reluctant to sign it. He did not need Mr Redmond to explain it to him although I think it is fair to say that if he (as he denies) was given advice as to the commercial incidences of the transaction, that reluctance may have been strengthened into a refusal. It is clear from his evidence that he did not have any real knowledge of Lanmar's financial position, let alone its ability to service the loan. That the loan was commercially unwise or improvident may be thought reasonably to follow from the fact that, as it appears, no payments were made of instalments of the debt as they fell due. 58 So far as Mr Assi's evidence goes, he was to a substantial degree a volunteer, yet he was not completely so. The company which obtained the loan was one of which he was a joint director, in whose business he had an interest and hope of employment; furthermore, there was Mr Lazar's promise of a payment of a very substantial sum if he agreed to enter into guarantees. Mr Assi was certainly not in any sense in the position of Mrs Garcia so far as her husband was concerned. The plaintiff would have been entitled to suppose that, as a director of the company, Mr Assi was fully aware of its commercial situation and its ability to pay the debt. Moreover, the plaintiff required Mr Assi to make solemn declarations concerning his understanding of both the legal and commercial considerations attending the debt. As was said in the judgment to which I have referred (at [33]), the unconscionability of enforcing the surety "depends upon the surety being a volunteer and mistaken about the purport and effect of the transaction, and the creditor being taken to have appreciated that because of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transactions purport and effects". 59 Of course, Amadio and Garcia were both decisions concerned with the general law applying to the unconscionable enforcement of contracts. It is necessary to consider the effect of the Contracts Review Act on the guarantee in question here. In West v AGC (Advances) Limited (1986) 5 NSWLR 610, McHugh J, with whom Hope JA agreed, made the point that the definition of "unjust" in s 4 of the Act is not exclusive and that a contract maybe unjust even though it is not "unconscionable, harsh or oppressive" (5 NSWLR at 621). His Honour said - "The Contracts Review Act 1980 is revolutionary legislation whose evident purpose is to overcome the common law's failure to provide a comprehensive doctrinal framework to deal with 'unjust' contracts … Any contract or contractual provision, not excluded from the operation of the Act and which the court considers is unjust in the circumstances existing at the time when it was made, may be the subject of relief under the Act. Moreover, the provisions of s 9(2) do not exhaustively indicate the criteria as to what can be taken into account in determining whether a contract or any of its provisions are unjust. The provisions of s 9(2) of the Act are concerned for the most part with matters of procedural injustice. But the court is entitled to have regard to all the circumstances of the case, subject to s 9(4) and the public interest. In an appropriate case gross disparity in the price of goods or services and their value may render the contract unjust in the circumstances even though none of the provisions of s 9(2) can be invoked by the applicant. Indeed, notions of unfairness and unreasonableness will, I think, generally be present when a contract or any of its provisions is declared unjust. This will particularly be the case where procedural injustice is relied on. If a contract or one of its relevant provisions is neither unfair nor unreasonable so far as the applicant is concerned, it is difficult to see how the existence of inequality in bargaining power or lack of independent advice, for example, can render the contract or a provision of the contract unjust. It is important to bear in mind that it is the contract or its provisions which must be unjust … The Contracts Review Act regulates contracts not investments … If a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice … … [Under] this Act, a contract will not be unjust as against a party unless the contract or one of its provisions is the product of unfair conduct on his part either in the terms which he has imposed or the means which he has employed to make the contract." 60 As I have implied, part of the difficulty facing Mr Assi here is that virtually nothing is known of the negotiations that led to the creation of the loan and the guarantee. It seems reasonable to infer from Mr Assi's evidence, accepting that it is truthful, that Mr Lazar conducted the negotiations. I have already mentioned the surprising fact that Mr Assi was not a part of those negotiations nor was his financial position the subject of enquiry by Seiza or the plaintiff. These facts certainly raise, to my mind, a question mark about the course of the negotiations conducted by or on behalf of the plaintiff. The affidavit of Mr Linton does not refer to those matters at all, essentially confining itself to the documentation to which I have already referred. I find this silence troubling. On a trial, discovery and other modes of investigation might well lead to evidence favouring Mr Assi. The cross-claim alleges that the plaintiff and Seiza engaged in unconscionable conduct knowingly or recklessly, in accepting Mr Assi's guarantee, without due inquiry as to the following - (a) whether or not the cross-claimant had obtained independent advice;

(b) whether or not the cross-claimant understood the subject documentation;

(c) whether or note the cross-claimant had any active role in relation to the development the subject of the proceedings;

(d) whether or not the power of attorney given to Fairclough by the cross-claimant was appropriately and correctly obtained. 61 In the circumstances, it is difficult to see how these matters constitute unconscionable conduct since I do not see and there does not appear to be alleged that there was any occasion that required the plaintiff and Seiza to ascertain those facts, especially in light of the documents received and signed by Mr Assi. The cross-claim alleges that Mr Lazar acted as the agent of the plaintiffs and Seiza in engaging in conduct which, though formally put, is to the effect of the allegations made by Mr Assi to which I have already referred. Certainly Mr Assi does not give any evidence and there are no particulars from which an inference could be drawn supporting this allegation. On the other hand, this is scarcely surprising in the light of his evidence that he was completely unaware of the course of negotiations. The relationship between Mr Lazar and the plaintiff (on the fair assumption that the former conducted the negotiations) is brought into question, as it seems to me, at least on a prima facie level by the lack of any inquiry of Mr Assi and the lack of any concern about his means. 62 In West, McHugh JA said (5 NSWLR at 620) - "A question which arises is whether the court is able to consider circumstances which were not known to the party against whom relief is sought even though the circumstances existed when the contract was made. In my opinion, the effect of s 9(1), 9(2) and 9(4) is that the court may have regard to any circumstance existing at the time of the contract whether or not a party was aware of that circumstance. But the court cannot have regard to any injustice arising from a circumstance that was not reasonably foreseeable at the time when the contract was made… Nevertheless, while knowledge of a circumstance by the party against whom relief is sought is not a condition precedent to the consideration of that circumstance, his lack of knowledge may render the circumstance of less materiality than he would if he was aware of it." 63 I should make it explicit that there is nothing particularised in the proposed statement of claim or Mr Assi's evidence that suggests that there was any matter known to either the plaintiff or Seiza which should have brought into question the propriety of the certificates relating to legal commercial advice and it would therefore not be unjust for the plaintiff not to make further inquiries about the propriety of those certificates: St George Commercial Credit Corporation Limited v Collins Wallace Properties Pty Limited (unreported, NSWSC, 17 & 18 August 1998 and 21 August 1998, Rolfe J at 52-53), approved in Esanda Finance Corp Limited v Tong (1997) 41 NSWLR 482 at 491 per Handley JA, with whom Santow AJA and Simos AJA agreed. 64 However, mere lack of notice of compromising facts may not finally determine the matter. In St George Bank Limited v Domenica Trimarchi & Anor [2004] NSWCA 120, Mason P said at [36] - "…a transaction may be unjust even though one party to it was not privy to or on notice of (all of) the circumstances rendering it unjust…Of course, the state of mind of the 'innocent' party is relevant to the unjustness calculus and to the discretionary remedial response." 65 See also Elko Fairi v Permanent Trustee Co Limited (2002) 11 BPR 20,841 at [69] to [78] where Beazley JA made the point that a contract may well be unjust in the circumstances in which it was made where one party has been misled by his agent into making the contract but the Court, in the exercise of its discretion under s 7 of the Act may decline to give relief because the other party, who sought to enforce the contract, had been both innocent and ignorant of any misleading conduct. 66 In this case the plaintiff submitted, in substance, that the conduct alleged by Mr Assi concerning Mr Lazar in particular but also Mr Redmond and Mr Bell and Mr Fairclough had nothing to do with the plaintiff or Seiza and that therefore no bona fide defence was disclosed. This is not strictly correct, as is evident from those parts of the proposed cross-claim to which I have referred. But it is certainly true that there is no evidence of any knowledge of the facts alleged by Mr Assi on the part of the plaintiff or Seiza. 67 The plaintiff also argued that s 6(2) of the Act precluded relief, contending that, by virtue of the agreement to provide guarantees for a fee, Mr Assi had entered into the guarantee "in the course of or for the purpose of a trade, business or profession carried on by" him. This contention, however, begs the question of the circumstances in which Mr Assi executed the guarantee. If established, it might well preclude relief, at least so far as the Contracts Review Act is concerned. But it does not dispose of that case now.

Conclusion 68 It seems to me that the proposed statement of cross-claim, for all that it might need to be further particularised, does disclose an arguable defence. It has been verified on oath and Mr Assi has given evidence, confused it may be, but in general supportive of his case at least so far as the conduct of the parties other than the plaintiff and Seiza is concerned. In some ways Mr Assi's evidence was unsatisfactory but I am certainly not able to conclude that its thrust was untrue. Although the link between the conduct of which he complains and the knowledge of the plaintiff and Seiza is rather tenuous at present, nevertheless the oddities in the transaction to which I have already brought attention do not suggest to me that an adverse decision in this respect is certain. Moreover, as I think is clear, the mere fact that the link is not established will not necessarily mean that relief to some extent or other will not be obtained. 69 So far as Mr Assi's not defending in time is concerned, I think in the circumstances his explanation for not doing so is a reasonable one. In light of what he was told, it was reasonable for him to think that Mr Lazar would take appropriate steps to deal with the statement of claim as he was, as Mr Assi saw it, the true debtor. When Mr Assi found out about the judgment against him, which was when he was served with the bankruptcy notice, he took early steps to have the matter dealt with and there was no untoward delay from that time. 70 In my view, the default judgment should be set aside and Mr Assi permitted to defend on condition that a defence and cross-claim properly verified are filed within 28 days of the date of this judgment. Of course, Mr Assi will have to pay the plaintiff's costs of this application but only to the extent that they involve his notice of motion. The plaintiff's application for summary judgment is dismissed with costs. 71 Accordingly I make the following orders - 1 The default judgment is set aside.

Leave is granted to Mr Assi to file a defence and cross-claim.

The defence and cross-claim, duly verified, must be filed and served within 28 days of the date hereof.

Mr Assi is to pay the plaintiff's costs of and incidental to the application to set aside the default judgment.

The plaintiff's application for summary judgment is dismissed.

The plaintiff is to pay Mr Assi's costs of and incidental to the application for summary judgment.

04/06/2008 - Error in citation - Paragraph(s) 63 and coversheet

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