Barecall Pty Limited v Hoban [2009] NSWSC 1104 | Case summary

Barecall Pty Limited v Hoban [2009] NSWSC 1104 | Case summary | Zoe

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Amalgamated Investment & Property Co v Texas Commerce International Bank [1982] 1 QB 84 Andrews v Racken Pty Limited [2007] NSWSC 1010 Ankar v Westminster Finance (Australia) Limited (1987) 162 CLR 549 Bell Group Limited (in liq) v Westpac Banking Corporation [2008] WASC 239 Bosaid v Andry [1963] VR 465 Chan v Cresdon Pty Limited (1989) 168 CLR 242 Clark Equipment Credit Australia Limited v Kiyose Holdings Pty Limited (1989) 21 NSWLR 160 Coghlan v Lock (1987) 8 NSWLR 881 Corumo Holdings Pty Limited v C Itoh Limited (1991) 5 ACSR 720 Discount & Finance Limited v Gehrig's NSW Wines Limited (1940) 40 SR (NSW) 588 Evans v Bremridge (1856) 8 DeG M & G 100; 44 ER 327 Expectation Pty Limited v PRD Realty Pty Limited (2004) 140 FCR 17 Farrow Mortgage Services Pty Limited (In liq) v Slade and Nelson (1996) 38 NSWLR 636 FCA Finance Pty Limited v Cummings (unreported, QSC, 8 February 1988) Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067 GEC Marconi Systems Pty Limited (2003) 128 FCR 1 Hadid v Redpath (2001) 35 MVR 152 Holme v Brunskill (1877) 3 QBD 495 James Graham Limited v Southgate-Sands [1986] 1 QB 80 James Thane Pty Limited v Conrad International Hotels Corp [1999] QCA 516 Jones v Dunkel (1959) 101 CLR 298 CASES CITED : Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 62 Macrory v Scott (1850) 5 Exch 906; 155 ER 396 Marston v Charles H Griffith & Co Pty Limited (1985) 3 NSWLR 294 Masters v Cameron (1954) 91 CLR 353 Monie v Commonwealth of Australia (2005) 63 NSWLR 729 NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 228 CLR 470 National Commercial Banking Corporation of Australia Limited v Cheung (1983) 1 ACLC 1326 National Westminster Finance NZ Limited v National Bank of New Zealand Limited [1996] 1 NZLR 548 NEC Information Systems Australia Pty Limited v Linton (Wood J, 17 April 1985, unreported) Scottish Amicable Life Assurance Society v Reg Austin Insurance Pty Limited (1995) 9 ACLR 909 Print National Pty Limited v Helps [2007] NSWSC 1050 R v Burdett (1820) 4 B & Ald 95 Rhoden v Wingate [2002] NSWCA 165; (2002) 36 MVR 499 RT & YE Falls Investments Pty Ltd v State of NSW [2001] NSWSC 1027 Schellenberg v Tunnel Holdings Pty Limited (2000) 200 CLR 121 Telado Pty Limited v Vincent (1996) 7 BPR 14,844; (1996) NSW Conv R 55-786 Toll (FGCT) Pty Ltd v Alphapharm Pty Limited (2004) 219 CLR 165 Tozer Kemsley & Millbourn (A'Asia) Pty Limited v Collier's Interstate Transport Service Limited (1955) 94 CLR 384 Trade Credits Limited v Burnes [1979] 1 NSWLR 630 Trade Indemnity Co v Workington Harbour and Dock Board [1937] AC 1 Waterman v Gerling Australia Assurance Co Pty Limited (2005) 65 NSWLR 300 Wilton v Farnworth (1948) 76 CLR 646

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3278/06 BARECALL PTY LIMITED V DAVID HOBAN & ORS JUDGMENT 1 In these proceedings Barecall Pty Limited seeks declaratory and other relief in relation to the alleged guarantee of a lease (as varied in 2003) and Sub-Lease it granted in 2001 to Aqualounge Manly Pty Limited in respect of premises in Manly which were occupied and used by Aqualounge as a nightclub/restaurant. Aqualounge went into liquidation in mid 2005 leaving considerable debts owing to Barecall in respect of its tenancy of the premises. 2 Barecall contends that each of the defendants (David Hoban, Deon Russell Harvey, Anthony Rossi, Radoslav Spadina and Jason Lussick) is a guarantor of the obligations of Aqualounge under the lease arrangements. At various (but by no means all material) times each of the defendants (other than Mr Spadina) was a director of Aqualounge. 3 Alternatively, Barecall relies upon the doctrine of estoppel for the proposition that it is not open to two of the five defendants (Mr Harvey and Mr Lussick), who did not sign documentation in relation to the varied lease in 2003, to deny liability under the alleged guarantee. This is put on two bases. 4 First, it is alleged that those defendants are estopped from denying their obligations as guarantors in relation to the lease (including any variation thereof) of the premises by reason of representations made by them allegedly on or about 20 November 2003 that, in exchange for Barecall's agreement to vary the lease, they would guarantee (or continue to guarantee) the due and punctual performance by Aqualounge of the covenants of the lease together with all moneys payable thereunder. This is referred to in the pleading as the Guarantee Representation. 5 Secondly, it is alleged that it was a common assumption between Barecall and each of the defendants that, in consideration of the variation of the original (2001) lease, the defendants, including Messrs Harvey and Lussick, would guarantee the obligations of Aqualounge under the lease as varied, by reason of which Messrs Harvey and Lussick are said to be estopped from denying their obligations as guarantors. This is referred to in the pleading as the Common Assumption Representation. 6 It is alleged that, in reliance both upon the Guarantee Representation and the Common Assumption Representation, Barecall to its detriment entered into the 2003 Variation of Lease; extended the area of the leased premises to include a first floor restaurant/café; accepted the Guarantee Representation; and took no further steps to procure the execution by Messrs Harvey and Lussick of documentation in relation to the 2003 Variation of Lease or to terminate Aqualounge's occupation of the premises and the lease as varied on account of the non-execution of the guarantee by Messrs Harvey and Lussick. 7 Barecall seeks an order that the defendants, or any of them, pay to it sums allegedly owed by Aqualounge under the lease arrangements. The sum claimed in the Second Amended Statement of Claim is $1,124,709.94 plus interest and costs. That sum is comprised of outstanding rent, outgoings and expenses. A claim for outstanding licence fees was abandoned prior to the hearing. The quantum of the claim has varied more than once since the commencement of the proceedings. It was ultimately revised downwards during the course of the hearing to $932,076.53 as explained in the various affidavits tendered from Barecall's bookkeeper, Ms Branson. 8 The defendants, for a variety of reasons some of which differ as between the respective defendants, deny that they owe Barecall obligations as guarantors in respect of the 2003 lease arrangements. They also dispute the amounts claimed by Barecall as owing by Aqualounge. Issues 9 Broadly summarised, the following issues arise for determination:

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(i) It has not been established, as a matter of contract, that the defendants have guaranteed (or, in the case of Messrs Hoban and Harvey, remain liable under the guarantees given by them in 2001 of) the performance by Aqualounge of its obligations under the 2001 Lease, as varied, and Sub-Lease. (a) The three defendants who signed the single page execution sheet submitted in November 2003 in connection with the variation of lease documentation (Messrs Hoban, Rossi and Spadina) there did so in their individual capacity as intended guarantors and not as directors or officers of the company. (b) As there was no amendment in 2003 to Article 18 or item 14 of the Reference Schedule to the 2001 Lease, as a matter of construction of the lease documentation there was no contractual obligation on either Mr Rossi or Mr Spadina to guarantee the lease obligations by Aqualounge. While Mr Hoban, by signing the said execution page, may otherwise have remained bound under the guarantee given by him in the 2001 Lease and hence bound to guarantee the obligations of Aqualounge as varied by the Variation of Lease (having thereby manifested his consent to the alteration of those obligations), by reason of the facts that the lease was unregistered and that not all of the intended co-guarantors of the varied 2003 lease obligations were bound thereby, Mr Hoban is released from liability under the guarantee of the lease obligations as varied. (c) While there seems to have been a dispute as to the substance of at least some of the varied lease obligations when the execution page submitted in connection with the 2003 Variation of Lease was signed by Messrs Hoban, Rossi and Spadina, if Mr Tocchini was authorised to affix that page to the Variation of Lease signed on behalf of Aqualounge then this would be taken as assent to be bound by that agreement. (d) On the proper construction of the 2001 Lease documents, the guarantee contained in the 2001 Lease (and Sub-Lease) did not cover the lease obligations of Barecall under those unregistered documents (applying Chan v Cresdon Pty Limited (1989) 168 CLR 242). (e) The fact that not all of the intended co-guarantors had bound themselves to the guarantee of the varied lease obligations means that no liability arises thereunder for any of the co-guarantors. (f) In the circumstances, there is not a clear admission of liability contained in the earlier affidavit sworn by Mr Rossi and I do not place any weight on that affidavit.

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(iii) By reason of my earlier findings, there is no liability under the alleged guarantee. However, had this question arisen, I would not have allowed any claim for amounts not proven on the face of the material before me actually to have been paid by Barecall in relation to the Aqualounge tenancy and being amounts for which Aqualounge under the leases would have been liable. The evidence in this regard was unsatisfactory and a recalculation based on my general rulings would have been required. I would not have permitted any further enquiry into damages in light of the way in which this part of the matter had been conducted. 11 I dismiss Barecall's claims against each of the defendants with costs. Conduct of the proceedings 12 Before turning to the facts, I outline briefly the conduct of the proceedings before me. 13 Each of Mr Hoban, Mr Rossi and Mr Lussick (the first, third, and fifth defendants) was separately represented during the whole of the hearing. Mr Harvey (the second defendant) was not represented when the hearing commenced on 18 February 2009 but, when the hearing resumed on 24 August 2009 (after an adjournment, the reason for which I explain below), he was represented by Counsel appearing for Mr Rossi (Mr Evans). Mr Spadina (the fourth defendant) was self-represented during the course of the hearing. 14 The hearing commenced on 18 February 2009. It was listed for three days. On the third day of the hearing, Counsel appearing for Barecall (Mr Baran) applied for an adjournment of the hearing on the basis that, as the evidence had emerged in cross-examination of Ms Branson (the bookkeeper who had prepared a reconciliation or summary of the various amounts claimed under the guarantee), Barecall needed to adduce further evidence to explain the way its claim was sustained. That application was opposed. For the reasons set out in my reasons for judgment on 20 February 2009, I acceded to Barecall's application and the matter was adjourned and relisted for hearing for three days commencing 24 August 2009. 15 When the hearing resumed, Mr Baran read a further affidavit from each of Ms Branson (sworn 26 March 2009) and Mr John Oppedisano, the managing director of Barecall, (sworn 15 April 2009). Ms Branson and Mr Oppedisano were subject to further cross-examination and then Mr Baran closed the plaintiff's case. 16 At that point I was informed by Counsel for each of the defendants (and, in Mr Spadina's case, by Mr Spadina) that each chose not to read any of the affidavit evidence which had been served on his behalf in the proceedings. Apart from a handful of documents (tendered on behalf of Mr Hoban, Mr Harvey and Mr Lussick, respectively), the defendants closed their cases. 17 Mr Baran immediately sought to reopen Barecall's case in order to tender extracts from an affidavit which had been sworn on 11 December 2008 by the third defendant (Mr Rossi) in separate Family Provision Act 1982 proceedings which had been brought by his wife in this Court in 2008. For the reasons set out in my reasons for judgment of 24 August 2009 I allowed the admission into evidence (against Mr Rossi only) of two paragraphs from that affidavit. I subsequently gave leave for Mr Evans to file in court an affidavit in reply affirmed by his instructing solicitor, Mr Stuart Latham, on 25 August 2009 in which Mr Latham deposed as to matters relating to the circumstances in which the two paragraphs tendered from Mr Rossi's earlier affidavit had been prepared. Mr Latham was cross-examined. The matter then proceeded to oral closing submissions. 18 Fortunately, having regard to the disrupted course of the hearing as outlined above, I have had the benefit of reference not simply to the transcript of the proceedings but also to my contemporaneous notes of the evidence and demeanour of the respective witnesses and, of course, to Counsels' various written submissions (see generally Hadid v Redpath (2001) 35 MVR 152 at 159 [34] per Heydon JA; Expectation Pty Limited v PRD Realty Pty Limited (2004) 140 FCR 17 at 33 [73]; Monie v Commonwealth of Australia (2005) 63 NSWLR 729 at 742 [43] per Hunt AJA; NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 228 CLR 470 at 504 [109]-[111] per Kirby J, at 525 [169] per Callinan and Heydon JJ). Background facts 19 The factual background is not uncomplicated and, having regard to the matters raised by the defendants, needs to be set out in some detail, particularly in relation to the manner in which the various lease documents were executed.

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20 Exhibit D2/1 is a copy of an ASIC extract as at 26 March 2009 which shows that, in the period from 2001-2003, there were two directors of Barecall, Mr Paul Oppedisano and Mr Antonio Cartiere, and that Mr Paul Oppedisano was secretary of the company at that time. Mr John Oppedisano was not appointed as a director of the company until 27 July 2005. It was he, nevertheless, who negotiated with the respective defendants and has apparently instructed Barecall's lawyers in the conduct of this claim. He appears to have conducted himself in such a fashion as would constitute him a director under the expanded definition of that term in the Corporations Act 2001. 21 For the defendants, it was submitted that I should draw inferences against Barecall due to its failure to call evidence, amongst others, from Ms O'Toole and Mr Paul Oppedisano (or anyone else from Barecall) to establish the quantum of Barecall's claim and to establish that Mr John Oppedisano had the authority to negotiate and commit Barecall to an agreement with the defendants. For the reasons set out below, I do not consider it necessary to draw any such inference, since Barecall's claim would fail even apart from any issue as to Mr Oppedisano's authority or lack thereof. · Aqualounge 22 ASIC's records (Exhibit O pp 190-195) show that Mr Hoban was appointed as a director of Aqualounge on 30 November 2001. Each of Mr Harvey, Mr Lussick and Mr Rossi is shown in ASIC's records as having been appointed a director of Aqualounge on 30 November 2001. Their appointments seem to have ceased on 27 February 2003. Mr Spadina is not recorded as having been a director of Aqualounge at any time. Mr Hardy was noted as having been appointed a director on 20 November 2000 but his appointment ceased on 30 January 2003. He was recorded as the secretary of the company over that period. · The leased premises 23 Barecall's title to the leased premises is a mixture of freehold and leasehold. 24 Barecall has at all material times been the registered proprietor of the property comprised in Folio Identifier 1/1034722 ("the Property") and the lessee, under two separate leases granted by Manly Council, of the property comprised in Folio Identifiers 1 and 4/1042657 and 2/1042657, respectively, ("the Leasehold Property"). Both properties are located in Manly and form part of the same street address. There is a multi-storey building established on parts of the Property and the Leasehold Property. · The Manly Council head leases 25 The two Manly Council leases are of the land below the surface of the road and the airspace above the surface of the road, respectively. 26 By registered lease commencing 10 December 2001, Manly Council leased to Barecall the property known as Lot 2/1042657 for a term of 24 years with three options to renew each for a 25 year period. The lease was signed, sealed and delivered as a deed on behalf of Barecall by Mr John Oppedisano (in the space marked "director/secretary") and by his brother, Mr Paul Oppedisano (in the space marked "director"). (At that time, as apparent from the ASIC records referred to above, Mr John Oppedisano was not a director of Barecall.) 27 The common seal of Barecall was affixed to the lease and certified correct pursuant to s 127 of the Corporations Act 2001 by Mr John Oppedisano (in the space marked "director") and Mr Paul Oppedisano (in the space marked "secretary"). 28 A copy of the lease is to be found from p 8 in Exhibit O. The land the subject of this lease was the land below the surface of the road and the lease was described in the header to the annexure forming part of it as the "Below Ground Lease". 29 The guarantors named in the reference schedule to the Below Ground Lease were Mr Paul Oppedisano and Mr Antonio Cartiere (the then directors of Barecall). 30 Also commencing on 10 December 2001, and for a similar term, was a lease to Barecall from Manly Council of the air space above the surface of the road, being Lots 1 and 4/1042657. It was similarly executed on behalf of Barecall by John and Paul Oppedisano (and guaranteed by Paul Oppedisano and Antonio Cartiere). In the Annexure thereto the lease was described as the "Above Ground Lease". A copy of this lease is to be found from p 44 of Exhibit O. · Lease to Aqualounge - November 2001 ("the 2001 Lease") 31 As between Barecall and Aqualounge, Barecall entered into a lease (dated 29 January 2002) commencing 10 November 2001 in respect of the Property (ie Folio Identifier 1/1034722). A copy of this lease (defined in the pleading as the "Lease") appears from p 81 of Exhibit O. I refer to this as the 2001 Lease. 32 Prior to the commencement of the 2001 Lease, Aqualounge was permitted to go into possession of the premises to be leased by it (broadly speaking the basement/sub-basement and ground floor), for the purposes of fitting out the premises. Mr Oppedisano, in his 17 August 2007 affidavit, says that this occurred in the first half of 2001. He deposed to a meeting during the course of the fitout (therefore, according to the time frame set out in his affidavit, within the 8 months prior to the commencement of the lease) with each of Messrs Rossi, Hoban, Lussick and Hardy, in which he says Mr Rossi introduced the others as his "partners". (Mr Oppedisano has described Mr Rossi as the "driving force" behind Aqualounge, although it is Mr Hoban who was ultimately the sole director of that company.) In that meeting, Mr Oppedisano says that he asked what they had as back up security for the payment of rent and (when given some general information by Mr Rossi as to his, Mr Lussick's and Mr Hoban's assets) said that "As long as you can satisfy my solicitor with personal guarantees I can't see it being a problem". 33 That conversation is of note for a number of reasons. First, it would appear from the content of the conversation as relayed by Mr Oppedisano that he had not up until then raised the issue of personal guarantees with Mr Rossi and his "partners" but had nevertheless been prepared for Aqualounge to take possession and commence fit-out. Secondly, this had occurred without any lease documentation being signed (or even perhaps prepared). Thirdly, of the four named "partners" with whom this discussion took place, personal guarantees for the 2001 Lease were ultimately provided by only two of them, Mr Hoban and Mr Hardy (which suggests that it was not Mr Oppedisano's unvarying requirement that all individuals associated with the business provide personal guarantees or even perhaps that all directors provide guarantees, since by January 2002 each of Mr Rossi and Mr Lussick was a director but there is no suggestion that either gave a guarantee in respect of the original 2001 Lease). 34 Insofar as Mr Oppedisano went on in this affidavit to depose to it being his standard practice (and his unvarying instructions to his solicitor) over at least twenty years to require that directors of any companies who leased premises from him or his companies provide personal guarantees, this is one occasion on which that practice or those instructions appears not to have been followed at least prior to Aqualounge being given possession of the premises to be leased. (This assumes some significance when considering what Mr Oppedisano says he would have done had he been aware in November 2003 that the variation of lease documentation had not been signed by each of the five defendants.) 35 The 2001 Lease bears a stamp duty imprint but was not registered. It was for a term of four years with two options to renew each for a period of three years. The permitted use of the leased premises was as a nightclub for the basement and sub-basement level and as a restaurant/café for the ground floor. 36 The common seal of Aqualounge (but not that of Barecall) was affixed to the 2001 Lease both on the page numbered 2 of 28 (in the certification of the dealing as correct for the purposes of the Real Property Act 1900) and on what is (rather confusingly) numbered page 31 of 28 (in what appears to be an execution page immediately following the reference schedule). The 2001 Lease was signed on behalf of Barecall by Antonio Cartiere as director and Paul Oppedisano as secretary. 37 The manner in which Barecall executed the 2001 Lease is inconsistent with what appears on the attestation clauses in that document, insofar as the signatures of the director and secretary (appearing next to the statement that "THE COMMON SEAL OF BARECALL PTY LIMITED ACN 060 567 095 was hereunto affixed in accordance with the Memorandum and Articles of Association and with the consent of the Directors") appear to be witnessing the affixation of a non-existent seal. If those signatures are not read as amounting to execution by the officers of the company for the purposes of s 127(1) of the Corporations Act, then there is no lease executed as such by Barecall. Of the many technical arguments raised in this matter, there was not argument as to this point and, given the other difficulties which Barecall faces on its claim, it is not necessary to determine this issue. 38 The affixation of Aqualounge's common seal on page 2 of 28 was witnessed by three signatories. It does not seem to be disputed that those are Mr Ian Hardy (who is not a party to these proceedings) and each of Mr Hoban and Mr Harvey. (There was no certification of the dealing in the space marked below that for signature by the "guarantor".) 39 The affixation of Aqualounge's common seal on page 31 of 28 [sic], ie in the execution clause for Aqualounge, was witnessed by Mr Hardy (in the space marked "director") and Mr Harvey (in the space marked "secretary"). Following the execution for Aqualounge was the execution by three individual signatories - Mr Hardy (who is described simply as having "signed" the document), Mr Hoban and Mr Harvey (the latter two being described as having "signed, sealed and delivered" the document). The first two signatures are witnessed by "S Hardy". The signature of Mr Harvey was witnessed by "P Oppedisano". 40 From this, it can be seen that Mr Harvey had signed the 2001 Lease in three places, twice witnessing the affixation of the common seal and once in an individual capacity; Mr Hoban had signed it twice, once witnessing the affixation of the common seal and once in an individual capacity.

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41 As the 2001 Lease was not signed until January 2002, by the time it was signed each of Mr Hardy, Mr Hoban and Mr Harvey was a director of Aqualounge and Mr Hardy was the company secretary (though as at the commencement date of the 2001 Lease, neither Mr Hoban nor Mr Harvey had been a director of the company). 42 The 2001 Lease is described in Annexure A thereto as being a lease "between BARECALL PTY LIMITED ACN 060 527 095 the Lessor and AQUALOUNGE MANLY PTY LIMITED ACN 095 121 832 the Lessee and IAN HARDY the Guarantor". However, item 14 of the Reference Schedule identifies the guarantors as being each of Mr Hardy, Mr Hoban and Mr Harvey. 43 Article 18 of Annexure A to the 2001 Lease contained the guarantee provision. Relevantly, it stated: In consideration of the Lessor at the request of the guarantors named in Item 14 of the Reference Schedule [ie Mr Hardy, Mr Hoban and Mr Harvey] granting the within lease to the Lessee the guarantor covenants with the Lessor as follows: (a) The guarantor guarantees the punctual payment by the Lessee of all rent and interest and all other monies … owing under this lease … … (c) The provisions of this Covenant shall be a continuing guarantee and shall not be considered as wholly or partly satisfied or discharged by the payment at any time or times of any part of the guaranteed amount and they shall extend to cover and be security for the whole of the guaranteed amount and the performance of the obligations fully performed. … (g) The liability of the guarantor shall not be abrogated, prejudiced or affected by: (i) The granting of time, credit or any indulgence or other concession given to the Lessee or any other person or to the guarantor by the Lessor or by any neglect or forbearance on the Lessor's part to require or enforce payment of the whole or part of the guaranteed amount by the Lessee or by any party to any negotiable instrument or by any compounding compromise, release, abandonment, waiver, variation, assets or any of the rights of the Lessor against the Lessee or by anything done or omitted or neglected to be done by the Lessor in exercise of the power and discretions vested in the Lessor by the lease which, but for this provision, might operate to abrogate, prejudice or affect the guarantee created by this covenant. (my emphasis) 44 Article 18.01(h) provided that where there was more than one guarantor, the guarantee was to bind the guarantors jointly and each of them severally. Article 18.01(i) provided that the expression " the lease", where used in the guarantee covenant, included "this lease as amended or varied from time to time and any renewal thereof". Article 18.01(j) provided that the guarantee covenant was for all purposes to be construed as a deed. (Therefore, while not all the named guarantors were recorded in the attestation clauses on p 31 of 28 as having signed under seal, the guarantee covenant itself operated in effect as a deed.) 45 Article 23 of the 2001 Lease referred to a Sub-Lease. Broadly speaking, it contained a disclosure by Barecall that, as a condition of obtaining the relevant consent from Manly Council to develop the building, it had transferred to Manly Council an area of 55.3 square metres (being the land described in Folio Identifier 2/1034722) and that Barecall would lease from the Council the area below the road surface forming part of the basement area and the area above the ground level upon which the lessor's improvements had been constructed and would grant a Sub-Lease of those areas to Aqualounge "to the extent that they relate to the basement and ground floor of the building". 46 Article 23.04 provided that the Sub-Lease would be substantially in the same terms and conditions as the head lease and for a term coinciding with the 2001 Lease. Article 23.08 contained an acknowledgement that the 2001 Lease was concurrent and interdependent with the Sub-Lease and that, upon the expiry or termination of the 2001 Lease for any reason, Barecall would be entitled to terminate the Sub-Lease without being required to provide any reason for such termination. · Sub-Lease - 10 November 2001 ("Sub-Lease") 47 Commencing on the same date as the 2001 Lease, although undated and not (at least on the face of the copy contained in Ex O) stamped for duty, is the Sub-Lease from Barecall, as sub-lessor, to Aqualounge, as sub-lessee, of part Folio Identifier 2/1034722. A copy of the Sub-Lease appears from p 114 of Exhibit O. 48 The Sub-Lease was certified and executed by Barecall (again with no common seal affixed) in similar (but not identical) fashion to the 2001 Lease. The common seal of Aqualounge was affixed both on the Real Property Act certification of the dealing and in the execution page at the conclusion of Annexure A to the Sub-Lease. However, this time the affixation of the common seal was witnessed in both places by Mr Harvey and Mr Hardy (not by Mr Hoban), each there being described as director, and there was no provision for separate execution by any of the three identified guarantors as individual signatories (unlike the 2001 Lease). There is no signature attributable to Mr Hoban anywhere on the Sub-Lease. (The header to Annexure A to the Sub-Lease referred simply to a Sub-Lease between Barecall as lessor and Aqualounge as lessee, with no reference to a guarantor.) 49 Clause 6.01 of the Sub-Lease contained an almost identical guarantee provision to that in the 2001 Lease. However, it did expressly name the guarantors in the body of the Sub-Lease. It provided, relevantly: In consideration of the Lessor at the request of Ian Hardy David Hoban and Deon Harvey hereinafter referred to as the guarantor granting the within lease to the Lessor the guarantor covenants with the Lessor as follows …

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and then went on to include identical terms to those contained in Article 18 of the 2001 Lease. 50 Under the Sub-Lease the "lease" is defined as meaning "this Lease and includes any other tenancy which exists between the Lessor and Lessee in relation to the premises". The "Principal Lease" is defined as meaning the lease between the parties "in respect of that part of the ground floor and basement of the [premises] which is not constructed upon land owned by Manly Council". · 2003 consent to modified use 51 It appears that in or about March 2003, Aqualounge sought Barecall's consent to a change of permitted use in respect of the premises since, by letter dated 13 March 2003 (pp 122-3, Exhibit O), Barecall consented to the modification of a consent given to Aqualounge by Manly Council (Consent No. 104/01). The effect of this was apparently to change the permitted use of the ground floor from restaurant/café to that of a nightclub. Barecall's consent was given on the condition that agreement was given to certain matters itemised in the letter, Barecall's letter relevantly stating: On the condition that Aqualounge Manly Pty Limited and its directors agree to the following matters, Barecall is prepared to consent to such a modification …(my emphasis) 52 I interpose to note that by this stage there was only one remaining director of Aqualounge as shown in the ASIC records (Ex O pp 190-195), namely Mr Hoban. No explanation was proffered for the change in the officers of the company. In referring to "directors" in plural, it seems that Barecall may have been acting on the assumption that those individuals who had earlier signed the 2001 Lease and/or Sub-Lease as directors of Aqualounge remained as directors of the company (which would be consistent with the 13 March letter, prepared I assume by Barecall or its lawyers, bearing room for three directors' signatures). Be that as it may, the letter makes it clear that Barecall required Aqualounge to execute a formal variation of lease and that it required an indemnity from not just the company but also its directors as to certain matters.

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53 The further matters on which Barecall's consent was conditional included the 2001 Lease being varied so as to include a provision in relation to any noise complaints and an agreement by Aqualounge "and its directors" to indemnify Barecall in respect of claims that might be made against it as a result of having consented to the variation of lease so as to permit the amended use of the ground floor (including but not limited to any claims made by the then lessee of the first floor, Mr Keith Long, and in respect of any loss of rent which might be suffered by Barecall as a result of other occupiers of the building complaining or terminating leases as a consequence of any noise emanating from the ground floor). (Mr Oppedisano was cross-examined as to the basis on which instructions had been given for such an indemnity, from which it seemed clear that this was his lawyer's wording, not his. However, nothing turns on that in my view. More relevant, it seems to me, is that at this stage no reference was made to a guarantee of the lease as varied or to any change in the existing guarantors.) 54 The 13 March 2003 letter was not signed by Barecall. Rather, there was provision (at the conclusion of the list of conditions set out in the letter) for the common seal of Aqualounge to be affixed (as it was). There was space marked for three signatures attesting to the affixation of the common seal (each with the typed designation of "director" appearing underneath the dotted line for the relevant signature). The signatures appearing on those lines (and thus designating the signatories as directors) purport to be those of Messrs Spadina, Hoban and Lussick. I say purport to be because some of the signatures are not readily decipherable and a number bear little resemblance to signatures appearing elsewhere, as noted below. Following those signatures, but not in any space allocated for or designated as directors' signatures, are two additional signatures which purport to be those of Messrs Rossi and Harvey. Mr Harvey's initials appear ascribed to the edge of the common seal. 55 A number of comments may be made about this document. First, as at this stage only Mr Hoban remained a director of Aqualounge. Secondly, Mr Spadina was never formally appointed as a director of Aqualounge (although he may of course have conducted himself in that role). Thirdly, while I am no handwriting expert, and while none of the defendants gave evidence denying that he had signed this document, even the briefest comparison between the signatures on this letter and the signatures appearing on the documents to which I have thus far referred (or others to which I will refer below) gives me doubt as to the provenance of the signatures on this letter. 56 In that regard, the second signature (which purports to be the signature of Mr Hoban) does not bear any resemblance to his signature at it appears on the 2001 Lease and Sub-Lease. Nor does the signature purporting to be that of Mr Lussick bear any marked resemblance to that appearing on his Defence to Second Amended Statement of Claim. Mr Rossi's signature bears some (but not a marked) resemblance to that appearing on the Variation of Lease (p 124, Ex O) or on the execution page submitted with that Variation of Lease (p 128, Ex O). Mr Spadina's signature also bears some resemblance but is not a ready match to his signature on p 128 Exhibit O. The only signature on this page which looks to me to be clearly comparable to other signatures of that person is the last signature on the page, which appears to be Mr Harvey's signature. That said, I am not position to make a determination in this regard and nothing in my conclusions turns on the provenance or authenticity of the signatures in question.

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· Agreement to vary 2001 Lease 57 Around the time that Aqualounge was seeking a consent to change of use of its leased premises, it was also seeking to occupy additional space in the building for use as a nightclub - the first floor. This area was leased at the time by Keith Long Enterprises Pty Limited for use as a restaurant (hence the reference to Mr Long in the 13 March consent modification). 58 Mr Oppedisano gave evidence that at different times each of Messrs Harvey, Rossi and Spadina had approached him saying that they wanted to take over the first floor restaurant and equipment. Mr Oppedisano says that he understood in that context that they meant that Aqualounge and those running the existing business ("same company", "same partners") wanted the upstairs area (T 16). Mr Oppedisano's affidavit of 17 August 2007 deposes to a conversation in about June/July 2003 to that effect and further conversations a month or so later with Messrs Rossi, Spadina and Hoban in which he says they pressed him to evict Mr Long for non payment of rent and he refused to do so (out of loyalty to the existing tenant). (Interestingly, in light of a submission made for Barecall in these proceedings, there was no suggestion in Mr Oppedisano's 17 August 2007 affidavit of Aqualounge being anxious to acquire the first floor premises so as to prevent a competitor from doing so - the first suggestion that it take over the premises being at a time when there was seemingly no intimation that the premises would be available for lease by others.) 59 Mr Long's company went into receivership (or perhaps administration) at some stage around August 2003 and Mr Oppedisano says that after a "receiver" was appointed to that company he agreed to Aqualounge taking a lease of the first floor (see 17 August 2007 affidavit; T 17). He was not able to identify the particular conversation in which he conveyed to any of the defendants that agreement or in which a "deal" to that effect was reached (nor did he recall precisely its contents) (something on which in due course Counsel for the various defendants placed some weight). 60 There was some discussion as to the basis on which Aqualounge would take the first floor - particularly to do with the kitchen equipment in the premises; a matter which later became the subject of ongoing dispute. Mr Oppedisano said the defendants (in particular, Mr Spadina) had offered to pay $200,000 for the equipment (T 17), though his 17 August affidavit deposes to Mr Spadina saying they would pay that amount for the first floor lease itself. Though there is some inconsistency in this regard, it appears that by the time the variation of lease documentation was being signed the dispute between the parties in relation to this issue was whether Aqualounge or Barecall was entitled to ownership of the equipment (and perhaps precisely what that equipment comprised). 61 Mr Oppedisano said that Barecall's position was it had bought the equipment from the "administrator" of the outgoing first floor tenant and that the equipment or at least part of it was to remain the property of Barecall unless Aqualounge paid for it (T 17-18; T 24). (The debate in this regard was continuing both at the time Aqualounge went into possession of the first floor (in September 2003) and when the Variation of Lease was signed in November 2003, with Aqualounge's solicitor still asserting that Aqualounge had property in the kitchen equipment.) 62 Mr Oppedisano says that in August 2003 he advised Aqualounge that it could have the first floor "on the same terms as Keith Long", by which he says he meant on the same rent (T 26), though he also seemed to accept that the August "deal" included an agreement that Aqualounge could have the fixtures and fittings (T 26; T 28) provided that it made payment for the latter. 63 Nevertheless, Mr Oppedisano accepts that by the time he gave instructions to Barecall's lawyers (Cara Marasco) to prepare the Variation of Lease, some time after September 2003, the August 2003 "deal" was "off the table" (T 28). 64 Aqualounge was permitted to take possession of the first floor of the Manly premises on or about 1 September 2003 (T 39.6). At that stage, no variation of lease documentation had been provided to Aqualounge, let alone signed by it or by its then sole director (Mr Hoban) or any of the other individuals associated with the business. 65 There was some uncertainty on Mr Oppedisano's part as to precisely when the various events relating to the first floor tenancy occurred (even though in the witness box he had a tendency to state matters in absolute terms as being "100% correct" (T 35)), the confusion as to when Aqualounge took possession seemingly arising over when he had travelled to America in that time. Mr Oppedisano was positive that he had left on a trip overseas prior to Aqualounge taking occupation of the first floor (saying "When they took over … 100% I was in America. 100% certain. They went into occupation of the first floor"). He at first put his trip in his affidavit as being October, but in the witness box then seemed to suggest that he had left six weeks before that, finally conceding "to be honest right now I can't remember" (T 38). (By reference to a passport immigration entry later noted on the transcript record by Mr Baran, the date of Mr Oppedisano's arrival in the USA seems to have been September 2003.)

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66 Whatever the actual date on which Aqualounge took possession seems immaterial. The significance, as I see it, is that Mr Oppedisano accepts that Aqualounge went into occupation of the first floor at a time when there was no binding lease and that he knew "the paperwork" had yet to be completed and the terms on which Aqualounge was occupying the premises had yet to be settled (T 35; 36). 67 By letter dated 3 October 2003 (p 132 Exhibit O), at a time when Aqualounge had already been given possession of the first floor and was apparently getting the area ready for opening as a nightclub, Cara Marasco (the solicitors acting for Barecall) wrote to Stewart Green Mijovich (the solicitors who had acted at some earlier stage for Aqualounge) and noted: We refer to previous correspondence in this matter and are instructed by our client that your client has now negotiated to take over the lease in relation to the first floor premises … Rather than prepare a fresh lease in relation to the first floor, we took the view it would be more cost effective to provide a deed of variation to your client's existing lease. 68 The letter refers to an enclosed variation of lease in duplicate and a tax invoice. It concludes: The lessor will not be bound by the terms of the enclosed document until the documents are signed by the lessee "and its Guarantors" and returned to us, together with a cheque in payment of our tax invoice. 69 It appears that, around this time, Aqualounge had instructed another solicitor to act for it on the variation of lease, since it was Mr Tocchini who responded to the 3 October 2003 letter (p 134 Exhibit O) on Aqualounge's behalf. By facsimile transmission on 31 October 2003, he stated: I am acting for the Aqualounge Manly and I have to hand your letter of 3 October 2003 addressed to Stewart Green Mijovich regarding the variation of lease. I don't have a copy of the original lease and I would be obliged if you would let me have a copy as it does not appear that it has been registered. I also wish to advise that Mr Ian Hardy has sold his shares in the company and that the persons who will guarantee the lease are, in addition to David Hoban, they are Jason Lussick, Anthony Rossi, Radislav Spadina and Deon Russell Harvey . If you could let me have those details at your earliest convenience we will attend to getting these documents as I understand there is some immediacy in having this executed. (my emphasis) 70 The "immediacy" in having the document executed, to which Mr Tocchini referred to in that letter, was not explained. 71 Mr Tocchini, who gave evidence in the proceedings, recalled that he had been approached by Mr Hoban who said that he and a group of friends had formed a company and were going to lease a bar or lounge (T 70). He could not recall the time he was approached. (It would seem that Mr Tocchini had earlier given some advice in about 2001 to one or more of the individuals associated with Aqualounge - see for example Exhibit D, a file note of a meeting apparently relating to some proposed venture between Messrs Hoban, Hardy, Harvey, Rossi and Lussick or their respective companies. I do not consider this of any relevance since it is not clear what the then proposed arrangement was or whether, in any shape or form, it eventuated. However, if he had some previous knowledge of the background of one or more of the individuals, it might explain why Mr Tocchini apparently did not see the need to confirm the factual instructions he was given as to who were the directors/secretary of the company when he was given instructions in relation to the variation of lease arrangements in 2003.) 72 Mr Tocchini's evidence was that at this stage (31 October 2003) he had not carried out a company search of Aqualounge (T 77.10); that he understood he was acting on behalf of Aqualounge and the five defendants "in their capacity as directors of the company" (T 76); that he was not acting for the individuals named in his letter as guarantors (T 85.30; T 88.4; T 94.3); that he had not seen a copy of the 2001 Lease (which was only forwarded to him by letter of 31 October) (T 78.30); that he was dealing mainly in correspondence with Mr Harvey since he was the one who had an email address (T 93.14; T 110.28); that most of his instructions came from Mr Hoban and Mr Rossi (T 77); and that he was not sure who he had been told was to guarantee the lease. 73 Mr Tocchini's recollection (which I have no reason to doubt) was that he wrote the 31 October 2003 letter on the basis of instructions from either Mr Hoban or Mr Rossi as to the persons who would guarantee the lease and that he had not provided a copy of that letter to any of the defendants (thus none of the others would have necessarily been aware of or had any opportunity to correct any misapprehension by Mr Tocchini in that regard). 74 A copy of the 2001 Lease appears to have been provided by Cara Marasco to Mr Tocchini by letter dated 31 October 2003, presumably received after Mr Tocchini had sent his own 31 October communication. 75 By letter dated 11 November 2003, Cara Marasco forwarded to Mr Tocchini the "execution page, as requested by you", stating that they looked forward to receipt of the variation of lease "duly executed by your client and its guarantor". At that stage, therefore, (and assuming, which may not necessarily be the case, that weight can be placed on the precision with which such terms are used in the correspondence) it would seem that Barecall's lawyers understood Mr Tocchini to be acting for Aqualounge ("your client") not "its guarantor" as such. 76 Exhibit J is a copy of a facsimile transmission dated 6 November 2003 from Mr Tocchini to Mr Harvey, advising the latter that Mr Tocchini had had a long conversation with Mr Bruno Cara on 5 November 2003 concerning the variation of lease. That letter noted there was an issue in relation to a dispute as to rent said to be due from September 2003 and an issue in respect of certain equipment: As I pointed out to you in our recent meeting the new lease acknowledges that there is a raft of plant and equipment set out in a letter from Gray Eisdell & Timmins [sic]. That document has not been produced. I am told however that the landlord has received from the AquaLounge $70,000 to cover the costs of equipment. If you have paid that money for the equipment then my contention would be that it is yours and not the landlords and, you wouldn't have to maintain it and you could take it out when you left. That needs to be clarified. 77 The letter also noted that: Bruno [Cara] is preparing an amendment page for signature with all the names of the guarantors on it and we should be ready to move forward once we can sort out the issues in 2 [the claimed outstanding rent] and 3 [the equipment]. If you could organise a meeting with the other directors and give me precise instructions about what we are doing with those matters then I can go ahead. 78 From this, it would seem that at least Mr Harvey was aware that an "amended" page for signature was being prepared with guarantors' names on it. (Had Mr Harvey thereafter signed the subsequent execution page, it would in my view have been hard for him to maintain that it was not being signed by him as guarantor. However, as it is clear that he did not sign the document no relevant inference from the awareness arising from this letter can be drawn.) 79 Clearly, at this stage, Mr Tocchini was under the impression not only that there was to be more than one guarantor of the 2001 Lease as varied (to which he seems to have been referring as the new lease) but also that there were a number of directors of Aqualounge, of whom Mr Harvey was one. This is consistent with his oral evidence, namely that his recollection was that all five of the defendants were directors of the company as at October 2003. 80 Mr Tocchini's recollection was that he had at least one meeting in his office at which all five of the defendants were present, but he could not place a date on this (T 86). Although at first he did not recall having a meeting with Jason Lussick (T 83) he then said that on the only occasion he met Mr Spadina, Mr Lussick (as was each of Messrs Rossi, Hoban and Harvey) was there (T 86). 81 I have no reason to disbelieve Mr Tocchini's evidence that he assumed the defendants were shareholders (T 87); that he was told (though he cannot recall by whom) that they were the directors of the company; and that he believed, as directors of the company, that they would be required and/or prepared to guarantee the lease (T 88). However, what is by no means apparent is that he was told that this was going to be the case in the one meeting at which all five were present; the significance of that being that it is by no means apparent that any particular instructions given to Mr Tocchini from one or more of Mr Hoban or Mr Rossi were ever acknowledged or accepted by any one or more of the other defendants. 82 By letter dated 17 November 2003, Cara Marasco wrote to Mr Tocchini enclosing a copy of the letter from Gray Eisdell Timms (this being the letter referred to in paragraph 4 to the annexure to the Variation of Lease), from which I infer that this is the first time Mr Tocchini had been provided with a copy of any equipment list. The letter stated: We have been instructed by our client that your client has been in occupation of the First Floor for a considerable period of time, well in excess of September this year. [To the extent this suggests that Aqualounge had taken possession prior to September 2003, this is inconsistent with the evidence that possession of the first floor was handed over in September 2003.] Notwithstanding your client's occupation of the property, your client has failed to pay the increased rent which was to be effective from 1st September 2003. We are instructed to advise that your client is to immediately pay to our client, the rent in respect of the First Floor in accordance with the provisions contemplated in the Variation of Lease. If your client fails to make the payment as requested herein, our client has indicated it will change the locks and retake the possession of the First Floor, without further notice. (my emphasis)

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Mr Tocchini sought urgent confirmation that 1. You [Aqualounge] owns the equipment and 2. you will sign the amended variation and pay the rent from 1 Sept to date by Friday. 86 Mr Harvey's handwritten response (Exhibit L) was to provide information as to the lease "back rents" which had been paid to John Oppedisano. Nothing was said about the equipment. 87 Mr Tocchini's response to Cara Marasco, by facsimile transmission on 18 November 2003, was that he was seeking urgent instruction "from my clients" (the use of the plural suggesting that by that time Mr Tocchini may have understood he was acting for more than just the lessee company). Relevantly, Mr Tocchini raised the issue in relation to the list of assets shown in the Gray Eisdell Timms letter. Mr Tocchini advised that he had been told by one of the directors of Aqualounge that those assets "are in fact the property of the AquaLunge [sic] for which they paid your client a sum I am told in excess of $70,000". (By this stage there was, as noted earlier, only one director.) Mr Tocchini advised that the proposed additional clause in the variation of lease (clause 27) should be removed. He said he had sought urgent instructions in terms of the rent. 88 On 20 November 2003, Mr Tocchini sent a further facsimile transmission to Cara Marasco in which he referred to a conversation with Ms Liliana O'Toole (Mr Oppedisano's sister and, as I understand it, a principal of or associated with a real estate company through whom payments made to or for Barecall were put forward as evidence of the amounts claimed in these proceedings). Mr Tocchini said that "she indicated to me that unless the documents were executed today and the balance of outstanding moneys were paid tomorrow and all delivered by lunchtime that the new building would not be allowed to open I think on Friday or Thursday evening". By this stage, therefore, there was clearly some urgency to resolve the situation and Barecall (not unreasonably, since Aqualounge had been in possession of the first floor for nearly three months without any signed agreement) was threatening to rely on its asserted right not to permit the new nightclub area to open. 89 Mr Tocchini's letter noted that Mr Hoban (one of his clients) "apparently was going to see your client last night with a view to assuring her the moneys outstanding in the amount of $63,000.00 together with your disbursements were to paid and I am told that will be paid on Friday morning and we will at that stage also have the executed lease". Nothing was said at that stage expressly as to the guarantee. Mr Tocchini raised again the issue of the plant and equipment which, he said, on his instructions, could not be the property of the lessor but were lessee's fixtures and fittings. He wrote: "I suggest that clause be crossed out of the lease and that we get the principal issues organised so that the matter can be determined at some later stage". 90 Later that day, on 20 November 2003, Mr Tocchini forwarded by facsimile transmission to Cara Marasco a photocopy of documents said to be on their way to Cara Marasco that day noting that: In the time available it hasn't been possible to get all the signatures of all of the guarantors however the other two guarantors Deon Harvey and Jason Lussick will attend your office for the purposes of signing the guarantee portion . The lease has been executed by David Hoban, director, Anthony Rossi, secretary on behalf of the company and we enclose herewith a cheque in payment of fees and a cheque for $53,612.35 being the amount of money due to your client as discussed between Mr Hoban and Liliana O'Toole last night" (my emphasis).

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96 Exhibit N is a copy of the original signed variation of lease with three original counterpart execution pages (each bearing the signatures of Messrs Hoban, Rossi and Spadina but with room for signature noted for Messrs Harvey and Lussick as well). 97 The Variation of Lease, which is stamped but which again does not appear to have been registered (appearing at p 124 of Exhibit O), increased the rent payable from $332,000 per annum to $567,480 per annum on and from 1 September 2003. (The difference was to incorporate the rent then payable for the first floor by the outgoing lessee, Mr Long.) 98 The Variation of Lease is signed on the cover page, as noted, purportedly by Mr Rossi as secretary and Mr Hoban as director. The handwriting in which the descriptions of the capacity in which those persons have signed appears (by comparison with Exhibit K) to be that of Mr Tocchini. The signature of Mr Hoban appears to be the same as that appearing on the earlier Aqualounge lease documents (inconsistent with that appearing on the 13 March 2003 consent to modification of user letter). The signature of Mr Rossi appears markedly different from that on the consent to user document. 99 The Variation of Lease contains Annexure A, which amends clause 4.01.8 (so as to delete the figure 60 and substitute the figure 100), with a similar amendment to clause 4.01.9. These amendments had the effect of increasing the proportion of the amounts payable by Aqualounge in respect of EnergyAustralia outgoings and for maintenance and upkeep of the arcade located on the ground floor from 60% to 100%. A new clause was inserted to the effect that Aqualounge would bear "All costs and expenses incurred by [Barecall] associated with the repair and maintenance of the elevator in the building" although read with the opening words of clause 4.01 the actual proportion to be borne of those costs would be as stated in item 13 of the Reference Schedule. That item was amended such that the proportion of the listed outgoings (other than in 4.01.8 and 4.01.9) to be borne by Aqualounge was increased (presumably consistent with the increased floor space now being rented by it) from 28.92% to 54.24%. 100 A noise provision to the effect of that referred to in the consent to modification of use letter was inserted (clause 6.19). Relevantly, for present purposes, a new clause 27 was also inserted as follows: 27. Lessor's Equipment The Lessee acknowledges that the plant and equipment listed and described in the attached letter from Gray Eisdell Timms Pty Limited is the property of the Lessor and the Lessee shall be responsible for the maintenance and upkeep of the said equipment and in the event that the equipment needs to be replaced during the term of the Lease the Lessee will at its own cost replace the equipment with the equipment of comparable standard as the equipment referred to in the said list of Gray Eisdell Timms Pty Limited. 101 A copy of the Gray Eisdell Timms letter appears at p 131 Exhibit O and itemises a list of items including not only kitchen equipment but equipment "outside", "downstairs" and in the "Bar Area". 102 There was also an amendment to the usage permitted under the 2001 Lease to include "first floor licensed restaurant/café with live music". 103 Provision was made at the end of Annexure A to the Variation of Lease for Real Property Act certification by each of Barecall and Aqualounge repeating the form of what was set out on the dealing itself (though inserting the corporation details). That certification provision was not completed by either company. There was therefore no execution (other than by way of the Real Property Act certification of the dealing) by either Aqualounge or Barecall. 104 As originally submitted to Mr Tocchini, the so-called "execution page" provided for the signatures of each of Mr Hardy, Mr Hoben [sic] and Mr Harvey (the three named guarantors in Item 14 of the Reference Schedule in the 2001 Lease), with the annotation "signed by the said …" in each case. 105 Subsequently, the replacement execution page provided to Mr Tocchini made provision for signature by each of the individuals whom Mr Tocchini had indicated would guarantee the varied lease (Mr Hoban, Mr Lussick, Mr Rossi, Mr Spadina and Mr Harvey). However, neither Mr Lussick nor Mr Harvey signed this document. There are signatures on the document which appear to be signatures of each of Mr Hoban, Mr Rossi and Mr Spadina. The first two were witnessed by Mr Tocchini and he gave evidence that Mr Hoban and Mr Rossi attended his office for that purpose. The signature appearing as that of Mr Spadina was witnessed by someone else from Mr Tocchini's office. 106 Although Mr Tocchini accepted in the witness box that the correspondence suggested that when Messrs "Hardy" [sic - Hoban] and Rossi executed the front page of the Variation of Lease it had been agreed that clause 27 had been excluded (T 91), I am not satisfied that the timing of the correspondence necessarily supports that conclusion. However, what does seem clear is that at the time those three signed the variation of lease documentation, Mr Tocchini's instructions were that clause 27 was to be excluded (T 92) and that the clause had not been deleted from the document at that time. 107 Mr Tocchini's evidence was that it was not his normal practice to have clients sign execution clauses in blank (T 97) and he thought the execution page, when signed, was physically attached to the Variation of Lease (T 99) (though it seems to me this was surmise based on his normal practice rather than actual recollection). However, he did not think that the Gray Eisdell Timms' letter (p 131) was part of the Variation of Lease document when signed. 108 Mr Tocchini assumed that he had had a discussion with the signatories (on the evidence this could only have been Mr Hoban and Mr Rossi) when they signed about the nature of any obligations they were undertaking as guarantors and thought he would have drawn their attention to the guarantee clause in the original lease but could not specifically recall doing so (T 99) and, when taken through the amendments, appeared to concede that, there having been no amendment to the guarantee clause, it was not clear to what the signatories were ascribing their names (T 101). 109 Mr Tocchini accepted that he had no discussion with the defendants of the risks of signing as guarantors (T 103). He seems to have regarded it as a foregone conclusion that Barecall would require directors to sign a guarantee, without any formal request by Barecall to do so, and said he would not have attached a great deal of significance to that requirement (T 94). · Disputes during 2004/2005 110 During the course of 2004, there was correspondence between the solicitors for Barecall and the solicitors for Aqualounge in relation to various complaints by Barecall as to compliance by Aqualounge with its lease obligations. At least part of the matters in dispute on the part of Aqualounge appears to have been the manner in which accounts or invoices were rendered by Barecall. 111 By letter dated 5 April 2004 (which was stated to be on a without prejudice basis), for example, Mr Tocchini raised concerns of his "clients" in relation, inter alia, to the receipt of invoices in matters such as insurance where his clients were concerned that Barecall had not actually paid the insurance at all. 112 Relevantly, while that correspondence asserted breaches by Aqualounge of its obligations under the lease it did not seem to raise any claims against the alleged guarantors and, hence, no issue seems to have been raised at that stage as to any liability or otherwise of the alleged guarantors in respect of those moneys. Barecall's solicitors do not appear to have pressed for signature of the Variation of Lease document by Mr Harvey or Mr Lussick. 113 During May 2005 there were further complaints in relation to Aqualounge's compliance with its lease. 114 By notice dated 10 June 2005, Cara Marasco gave notice of default and advised of Barecall's intention pursuant to Article 15 to terminate Aqualounge's lease if rectification of arrears in rent and outgoings was not made by 5 pm on 17 June 2005. When the arrears remained outstanding at that time a formal Notice of Termination (p 189 Exhibit O) was issued, signed by Mr John Oppedisano, on that date. 115 On 20 June 2005 an external administrator and/or controller was appointed to Aqualounge Manly. As between Aqualounge and Barecall, it was accepted that the respective leases had been terminated with effect from 4.00 pm on 23 June 2005. On 12 August 2005 a special resolution to wind up Aqualounge was passed. 116 A letter of demand was subsequently issued on 3 November 2005 (under Barecall letterhead and signed by John Oppedisano) addressed to Messrs Hoban, Lussik [sic], Harvey, Rossi, and Spadina (as well as a Mr Harding, by whom I assume Barecall intended to refer to Mr Hardy), for the sum of rent, outgoings and damages ($457,183.25) then said to be owing by Aqualounge and due under the guarantee of the 2001 Lease as varied. 117 By letter dated 5 December 2005, Cara Marasco advised the solicitors then acting on behalf of each of the five defendants in these proceedings (Hunt & Hunt) that Barecall would be "relying on the Guarantee provisions contained in the Lease (Article 18) and the fact that Anthony Rossi, Radislav Spadina and Jason Lussik [sic] had agreed to become Guarantors of the Aqualounge Manly Pty Limited obligations at the time the Lease was varied in September 2003". Reliance was also said to be placed upon representations made both by the Guarantors and the Guarantors' solicitor, Mr Paul Tocchini, in his letter of 20 November 2003, that Mr Harvey and Mr Lussick would attend at the offices of the solicitor "with the view of executing the Guarantee". Issues

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(i) Have the defendants guaranteed the obligations of Aqualounge as lessee of the Manly premises? 118 Counsel for the second and third defendants (Mr Evans) correctly notes that what is being sued upon by Barecall is an alleged guarantee in respect of the 2001 Lease, as varied by the Variation of Lease executed on 20 November 2003, and the Sub-Lease (and not the 2001 Lease in its original form). 119 Paragraphs 2-3 of the Second Amended Statement of Claim defined the "Lease" as the original lease executed on 29 January 2002, not the Sub-Lease. Somewhat inconsistently with this, paragraph 4 of the Second Further Amended Statement of Claim particularises the express term relied upon for the joint and several agreement to guarantee Aqualounge's obligations by reference to both Article 18 of the Lease and Article 6 of the Sub-Lease. 120 It is not clear to me how, if at all, the provisions of the Sub-Lease are said to form part of the express terms of the 2001 Lease on which reliance is placed. However, the relief claimed in prayer 1 seeks a declaration as to the defendants' status as guarantors under both "a lease (including any variation) and a Sub-Lease" of the premises. Other than if it were to be suggested that the pleading does not plead the facts on which Barecall relies for a claim in respect of moneys outstanding under the Sub-Lease, it does not seem to me that anything turns on this lacuna in the pleading. · Effect of variation of 2001 Lease 121 The import of Mr Evans' submission in this regard is that there is no pleading, in the alternative, of a claim in respect of the guarantee under the original 2001 Lease (ie of the original Lease not as varied in 2003). This is clear from the fact that the claim in respect of the outstanding rent is calculated by reference to the increased rent as varied under the Variation of Lease. 122 Reliance was placed by Mr Evans on Ankar v Westminster Finance (Australia) Limited (1987) 162 CLR 549 (referring to the statement of principle in Holme v Brunskill (1877) 3 QBD 495) for the proposition that a substantial alteration of the kind effected by the Variation of Lease has the effect of altering the guarantor's rights and discharging the guarantor from liability under the original lease. In Ankar, the majority in the High Court cited the general principle outlined in the English cases in relation to alterations and noted (at 559) that: [T]he principle applies so as to discharge the surety when conduct on the part of the creditor has the effect of altering the surety's rights, unless the alteration is unsubstantial and not prejudicial to the surety. The rule does not permit the Courts to inquire into the effect of the alteration. The consequence is that, to hold the surety to its bargain, the creditor must show that the nature of the alteration can be beneficial to the surety only or that by its nature it cannot in any circumstances increase the surety's risk. 123 In Farrow Mortgage Services Pty Limited (In liq) v Slade and Nelson (1996) 38 NSWLR 636 at 637, Gleeson CJ noted: The case is to be determined by the application of the well-settled principle that a variation of the agreement between a creditor and a debtor, of a kind which could prejudice a surety, will discharge the surety from liability unless the surety consents to the variation, or unless there is a contrary provision in the contract of suretyship. 124 Instances where a variation of the principal contract has lead to the discharge of the guarantor have included, relevantly, where there was an agreement to increase the rent payable and where there was an alteration to the area of the leased premises (Holme v Brunskill). Both such alterations were made to the 2001 Lease.

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126 However, Article 18.01 of the 2001 Lease provided that "lease" in the guarantee covenant included the lease as amended or varied from time to time. It therefore contemplated some form of variation or amendment might occur without discharging the guarantors from liability. Nevertheless, although the terms of the guarantee clause under the 2001 Lease did contemplate that the guarantee could apply notwithstanding a variation, that does not necessarily mean that a variation of the kind which occurred was contemplated. Phillips & O'Donovan, The Modern Contract of Guarantee, 2nd edn, at p 294, note that a general reference in the guarantee to the principal transaction may be interpreted as referring to the particular obligations embodied in that transaction as from the date of the guarantee, so that a departure from those obligations may still operate to discharge the guarantor, citing Corumo Holdings Pty Limited v C Itoh Limited (1991) 5 ACSR 720 at 728-729. In Corumo, one of the defences raised was the absence of a provision contemplating the variation of the agreement in question, which can be seen from the statement that: … by virtue of the deletion of cl 5.2 of the document of 10 March 1988, no liability in BNY remained in existence because it was by reference to that clause that the "guaranteed moneys" were defined. Furthermore, the clause was not "as varied from time to time" but as stated in "the agreement dated 10 March 1988", ie the clause in its original form 127 Mahoney JA, with whom Street CJ and Samuels JA agreed, in Trade Credits Limited v Burnes [1979] 1 NSWLR 630 at 634 similarly said: In determining the operation of a guarantee, it is necessary to determine precisely what is the obligation the performance of which is guaranteed. That obligation may be one which is simple and definite, e.g., the payment of a sum certain on a fixed date. But it may also be one the content of which may change from time to time. There may be a guarantee of "whatever may be owing" from a course of dealing: Wood v. Priestner (1866) L.R. 2 Exch. 66; affirmed (1867) L.R. 2 Exch. 282. Where a creditor proposes from time to time to supply the principal debtor with goods on credit, the guarantor may guarantee the indebtedness flowing ultimately from such a course of dealing: Matthews Thompson and Co. Ltd. v. Everson (1934) 34 S.R. (N.S.W.) 114; 51 W.N. 39. The contract the performance of which is guaranteed may, by its terms, permit the variation of what is to be done to perform it, and the content of that which is guaranteed will vary accordingly: Trade Indemnity Co. Ltd. v. Workington Harbour and Dock Board [1937] A.C. 1, at p. 21. 128 The question here is whether the alterations are "within the general purview of the original guarantee" (Rowlatt on Principal and Surety, 2nd ed. (1926), p. 118, as quoted and adopted by Lord Atkin in Trade Indemnity Co v Workington Harbour and Dock Board [1937] AC 1 at 21). 129 In FCA Finance Pty Limited v Cummings (unreported, QSC, 8 February 1988), Ryan J addressed a case in which a guarantee was given of obligations under a deed (including any written amendments and additions thereto) stating: The variation of the terms of the project supervisor deed effected by the supplementary deed was a material one and would in my opinion discharge the guarantors' obligations under the guarantee unless it was authorised by some provision of the guarantee. I consider that it was authorised by the provision of the guarantee under which the guarantors guaranteed due and punctual payment of moneys payable to the obligee pursuant to or as a result of the supervisor deed which included any written additions and amendments thereto. The deed of March, 1973 was one which made such additions to the supervisor deed. It may be that the words should be read as relating only to additions within the general purview of the original guarantee: See Trade Indemnity Company v Workington Harbour and Dock Board (1937) AC p21; but the additions in this case were of this character.

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130 The changes here were clearly substantial and cannot have been to the benefit of the surety. Some of the changes (such as to the outgoings and perhaps even the liability for noise complaints) may well be said to have been within the purview of the original guarantee. I would not have thought that a substantial extension to the leased area (by the addition of a new floor) thereby increasing substantially the obligations in relation to rent and outgoings attributable to that area, would fall within the purview of the original guarantee. Had the parties been asked at the outset whether they understood the guarantee to be capable of extension to what could readily have been the subject of a completely separate lease, I doubt that they would have considered this to be the case. Accordingly, I do not consider that they could readily be said to have been amendments or variations of the kind falling within the words "as amended or varied from time to time" where appearing within Article 18.01(i). Therefore, had the issue arisen for determination, I would have been inclined to find that, without the consent of the original guarantors, the guarantee provided under Article 18.01 of the 2001 Lease would not have extended to the substantially varied lease obligations from 2003. This issue would of course only affect only Messrs Hoban and Harvey (they being the only two, of the three originally named guarantors, against whom proceedings have been brought). 131 In those circumstances, I consider that the result of the variation of the lease in 2003 is that Mr Harvey has been discharged from liability as a guarantor of the obligations of Aqualounge under the 2001 Lease. Subject, therefore, to any claim based on estoppel, it seems to me there would be no basis for any claim against Mr Harvey under the 2001 Lease as varied. 132 The position of Mr Hoban is somewhat less straightforward, since he clearly signed the Variation of Lease document on behalf of Aqualounge and must have done so on notice of the increased obligations thereunder. If that amounts to a consent to the changed obligations, then the fact that the original lease obligations had been substantially altered would not of itself discharge Mr Hoban from liability for the varied lease obligations under the guarantee he entered into in 2001. 133 However, as discussed later in these reasons, I consider Mr Hoban's liability to have been discharged by the circumstances in which what were in effect the replacement guarantees were executed and, in any event, the claim against both Mr Hoban and Mr Harvey rests on the 2001 Lease as varied and not in respect of the obligations of Aqualounge under the 2001 Lease prior to its variation. 134 Turning then to the issues which have been raised in defence of the guarantee claim based in contract, I note as follows:

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138 In Scottish Amicable Life, McHugh JA (as his Honour then was) noted that commercial documents must be construed in their commercial setting; in accordance with the surrounding circumstances known to the parties and that this applied not only where the issue concerned construction in the strict sense but also where it concerned the capacity in which a person signed a document. 139 In Clark Equipment, Giles J, having considered what was said by Clarke J in National Commercial Banking Corporation of Australia Limited v Cheung (1983) 1 ACLC 1326; Wood J in NEC Information Systems Australia Pty Limited v Linton (Wood J, 17 April 1985, unreported) and McHugh JA (as his Honour then was) in Scottish Amicable, concluded (at 174) that: [T]he proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby …not a subjective intention but an intention to be found objectively, notwithstanding a qualification attached to the signature. That intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an assent to be personally bound. 140 In James Thane Pty Limited v Conrad International Hotels Corp [1999] QCA 516 at [60], after discussing Clark Equipment, Williams J, with whom McMurdo P and Thomas JA agreed, stated: There, as is the more usual situation, the qualification was found at the end of the contract where it was executed. That is not the case here; Conrad's signature when executing the contract is not qualified. The only reference in this contract to Conrad being the agent of Jupiters is in the recital of the parties. But, in my view, the problem is to be resolved by application of the principle derived from the authorities referred to above. One must determine the intention of the parties objectively having regard to the nature of the contract, the terms of the contract (including the qualification in the recitals), and the surrounding circumstances. Further, in my view, where a party signs a contract without qualification in the execution clause it would be natural for any other party to assume that the party so signing was contractually bound unless the contrary was made clear beyond doubt. 141 In Clark Equipment, Giles J declined to find an intention that the directors were personally bound having regard to the form of the signing clause (which stated that one was signing for and on behalf of the company and the other as witness). The same form of words had been used for a person who no one contended was personally bound; the addition of the common seal pointed to them having signed simply in their capacity as directors; and that the same form of words were used in a separate document where there was no provision for personal responsibility. 142 Applying those principles, I turn to the position of the respective individuals.

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· Mr Hoban 143 Mr Hoban (a director of Aqualounge at the relevant time) signed the 2001 Lease not simply next to the affixation of the company's common seal, but also as an individual under the form of attestation commonly used for an individual ("signed sealed and delivered"). He was named in the reference schedule as guarantor. Article 18 of the 2001 Lease, read with Item 14 of the Reference Schedule, disclosed that the lease was granted at the request, inter alios, of Mr Hoban. His execution cannot in my view be read as limited to witnessing the affixation of the company seal in his capacity as a director of Aqualounge. 144 The manner of execution by Mr Hoban at the conclusion of the document (contrasted with the manner of execution where he witnessed the affixation of the common seal) leads me to conclude that where Mr Hoban signed the 2001 Lease in his personal capacity he did so as guarantor not as a director. There would have been no need for any further execution by Mr Hoban had this not been in a capacity other than as director. 145 The Sub-Lease was not signed by Mr Hoban and cannot bind him personally. 146 The signature attributed to Mr Hoban in the 13 March 2003 consent to modification of use was clearly appended in the capacity of director. 147 The Variation of Lease was certified as a dealing by Mr Hoban as director. However, the execution page was, on its face, signed by him personally. The execution page was submitted by way of replacement of a sheet in the same format as that in which Mr Hoban had earlier executed the 2001 Lease as guarantor. Subject to what I have to say below in relation to the Variation, I would have held that in so signing Mr Hoban was acknowledging a personal liability under the lease as varied, which can only have been in his capacity as guarantor. 148 Mr Blank submitted, in the alternative, that if Mr Hoban did sign this document as a guarantor (which is denied) then the Variation of Lease has not been executed by Aqualounge at all (on the implicit assumption that the certification clause itself cannot be regarded as execution by Aqualounge) and no primary obligation of Aqualounge has arisen for Mr Hoban to guarantee. This submission contemplates that Mr Hoban could not have signed in a dual capacity. 149 In relation to "dual capacity", in Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067 at [9] Finkelstein J observed that: Mr Simon for the appellant sought to avoid this result by arguing that it is not permissible for a person to affix one signature to a contract and have that signature operate in, say, two capacities: one as agent for a principal and another to assume personal responsibility. But I see no reason in principle why this could not occur. All that is necessary is that the capacity or capacities in which the person is placing his signature on a contract be clear. If it is clear that he intends to sign the contract in two or more capacities, there is no reason why that intention should not be given effect. 150 While there is not a separate execution of the Variation of Lease by Aqualounge, I would have been inclined to treat its certification of the correctness of dealing as manifesting an objective acceptance by Aqualounge of the obligations under the Variation of Lease. Accordingly, I do not accept this submission as warranting a conclusion that Mr Hoban did not sign this document as guarantor.

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For these reasons, I conclude that Barry Andrews was a party to the Agreement for Provision of Finance. 164 In Bosaid v Andry [1963] VR 465, Sholl J referred to the old case of Macrory v Scott (1850) 5 Exch 906; 155 ER 396 of which his Honour said: …the defendant signed a suretyship agreement which was sent to him by post, and which referred to "the within deed" as the measure of his liability. When sent to the defendant, however, the document was not attached to the deed, nor was the deed even sent to him. He returned the executed document to his brother, who attached it to the deed and sent it to the plaintiff, the creditor. Parke, B, said at p. 915: "If the defendant chose to trust his brother to annex this instrument to the deed, he is precisely in the same position as if he had signed the memorandum with the deed appended to it, or if the memorandum had been indorsed on the deed and then signed". 165 I think the inference can be drawn, particularly having regard to the threat by Barecall that it would prevent the nightclub on the first floor from opening if, inter alia, the lease documentation was not signed and returned, that the three defendants who signed the execution page (even if it was not then attached to the Variation of Lease) did so thereby authorising Mr Tocchini to attach it to the Variation of Lease (and, perhaps, to negotiate on their behalf any further amendments to the document in accordance with Aqualounge's instructions before so doing) and to submit it to Barecall. However, there is nothing to suggest that by so doing they authorised Mr Tocchini to accept a position contrary to the previous instructions in relation to the equipment clause. 166 The circumstances in which the replacement execution page was submitted to Mr Tocchini make it clear, in my opinion, that what was requested to be signed by the named individuals was a document by which they would agree to guarantee the obligations of Aqualounge under the 2001 Lease as amended. Mr Tocchini understood at the time that this was what was intended. 167 The position was that there was then in place a lease over the basement and ground floor; it had been agreed with Aqualounge that this would be amended to extend the area of the leased premises to the first floor and to incorporate various other provisions; and Barecall was requiring that Aqualounge's obligations under that amended lease be guaranteed. At the very least, Mr Hoban, Mr Rossi and Mr Harvey must have been aware of this. The execution of a page apparently submitted for signature as a page to be affixed to the Variation of Lease, if then provided to Mr Tocchini for the purpose of affixation to the Variation of Lease could arguably manifest an objective intention by those individuals to be bound by the giving of a guarantee on the terms provided for under that document, at least in circumstances where that document had been assented to by Aqualounge, or as an implied grant of authority to Mr Tocchini so as to bind them. 168 Therein, however, lies the problem. Even if the equipment clause issue had not arisen, there was no variation to Article 18 to make provision for a guarantee by anyone other than the original guarantors. What the Variation of Lease did not do was to amend the reference schedule to the 2001 Lease so as to amend the names of the individuals in Item 14 from Messrs Hardy, Hoban and Harvey to those of Messrs Hoban, Harvey, Rossi, Spadina and Lussick. 169 That, of itself, in my view, is fatal to the contractual claim against Messrs Rossi, Spadina and Lussick. This was not a new lease. It was a variation of an existing lease. It has to be read with the 2001 Lease which stands unless and until amended by a later document. 170 Insofar as Article 18 of the 2001 Lease even as amended still identifies only those persons listed in item 14 of the reference schedule as a guarantor, it is submitted by Mr Evans (and I agree) that it cannot be said that it was an express term of the 2001 Lease, as amended, that each of the five defendants guarantee the performance of Aqualounge under that lease. 171 Accordingly, the fact that the Variation of Lease did not in terms make provision to amend Article 18 or the reference schedule to add additional names has the effect that, strictly speaking, any signature by those individuals (other than Mr Hoban) on the single execution page is meaningless because the 2001 Lease, even as varied, did not include a guarantee by any one or more of Mr Rossi, Mr Lussick or Mr Spadina. (It might conceivably have amounted to a separate agreement by the three individuals who did sign it - Mr Hoban, Mr Rossi and Mr Spadina - to give a guarantee in respect of Aqualounge's obligations but no such agreement is pleaded. Its submission as signed clearly, in my view, amounted to a representation by Mr Tocchini, with the implied if not express authority of those three defendants, that they would be party to the varied lease arrangements - and this can only have been in the capacity contemplated as guarantors. However, the lease documentation as varied did not reflect that). 172 It is also submitted, with some force, that any agreement by the three defendants who signed the document to bind themselves to a guarantee in terms of that provided for under Article 18 must have been subject to execution of such a guarantee by the remaining two individuals - which never happened. Thus any agreement or representation to be bound by a contract of guarantee was one it was said falling under either the second or third categories in Masters v Cameron (1954) 91 CLR 353, since the guarantee so contemplated was by a person as one of a number of guarantors (relying upon Marston v Charles H Griffith & Co Pty Limited (1985) 3 NSWLR 294 and James Graham Limited v Southgate-Sands [1986] 1 QB 80. I consider this submission further below. 173 I do not find an express contract of guarantee as pleaded between Barecall and any of Messrs Harvey, Rossi, Spadina or Lussick. While it may well be that a claim could have been brought to rectify the Variation of Lease in order to correct the name of the individual guarantors under the lease, this was not done. 174 (For completeness, I note that it was further submitted by Mr Blank that, where individual defendants have not expressly signed under seal, there is no evidence of consideration passing to them in exchange for the provision of a guarantee. I understood this submission to be to the effect that all co-guarantors needed to be bound in the same capacity. As Article 18 itself would operate as a deed poll, I do not see it as necessary to consider that submission further.)

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184 In Ankar the majority confirmed (at 561) that: At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety. 185 In Coghlan v Lock (1987) 8 NSWLR 881, it was accepted that a guarantee and indemnity was to be construed strictly; read contra proferentem; and, in case of ambiguity, construed in favour of the surety. 186 It seems to me that this is not a situation where something has been omitted or neglected to be done by Barecall in exercise of the power and discretions vested in [it] by the lease". The 2001 Lease does not "vest" in Barecall a power or discretion to effect registration. Rather, Barecall has impliedly covenanted with Aqualounge (by agreeing to grant a lease, which for its validity at law required registration) to do so. Barecall had the ability to register the 2001 Lease at any time after exchange of signed copies of the lease. It failed to do so. In Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 62 it was said that the lessor, by entering into a lease intended to operate at law, was obliged to register or procure the registration of the lease. 187 In Chan v Cresdon the guarantee was expressed to be given in consideration of entry "into this lease", words said by the majority to refer to the existence of a lease at law by the lessor. Here, the guarantee is expressed to be given in consideration of the grant of "the within lease". 188 Mr Baran further sought to rely upon Telado Pty Limited v Vincent (1996) 7 BPR 14,844; (1996) NSW Conv R 55-786. There, the Memorandum of Lease contained an express provision deeming the parties to be bound as if the document were registered notwithstanding that no estate may have passed thereunder. This was regarded as significant in Powell JA's view, since it made clear (unlike the position in Chan) that the parties did not necessarily intend the Memorandum of Lease to operate as if it were a lease at law. The word "parties" in that clause was not restricted to the lessor and lessee but also applied to the guarantors who had executed the memorandum (albeit not in a form appropriate to a deed) and thus were bound by the memorandum. 189 I do not consider that Article 18 approaches the level of a deeming provision of the kind considered in Telado. Therefore, had this issue been necessary to determine it would in my view have turned on whether "the within lease" could be said simply to refer to the document (effectively, as a guarantee being given in consideration of entry into a document called a lease) as opposed to the grant of a lease effective at law. I would have been inclined to have construed any ambiguity in that regard in favour of the guarantors such that the failure to register the lease (and Sub-Lease) would have the result that liabilities incurred under the unregistered 2001 Lease and Sub-Lease were not within the ambit of the guarantee. 190 While I accept that seems a harsh result from Barecall's point of view as landlord, as was observed by Phillips & O'Donovan, The Modern Contract of Guarantee p 153 fn 53, the fact is that the ramifications of Chan v Cresdon (decided some 20 years ago) and the difficulties which can arise viz-a-viz guarantees given in respect of obligations under unregistered leases should have been well and truly to the mind of lawyers practising in this area and could have been dealt with at the time. 191 Accordingly, I am of the view that the guarantee provided in Article 18 does not extend to liabilities arising under the unregistered 2001 lease as varied.

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(e) Significance of failure by other co-guarantors to sign 192 As to Mr Hoban, who did sign a document purporting to agree to a variation of lease which, in its terms, included a guarantee by him, there remains a difficulty for Barecall in that it is said that there is a presumption that the guarantee shall not be binding on Mr Hoban unless each other named intended co-guarantor has executed it (and an implication that the document must be validly executed). 193 Reliance is placed in this regard on the decision by Powell J in Marston (at 300) that if it is an express or implied term of a contract of guarantee that there will be a co-surety, then unless the intended surety who has executed the guarantee consents to the other co-surety not executing it, the failure of the latter to execute the guarantee will relieve the intended co-surety of liability under the guarantee. 194 In James Graham Limited v Southgate-Sands, Browne-Wilkinson LJ held that if a surety signs a contract which, on its face, shows that other joint and several co-sureties are intended to be parties, then at law there is no contract at all unless and until all the anticipated parties to the contract in fact become bound (referring to Evans v Bremridge (1856) 8 De G M & G 100; 44 ER 327 and the cases referred to by O'Connor LJ). 195 Here, the 2001 Lease as varied (in Article 18) contemplated that each of Mr Harvey, Mr Hoban and Mr Hardy would jointly and severally guarantee the obligations of Aqualounge. Neither Mr Hardy nor Mr Harvey signed the 2003 execution page which was, on its face, put forward for execution by the guarantors of the varied lease obligations, nor did at least one other of the five defendants (Mr Lussick) apparently to do so in his intended capacity as co-guarantor. 196 In Marston, Powell J considered the general statement of principle set out in Rowlatt on Principal & Surety 3rd ed (1936) at 281, 282, 283-284; 4th ed (1982) at 80, 181 and 182 and expressed the view that the formulation of the statement of principle was rather less than clear, and set out his conclusions from a consideration of the authorities, relevantly in four numbered points (at 300-301), including: 1. if it is a term, whether express or implied, of the arrangements pursuant to which a parol contract of guarantee is executed, that there will be another co-surety or other co-sureties, or that the principal debt, or the guarantee, will be secured in an identified way, then, unless the intended surety who has executed the guarantee consents to the other co-surety or co-sureties not thereafter executing the guarantee ( Hansard v Lethbridge ) or to the contemplated security not being provided ( Re Parent Trust & Finance Co Limited [1936] 3 All ER 432, (CA); affirmed sub nom Greer v Kettle [1938] AC 156 (HL (E)) then the intended surety never becomes liable under the guarantee despite his execution of it - the failure of the other co-surety or co-sureties to execute the guarantee, or the failure to provide the intended security, thus affords the intending surety who executed the guarantee a defence at law to an action on the guarantee; 197 In the present case, not only did the lease as varied contemplate that Mr Hoban would be one of a number of other co-guarantors (there, three in total) but the arrangements pursuant to which it is said he signed the execution page contemplated that he would be one of five co-guarantors. In the end result, there may be a significant difference in Mr Hoban being the sole guarantor as opposed to one of five or even three guarantors. 198 I consider that the application of the principle in Marston operates to discharge Mr Hoban from any liability under the guarantee.

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207 Even if this were to be treated as an admission against Mr Rossi, the fact is that in the absence of a guarantee by the other co-sureties, even if he had signed a formal guarantee document it would not be binding on him for the reasons outlined above. 208 While it was submitted that this conduct reflected poorly on Mr Rossi, in that he was said to be attempting to portray a position of his financial affairs (by reference to the existence of a guarantee) in order to bolster his wife's position in the other proceedings while at the same time he knew or should have known in these proceedings that he was asserting that he had no liability (which, in those circumstances it clearly would have done), I do not know enough about those other proceedings to make any finding in this regard. 209 I do have real misgivings about the circumstances in which this affidavit came into the hands of Mr Baran's instructing solicitors, and which may well have involved breach of the implied undertaking not to use affidavits in other proceedings than those in which they have been filed. However, I accept Mr Baran's assurance that receipt of this document was both unsolicited and unexpected. It is not appropriate that I say more in this context. (That said, I do think, it would have been open to the plaintiff to bring an application for leave to use the affidavit at any time between June 2009 and when it was received and August 2009 when the plaintiff's closed their case rather than leaving such an application to after the close of the defendants' case. I thought there was force in the submissions raised in the objection made to its tender, to the effect that, having made a forensic decision to use it in cross-examination rather than in chief, the plaintiff should be left to that election and not permitted to re-open their case. However, for the reasons set out in my ex tempore judgment I admitted the paragraphs in question in the case against Mr Rossi.) 210 Nevertheless, the Rossi affidavit evidence so tendered does not lead me now to form any different view of the merits of Barecall's overall claims.

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212 Reliance is placed by Mr Baran in this regard on the facsimile transmission of 20 November 2003 from Mr Tocchini advising that Messrs Harvey and Lussick would attend to execute the guarantee (not on the earlier representation contained in Mr Tocchini's 31 October 2003 letter naming the persons who would guarantee the so-called new lease). 213 It seems to me that there is no doubt that a representation was made in the 20 November 2003 letter to the effect that it was then the present intention of Messrs Harvey and Lussick to sign the execution page which had been submitted by Barecall's solicitors and that they would attend those offices to do so. I also think it is clear that this was a representation made with the intention that it be relied upon by Barecall not to exercise any entitlement to retake possession of the first floor or to prevent the opening of the nightclub as planned. The question, however, is whether it was a representation which binds either Mr Harvey or Mr Lussick and then whether it was sufficiently clear in its terms as to permit a claim for relief. 214 Mr Tocchini was cross-examined as to the identity of his client(s). His correspondence, I think, makes reasonably clear that when he first became involved in the matter he was holding himself out and understood broadly that he was acting for Aqualounge. It was put to him that he had not seen any need to advise the individual guarantors to obtain independent advice (as I understood it, to suggest that he could only have been acting for the company, not each of them individually). Mr Tocchini did not consider that he had any potential conflict in acting both for the company and in arranging for the execution of guarantees by those individuals whom he assumed (at least at first but may also have been told by one or more) were its directors. He assumed that directors' guarantees would be required, and either assumed or was (incorrectly as it turns out) told by either Mr Hoban or Mr Harvey that all five of the individuals were directors (and/or would be providing guarantees). (Confusion on the part of one or more of the individuals may be explicable by reference to the fact that (other than Mr Spadina) each of them had at one stage been appointed as a director of Aqualounge. The reason for the change of directors in February 2003 is unexplained.) 215 Mr Baran submitted that I should draw a Jones v Dunkel (1959) 101 CLR 298 inference in the context of the question of Mr Tocchini's authority, by reference to the fact that (bar the tender of some documents, and the evidence subsequently called from Mr Latham for Mr Rossi) none of the defendants chose to go into evidence and each was, it is said in a unique position to explain the limits on any authority Mr Tocchini had to represent him. Of course, no one defendant could necessarily have given evidence as to what another defendant may separately have instructed Mr Tocchini to do, which would limit greatly any weight I could put on any such inference. 216 As to the significance of the defendants' respective decisions not to read any affidavit evidence, it seems to me that each of the defendants was entitled to form the view, at the end of the plaintiff's case, as to whether there was any or any sufficient case to answer. Mr Baran suggested that it was relevant that there was no application to dismiss at that stage. In that regard I note what was said by Heydon JA, as his Honour then was, in Rhoden v Wingate [2002] NSWCA 165; (2002) 36 MVR 499 at 516-517 [55]-[58] as to the forensic decisions to be made by a plaintiff before closing its case, in which his Honour recognised that a defendant may (quite properly) form the view at that stage that the case as adduced against him or her does not require any evidence to be led: The moment when the plaintiff's case closes is one of the most significant moments in a civil trial. … From the point of view of the defendant, the moment when the plaintiff's case is closed makes it necessary to answer particular questions. One question is whether a submission that there is no case to answer should be made. This is a difficult decision, since if the submission fails no evidence can be called by the defendant: Supreme Court Rules Pt 34 r 8; District Court Rules Pt 26 r 8. Even if the defendant decides not to submit that there is no case to answer but does decide to call some evidence, a decision must be made as to whether or not the plaintiff's evidence on particular points is such that inferences arising from it may more confidently be drawn if it is not contradicted by a witness available to the defendant. 217 An unexplained failure of a defendant to give evidence cannot "fill the place of actual evidence on an issue" or "make up any deficiency of evidence" in the plaintiff's case (Tozer Kemsley & Millbourn (A'Asia) Pty Limited v Collier's Interstate Transport Service Limited (1955) 94 CLR 384 at 403 per Fullagar J, with whom Kitto J agreed; Jones v Dunkel at 312 per Menzies J). Such a failure can only "serve to resolve a doubt or an ambiguity", make "certain evidence more probable", or allow an inference available on the proved facts more readily to be drawn (Tozer Kemsley at 403; Schellenberg v Tunnel Holdings Pty Limited (2000) 200 CLR 121 at 143 [53] per Gleeson CJ and McHugh J; Jones v Dunkel at 312). 218 It is open to a defendant to conclude that the evidence adduced by the plaintiff is insufficient to make out its case and so to decide not to answer it. In Jones v Dunkel at 321, Windeyer J quoted from R v Burdett (1820) 4 B & Ald 95 at 161; 162; 106 ER 873 at 898, in which Abbott CJ had said: No person is to be required to explain or contradict, until enough has been proved to warrant a reasonable and just conclusion against him, in the absence of explanation or contradiction; but when such proof has been given, and the nature of the case is such as to admit of explanation or contradiction, if the conclusion to which the proof tends be untrue, and the accused offers no explanation or contradiction; can human reason do otherwise than adopt the conclusion to which the proof tends? 219 The "required to explain or contradict" formulation is replicated in Cross on Evidence at [1215] (citing Jones v Dunkel and R v Burdett), the relevant passage of which was adopted by Gleeson CJ and McHugh J in Schellenberg at 143 [51]. 220 A decision was open to be made by the defendants at the close of the plaintiff's case as to whether to lead evidence. In making that decision no doubt regard was had to the evidence which had been given by Mr Tocchini. If no evidence was called to contradict or explain what he had said, as was the case, then the inference to be drawn is that nothing further that could have been said by the defendants would have assisted their case and I can draw whatever inferences emerge from Mr Tocchini's evidence bearing that in mind.

[68]

221 The evidence which was given by Mr Tocchini was that he was told either by Mr Hoban or by Mr Rossi that the five defendants would guarantee the lease; that he assumed that they were directors; that he was told (again either by Mr Hoban or by Mr Rossi) that Mr Rossi was the company secretary; that he assumed that Barecall would require the giving of directors' guarantees and that he proceeded accordingly when he wrote the 31 October 2003 letter. I accept that evidence. However, I cannot infer from the fact that none of the defendants gave evidence that, had they done so, they would have admitted that the instructions given to Mr Tocchini by either Mr Hoban or Mr Rossi were authorised by or given as the agent of Mr Harvey and Mr Lussick or that either of those men knew what had been said to Mr Tocchini. Such an inference may be available from the fact that either Mr Hoban or Mr Rossi told Mr Tocchini that the five defendants would guarantee the varied lease but, having regard to the matters set out in paragraph 223 below, it is not one which I would draw. 222 Whatever Mr Hoban or Mr Rossi might say as to the instructions given in relation to the 31 October 2003 letter, clearly any representation (or common assumption) as at that point cannot later reasonably have been relied upon by Barecall in entering into the Variation of Lease, since by 18 November 2003 Barecall was clearly on notice of a dispute in relation to ownership of the lease equipment, a term which Mr Tocchini had regarded of importance and which was the matter of continued communication around that time. Mr Oppedisano acknowledged that the August "deal" was off the table by November 2003. The fact that Barecall's solicitors may have agreed with the suggestion to defer the resolution of that issue (by deleting the clause) does not alter the fact that Barecall was still asserting its rights to the equipment. 223 There is nothing to show that either Mr Harvey or Mr Lussick was asked to confirm his agreement to bind himself to a guarantee of the lease as varied as at November 2003. Mr Tocchini had met only once with Mr Lussick and there was no evidence of any communication with him around this time. Nor was there evidence of any communication with Mr Harvey around this time other than the request for instructions as to the equipment and the back rent. Mr Harvey's receipt of the November communication suggests that he was aware that Barecall was requiring the provision of guarantees but not that he gave any instructions in relation thereto. The ad hoc manner in which documentation was signed by one or more of the defendants over the period does not give me sufficient confidence to infer that any one or more of the defendants turned his mind to particular issues as to who was to sign what. It certainly does not appear that Mr Lussick was involved in any or any meaningful way in negotiations or discussions with Mr Oppedisano and hence it does not appear to me that I can infer that he knew or expected either that Mr Hoban or Mr Rossi might be promising his signature on particular documents or that Barecall was or had been acting on an assumption that he personally was going to guarantee the altered lease arrangements (let alone that he knew what they were) or that it had been represented that he would do so. It is for the plaintiff to establish its case in relation to those matters, not simply to rely on an inference drawn from Mr Lussick's decision not to lead affidavit evidence to assist in supplementing any deficiency in the plaintiff's evidence. I am not satisfied that it has done so. 224 Accordingly, I am not satisfied that the making of the Guarantee Representation was one which was made with the authority of Mr Harvey and Mr Lussick (whether directly or whether through Mr Hoban or Mr Rossi acting as their agent). 225 Had I been satisfied on this point, the issue would then have been whether the representation was sufficiently clear to give rise to an equitable estoppel. As a similar issue arises in relation to the Common Assumption Representation, I consider that below. · Common Assumption Representation 226 As to the conventional estoppel claim, it is submitted by Mr Baran that the parties all assumed an identical state of facts, namely that there was a Lease and Sub-Lease of the subject premises; that a variation of the lease had been agreed upon (either pursuant to the terms of the lease variation itself or as a result of confirmation of the correctness of those terms in correspondence) and that they had proceeded on that basis. 227 In Amalgamated Investment & Property Co v Texas Commerce International Bank [1982] 1 QB 84 at 122, Lord Denning MR stated the principle as follows: When the parties to a transaction proceed on the basis of an underlying assumption - either of fact or of law - whether due to misrepresentation or mistake makes no difference - on which they have conducted the dealings between them - neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. 228 Brandon LJ (at 130) cited Spencer Bower and Turner, Estoppel by Representation, 3rd edn (1977) at pp 157-160, where the authors said that estoppel by convention is founded on an agreed (or given) statement of facts "the truth of which has been assumed, by the convention of the parties, as the basis of the transaction into which they are about to enter". 229 In Bell Group Limited (in liq) v Westpac Banking Corporation [2008] WASC 239, Owen J considered the nature of estoppel by convention, adopting the legal analysis of Brereton J in Waterman v Gerling Australia Assurance Co Pty Limited (2005) 65 NSWLR 300, in summary being that both parties have adopted the same assumption as to the terms of their legal relationship and have considered their relationship on the basis of the mutual assumption, knowing or intending the other to act on that basis, in circumstances where a departure form that assumption will cause detriment to the plaintiff. Owen J said (at [3521]): It seems clear that there must be some mutually manifest conduct by the parties that is based on a common but mistaken assumption. But what exactly does this mean? As McPherson J remarked in Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Limited [1989] 2 Qd R 40, 46, the conventional basis for the assumption relied upon must first be identified. The word 'conventional' in this context carries connotations of agreement, not necessarily express but to be inferred. There must be at least a demonstrable acceptance of a particular state of things as the foundation for the dealings of the parties. There has to be a course of dealings between the parties, that is to say, acts or conducts that impinge upon their mutual affairs. McPherson J also noted that acts done privately by one party without them coming to the knowledge of the other are not capable of forming a conventional or accepted basis of their relations. The point that communication is necessary was also made by Lord Steyn in Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878, 913. 230 His Honour also noted the need for clarity, referring to the differing terms in which this requirement has been put, including that the assumption be "sufficiently clear to be enforceable" (National Westminster Finance NZ Limited v National Bank of New Zealand Limited [1996] 1 NZLR 548, as cited by Finn J in GEC Marconi Systems Pty Limited (2003) 128 FCR 1), that it be "clear and unequivocal" (Waterman v Gerling) or "precise and unambiguous" (Discount & Finance Limited v Gehrig's NSW Wines Limited (1940) 40 SR (NSW) 588). 231 His Honour concluded (at [3534]): I believe the better view, and the one that accords with High Court authority, is that there is no relevant distinction between estoppel by representation and conventional estoppel in relation to the degree of clarity required. Whether the terms used are 'clear and unequivocal' or 'plain and unambiguous' or a combination of those words it seems to me not to matter a great deal. The essence is the same. The representation in relation to estoppel by representation and the language of conduct for conventional estoppel must meet the same standard of clarity. 232 Mr Evans submitted that, insofar as Barecall has not pleaded what the assumed facts might be (beyond paragraph 10 of the Second Amended Statement of Claim in which it says that the common assumption was "that in consideration of the variation of the lease the defendants, including the second and fifth defendants, would guarantee the obligations of Aqualounge under the lease, as varied"), the alleged common assumption was not clear and unambiguous nor was it unqualified: (RT & YE Falls Investments Pty Ltd v State of NSW [2001] NSWSC 1027 per Palmer J at [70]). 233 Mr Baran, in closing submissions in reply, confirmed that the common assumption on which Barecall relied was that Aqualounge would have a lease over the first floor and there would be personal guarantees. In my view that is an insufficiently clear set of assumed facts to support an estoppel by convention in this case.

[69]

234 There was no suggestion that there was any common assumption prior to 31 October 2003 that the five defendants would be guarantors of any new or varied lease. As at that stage Mr Oppedisano may have assumed that the directors of the company (of whom by then there was only one) would guarantee the lessee's obligations. He may even have assumed that the existing three guarantors would continue to do so. However, there was no suggestion that there had been any more focussed discussion as to guarantees. 235 Any assumption engendered by Mr Tocchini's 31 October 2003 letter (that the guarantors would be the five named defendants) could at that stage only have been an assumption that they would guarantee a lease including the equipment on the first floor (part of the August "deal") and arguably it must have been part of any such common assumption that Barecall (and hence the guarantors) would not be bound until all the paperwork had been signed off (since this is what had been asserted on behalf of Barecall in Cara Marasco's letter of 3 October 2008). 236 Even if there was a common assumption to that effect it is difficult to accept that any relevant reliance was placed thereon by Barecall. It had already permitted Aqualounge into possession at the time the 31 October 2003 letter was written. It is not clear when (and what) fitout work was being carried out to the first floor but presumably it was well underway as at 31 October since Aqualounge had been given possession on 1 September 2003. By the time Barecall next took (or did not take as the case may be) any steps which might have been referable to an assumption that the five would guarantee the lease, Barecall was well and truly on notice of a dispute as to whether the first floor equipment (and perhaps as to what that comprised) was to be the lessor's property or the lessee's property. At that stage, Barecall was asserting a right to retake possession (which in my view it clearly had) so cannot have been operating on the basis that there was a binding agreement for lease at that stage (unless it was implicitly asserting that it had by then been wrongfully repudiated by the lessee). 237 What then is the status of the communication on 20 November 2003 that Mr Harvey and Mr Lussick would attend Cara Marasco's offices to sign the execution page? There is nothing to show that Mr Lussick was aware of any such representation being made or shared any assumption at that stage as to the guarantee or the content of the lease which was proposed to be guaranteed. Mr Tocchini was still apparently working on the basis of instructions (from either Mr Hoban or Mr Rossi) that the equipment was the lessee's equipment (a payment having been made, it was said, to Barecall for that equipment) and that the five individuals would guarantee the lease. 238 The commonality of any assumptions as between the five individuals and Barecall at that stage remains very much in issue. Was this lease to be guaranteed one under which the lessor held and retained property in the first floor equipment or, as Aqualounge's lawyer was insisting, had property in that equipment been acquired by Aqualounge? Was it still the case that until execution of the paperwork neither party would be bound? Moreover, it must have been the case that any assumption of the defendants was that all co-guarantors, whoever they might be, would need to be bound by the guarantee. 239 I am not satisfied that the evidence discloses a sufficient clear and unambiguous set of assumed facts on which all parties operated at the relevant time(s). (It was in this regard noted by Counsel for Mr Lussick, Mr Haverfield, that insofar as the demand made under the guarantee was also issued to Mr Hardy this evidences the fact that any assumption held by Barecall in November 2003 was that there would be six, not five, guarantors - something clearly not shared by Mr Tocchini.) 240 As Mr Blank submitted, this seems to be a case where insufficient attention to detail was paid on all sides to the documentation and specific details of the transaction and where a series of assumptions was made by one or more of the parties but there was not necessarily a common assumption between all of the defendants and Barecall such as would be sufficient to establish a basis for relief on the doctrine of conventional estoppel. 241 For any such assumed state of affairs to bind the guarantors, part of the assumed facts must have been the terms of the lease, who were to be the guarantors and when they were to become bound. There must also be evidence that each of the defendants by his conduct manifested an awareness and acceptance of that assumed state of affairs. I am not satisfied that there is such evidence.

[70]

242 As to reliance, Mr Baran submits that I should accept that the defendants were pressing to move to the first floor (which the evidence shows they were) in order to prevent any competitor obtaining the space (which I am not convinced is demonstrated on the evidence) and that they knew that Mr Oppedisano would not proceed without guarantees. Reference is made to Mr Oppedisano's affidavit of 17 April in which he recounts a conversation with Mr Hoban and Mr Rossi prior to entry into the 2001 Lease in which he made it clear that personal guarantees (satisfactory to his solicitors) would need to be provided and enquired as to the assets of those gentlemen. (Significantly, in that regard, no guarantee was provided by Mr Rossi in 2001 so that I do not think an inference should be drawn that the parties were on notice that guarantees would be required from all individuals associated with the company or its business.) 243 By letter dated 3 October 2003, and then in the 17 November correspondence, Barecall's solicitors had asserted first that the lessor would not be bound until the lease and its guarantee was executed and, secondly, had threatened not to allow the nightclub to be opened until documentation and payment of back rent had been received. Yet Mr Oppedisano had apparently been prepared to allow the company to move into the premises prior to all the paperwork being completed and had regarded the "deal" at that stage as still open to negotiation or amendment (as evidenced by what happened in relation to the equipment clause). Mr Oppedisano says that had he been aware that the documentation had not been completed he would not have allowed the situation to continue. Yet his lawyers were clearly aware of the fact that the documentation had not been completed. The principal concern as at November 2003 on the part of Barecall seems to have been to procure payment of the back rent and an executed lease - not the guarantee. In any event, even if the execution page had been signed it suffered from the problem that under the lease documentation itself there was no express guarantee from Messrs Rossi, Spadina or Lussick. 244 Further, for it to be unconscionable for the defendants to be permitted to resile from any such assumed state of affairs, consideration needs to be given to whether each of the defendants encouraged or induced Barecall to act upon such an assumption. Again, I not satisfied that the evidence supports such a funding. 245 The underlying basis of either equitable or conventional estoppel is unconscionable conduct. Barecall must show that it would be unconscionable for each of the defendants, in the circumstances, to insist on his strict rights. I note that the only relevant representation, as at 20 November 2003, (whether authorised or not) was that the remaining two individuals would attend Cara Marasco's offices and sign the documentation put forward to them. If by so doing this would still not have resulted in them becoming liable under the guarantee (for the reasons considered earlier) then it cannot have been unconscionable for the defendants to have resiled from this representation. 246 In my view the respective defendants are not estopped from denying that they are or remain liable as guarantors in respect of the lease obligations of Aqualounge as varied in 2003.

[71]

(iii) Quantum of claim under guarantee 247 I am of the view that Barecall has not established any claim based on the alleged guarantee, whether in contract or by way of the alternative estoppel claims it has raised. Accordingly, it is not necessary to analyse in detail the financial material put forward to sustain its claim to recovery of moneys allegedly due from Aqualounge under the lease. 248 Ms Branson has sworn five affidavits in the proceedings (on 27 November 2007, 2 April 2008, 9 February 2009, 16 February 2009 and 26 March 2009 respectively). In her third affidavit she corrected various errors where GST had either been omitted from invoices rendered to Aqualounge or incorrectly included in those invoices (thus overcharging Aqualounge in that respect) or where there was a duplicated charge or incorrect calculation of the proportion of outgoings to be borne by Aqualounge. 249 In her last affidavit, Ms Branson deposed to the attempts she had made to locate documents evidencing payments by Barecall to third parties or on its behalf by third parties. The documentary evidence relied upon, according to Ms Branson, were cheque butts, bank statements, third party deposit slips, trust ledgers of a real estate agency (Doyle Spillane Pty Limited), premium schedule issued by an insurer and a bank statement of a third party Pilato Pty Limited and its journal printout. In some instances Ms Branson identified where claims had been made on the basis of work quotations but where work had not been performed. Ms Branson found a number of invoices on which there was reference to cheque numbers in handwriting she could not identify and for which she was unable to locate any relevant matching entry on bank statements. 250 Insofar as the evidence (even as supplemented following leave granted for that purpose) disclosed a number of deficiencies in the preparation by Barecall of the primary accounting material (payments claimed for amounts invoiced in circumstances where there was no proper tax invoice or which depended on a bookkeeper's assessment of the nature of the outgoing - ie whether it was a capital expenditure or in the nature of ongoing repair and maintenance), I would therefore have had considerable concern in accepting the claim as itemised (even with the deductions conceded in the course of argument which had already reduced the claim by a significant amount). 251 Ms Branson presented as a careful witness. She was at pains to acknowledge the limitations on what she had done and what she had been asked to do. She was critical of the way in which the accounts had previously been kept and was prepared to concede errors and shortcomings in the accounts. I do not draw any inferences from the way Barecall has chosen to present its evidence on quantum. However, the difficulty I have with Ms Branson's evidence is that she was not called as an expert, nor was there any attempt to qualify her as such. The difficulty which emerged during the course of her initial cross-examination was that Ms Branson had been given a set of assumptions (Ex D1/5) which had the effect that her initial task had been simply to sort the invoices given to her (in plastic bags) and put them into an Excel spreadsheet by reference to her view of the expense categories into which they fell (and then carry out the mathematical exercise of totalling those amounts). Ms Branson was not called upon to verify the underlying transactions nor could she do so. Her judgment as to what was to be attributed to various categories of expense may have been a relatively informed one but the assumptions on which she based that exercise were not made clear in her report. Largely, as I think she conceded. Her exercise was one of spreadsheet preparation. That is no criticism of Ms Branson. It is what she was asked to do. 252 During cross-examination by Mr Blank in February the deficiencies in this task became apparent - so, for example, Ms Branson was taken to an invoice including expenses for a spa (presumably referable to the residential apartments above the leased premises as there was no evidence that the nightclub came equipped with a spa) and to invoices which on their face did not appear to be valid tax invoices (having no ACN or ABN identification and not being described as tax invoices) and where cheque payment numbers did not seem to match the bank account records. 253 During the adjournment, Ms Branson was asked to verify that payments had been made by Barecall in respect of the invoices passed on to Aqualounge. This exercise resulted in a large deduction from the amount claimed but did not remedy the underlying problem and highlighted the lack of authentication of some of the source materials on which Ms Branson had made her arithmetical calculations. Ms Branson accepted that there were still included in the spreadsheet invoices not likely to be tax invoices. There would be real issues as to whether Aqualounge was obliged to meet such claims for payment. 254 Ms Branson made some enquiries (the nature of which she could not recall when she was taken to some of the invoices) of contractors, the plaintiff's solicitors and of Ms O'Toole. There is no evidence of those enquiries or what emerged therefrom. Ms Branson accepted that she had made no reference to Business Activity Statements or worksheets; she had apparently been given no or incomplete access to MYOB files; and she seems to have drawn inferences from payments out where there were no matching cheque details. 255 The fact is that Aqualounge had been disputing for some time the accuracy of Barecall's records. Ms Branson confirmed that in her opinion (and I note that she seems to be an experienced bookkeeper) the manner in which the books and accounts had previously been kept had been highly disorganised and therefore unreliable. Mr Oppedisano was not in a position to assist in that regard. In effect, he said he handed all such material to the bookkeeper to deal with. 256 I regard the evidence on quantum as highly unsatisfactory. While I accept that Ms Branson, as an experienced bookkeeper, is capable of collating and compiling information apparent on the business records of the company, she is not in a position to authenticate or prove that any of the expenses (which in some instances she believes were paid by third parties on behalf of the company and as to which Barecall has no primary records) were expenses properly incurred by Barecall or ones which related to the Aqualounge tenancy and hence ones for which it would be liable under the lease arrangements. 257 Mr Baran says that on the balance of probabilities the plaintiff has done everything it could do to demonstrate that it has suffered a loss and that it would be unfair if it were otherwise to succeed for it to be left without recovery. It does not seem to me that Barecall has done all it could have done to put forward admissible evidence of its claimed losses. This is not a case where general damages are claimed (which might be able to be fixed on a general approximation drawn from the available evidence). This is a claim under a guarantee. Barecall must prove that the amount it claims represents debts or liability of Aqualounge for which the guarantor(s) are liable. 258 It seems to me that a forensic decision must have been made (and I do not suggest this was made by Mr Baran nor is it a criticism of him) to run the case in relation to loss in this fashion. The plaintiff sought and obtained, over the defendants' staunch objections, additional time to locate primary source material and to adduce it. Therefore, had I found for Barecall on the guarantee claims I would have been most reluctant to force the defendants to incur any additional costs in a further enquiry of the kind which Barecall could have conducted from the outset. What I would have done, as suggested by Mr Blank, would be to rule that certain categories of expenses were irrecoverable and to direct that a recalculation be prepared. Expenses of the kind which I consider would prima facie be irrecoverable include: · amounts claimed by reference to invoices not on their face appearing to be valid tax invoices · amounts claimed in the absence of underlying invoices which constitute business records of the company (such as the Council rates for which I note no claim is now made) · amounts which on the face of the invoice are not directly referable to the leased premises · amounts which were not paid directly from Barecall's bank accounts and for which no authenticated evidence of authorisation from Barecall to make such payment has been established. 259 In relation to the rent component of the claim, which is for the balance of the term of the 2001 Lease (as varied), it is submitted that the consequence of this being an unregistered lease is that there was no more than a common law tenancy from month to month and therefore, any claim for rent could not have been made beyond July 2005 (a month after termination of Aqualounge's leasehold interest). 260 I was not taken to any provision of the 2001 Lease pursuant to which on termination for breach, the lessor may claim as a debt or by way of liquidated damages the balance of the rent payable for the term of the lease. Any such claim must therefore be a claim for damages. However, if the 2001 Lease is no more than a monthly tenancy, it would have been open for the monthly tenancy to be terminated on one month's notice. Hence, any calculation of damages would surely have to take that into account. Accordingly, any claim for rent beyond the end of July 2005 would be disallowed, a reduction of approximately $227,000. (The rent claimed was through to 9 December 2005, see schedule p 356ff.) 261 Had I found any one or more of the defendants liable under the alleged guarantee it would have been necessary for a careful scrutiny to be made of the material submitted in relation to the claimed amounts in order to rule on whether each item claimed by Barecall has been properly verified. I have not carried out that exercise nor do I think the evidence as tendered would permit a comprehensive exercise of that kind to be carried out. Conclusion 262 As unpalatable as it is for Barecall, which allowed Aqualounge into occupation of the first floor premises on the assumption that at least its directors (if not all of those associated with the running of the business) would personally guarantee its liabilities, the difficulty as I see it is that it was never contemplated that any one of the defendants should be the sole guarantor of the company's liabilities. Any guarantee was to be a joint and several guarantee. The consequence of not all co-sureties becoming bound is that none is liable. Even if all five defendants had signed the execution page attached to or provided with the Variation of Lease, the fact that there was no appropriate amendment to the lease itself means that on its proper construction there was still no guarantee provided for under the lease by any of Mr Lussick, Mr Rossi or Mr Spadina of the lease obligations.

Barecall Pty Limited v Hoban

At a glance

Court

Decision date

Before

Source

Judgment (73 paragraphs)

Parties

Cases Cited (29)

Cited By (4)