Bobi Damcevski v Emilios Demetriou & Ors

Supreme Court of NSW|2018-05-21|Before: Sackar J

Solicitors: Bobi Damcevski, Corporate & Civil (Plaintiff) Somerset Ryckmans (Second Defendant) Marsdens Law Group (First & Third Defendants) MCW Lawyers, J Prowse (Fourth Defendant) V R W Gray (self-represented) File Number(s): 2016/163514 Publication restriction: n/a

Judgment The proceedings Background facts Legal principles Section 73 of the Civil Procedure Act 2005 (NSW) The "four" categories of agreement Heads of agreement as binding Admissibility of extrinsic evidence Shadow directors Parties' submissions Plaintiff First Defendant Second Defendant Third Defendant Fourth Defendant (SPC) Fifth Defendant The evidence Plaintiff Mr Darren John Vardy First Defendant Ms Kim Nguyen Ms Maria Demetriou Consideration Conclusion

Background facts

On or about 3 November 2009, the First Defendant, Second Defendant and Third Defendant retained the Plaintiff as their solicitor to act for them to recover moneys invested in a venture with a Donald Matheson and Gusdote Pty Ltd in the Federal Court of Australia (see for example Demetriou v Gusdote Pty Ltd [2010] FCA 581) (CB3 16).
The Plaintiff alleges the First Defendant, Second Defendant and Third Defendant retained him again in 2010 in relation to this recovery claim against Mr Matheson. In total the Plaintiff claimed his fees as of 12 December 2012 were agreed to amount to $224,707 (CB3 18). These included the majority of fees owing to counsel Mr Gray (now the Fifth Defendant).
The Fourth Defendant SPC was incorporated on 24 September 2010 (CB3 235). Ms Maria Demetriou was appointed as director of this company on this date (CB4 54).
On or about 16 October 2015, the Second Defendant paid the Plaintiff $25,000, leaving an allegedly outstanding amount of $199,707 plus interest (CB3 19).
On 19 February 2016 Mr Damcevski provided to Holding Redlich upon their request various tax invoices. Mr Damcevski deposes these invoices included details as to the application of an amount of $65,000 held in a trust account of his firm (CB4 334).
On 24 March 2016 the Plaintiff sent Ms Kim Nguyen of Holding Redlich by email a series of tax invoices (CB4 185).
On 27 May 2016, the Plaintiff filed a Statement of Claim seeking to recover these fees and against the First Defendant, Second Defendant and Third Defendant seeking (CB3 15-24): 1. An order that the Defendant each execute and deliver to the Plaintiff an instrument of charge registrable under the Real Property Act 1900. (a) In the case of the Defendant Emelios Demetriou [sic] and Georgina Demetriou over the land in: (i) Folio Identifier 8/SP55029 (ii) Folio Identifier 7/SP55029 (iii) Folio Identifier 1020/883734. (b) In the case of the Defendant Janette Linda Ashley over the land in: (i) Folio Identifier 207/219192. 2. A declaration that the Plaintiff is entitled to a lien over: (a) The land registered in the name of SPC & Co Pty Limited known as "Willows Golf Course" described in Queensland Land Title Registry certificate of title 50833729 (b) The shares in SPC & Co Pty Limited. 3. Judgment in the sum of $199,707.00. 4. Interest at the rate from time to time payable under the Legal Profession Act on the invoices referred to in paragraph 12 below from the date of the invoice to judgment. 5. An order reserving to the Plaintiff liberty to apply for an order for judicial sale of all or any of the properties and assets over which the Plaintiff holds a charge or a lien. 6. Costs. 7. Such further or other relief as may be just.
At the time of filing the Statement of Claim the Willows Golf Course was owned by SPC & Co Pty Ltd (now the Fourth Defendant). However SPC was not joined to the proceedings at the time of filing. Mr Gray (now the Fifth Defendant) was also not joined in the proceedings at the time of filing.
Defences were filed by the Third Defendant on 22 July 2016 (CB3 25-9), by the Second Defendant on 25 July 2016 (CB3 30-6) and by the First Defendant on 25 July 2016 (CB3 37-43).
On the morning of 28 October 2016 the Fifth Defendant telephoned the Plaintiff. Mr Damcevski deposes that the Fifth Defendant said that Bede Haines of Holding Redlich had requested he prepare a summary of deposits, payments and trust ledgers for all Demetriou matters to be provided at the mediation being held on that day (CB4 166).
At 11:44am on 28 October 2016 in preparation for the mediation that would take place later that day the Plaintiff deposes to having sent the Fifth Defendant by fax a one-page summary of deposits and payments and 11 pages of trust account ledger statements (CB4 166).
In the afternoon of 28 October 2016 prior to the mediation the Plaintiff arrived at the Fifth Defendant's chambers. At this time the Plaintiff alleges he realised that there was one page missing from the faxed document, being one page of trust account ledger statement 4074 relating to $65,000 (CB4 166).
Later on 28 October 2016 there was a mediation conducted by Registrar Flaskas of the Supreme Court of New South Wales. The mediation was between the parties with the solicitors Holding Redlich appearing for the First, Second and Third Defendants (T152/23-40). Ms Kim Nguyen and Mr Bede Haines were the solicitors from Holding Redlich. The Plaintiff, First Defendant, Second Defendant and Third Defendant were present. As noted Mr Gray (now the Fifth Defendant) was present although at that time he was not a party to the proceedings. At the time of signing the Third Defendant was not at the mediation.
The mediation is alleged by the Plaintiff to have begun at 2:00pm ending at approximately 5:00pm with the drafting of the Heads of Agreement taking approximately one hour (CB4 166). The First Defendant however contends the process of drafting the Heads of Agreement took far less time than one hour and was more like 10 to 15 minutes (CB4 3).
The Plaintiff and Mr Gray (the Fifth Defendant) were in one room. The other parties were in another room. Mr Haines and Ms Nguyen are alleged to have brought the Heads of Agreement in draft form into the room where the Plaintiff and Fifth Defendant were sitting and with changes being made at least once to the handwritten document (CB4 333). Mr Haines and Ms Nguyen going back and forth between the two rooms during the course of the mediation.
Shortly after 4:38pm 28 October 2016 upon request the Plaintiff received an SMS text message image of a trust account ledger statement for matter 4074 from an employee of his office Elvis Damcevski (CB4 183-4). This ledger statement concerns an amount of $65,000 received from the liquidators of North Queensland Land Development Pty Limited which was discussed during the mediation. He deposes to having showed it to the Fifth Defendant, Mr Haines and the First Defendant (CB4 167).
Maria Demetriou (a former director of the Fourth Defendant) deposes that on the date of the mediation Ms Nguyen called her and the following conversation occurred (CB4 54): Ms Nguyen: Hi Maria, we are currently holding the mediation, Ventry has agreed that if a mortgage be drafted that allows him to exercise his rights to sell a part of the golf course to obtain monies owed to him, he would then allow your father to pay the money owed by 28th October 2018. … Ms Nguyen: Holding Redlich do not represent SPC & Co or yourself as director. You should seek separate legal advice. Fourth Defendant: I am a university student and I do not have the money to obtain legal advice. Ms Nguyen: That is your decision to make whether you do or not. I will email you the documentation for your review.
After discussions at the mediation the Plaintiff, the First Defendant, the Second Defendant and Mr Gray (now the Fifth Defendant) signed a document entitled "Heads of Agreement". The Heads of Agreement is a handwritten document on Holding Redlich file note paper and a typed version of the document is provided. A colour facsimile of the handwritten document is provided (Exhibit P1), which includes interlineation, details and initials not reproduced in the typed version. At least two coloured inks have been used and the exact provenance of the different inks and interlineations is not the subject of absolute clarity. The blue ink on the front of the document and the black ink on the back of the document is the handwriting of Ms Nguyen (T100/33-46). The handwriting in black pen on the front of the document is not subject to clarity but may include handwritten additions by the Fifth Defendant (T53/47-50): "A" 2016/163514 Damcevski -v- Demetriou Heads of Agreement 1) $188,000 - agreed payable to Ventry Gray. 2) 8%p.a. interest commencing 28.10.16 compounded annually meaning any unpaid interest is added to principal debt each year. 3) Emilios Demetriou is the debtor under the deed (not Janette Ashley or Georgina Demetriou). 4) An appropriate security over the Willows Golf Course as a registered mortgage to be provided within 28 days. 5) Holding Redlich to prepare within 28 days a Deed of Settlement and Release and Mutual Release including SPC & Co Pty Ltd, all Defendants, Ventry Gray, Bob Damcevski, applicable to every claim known and unknown. 6) The Principal ($188,000) can be repaid by part payments, so long as in multiples of $10,000 unless Ventry otherwise directs in writing. 7) Proceedings be discontinued within 7 days of execution of Deed with no orders as to costs. 8) Agreement based on $65,000 applied to an amount properly owed as appearing in Trust Account Record - Evidence to be provided by Bob by 11 November 2016. 9) Bobi to provide assistance in providing invoices and other documents for preparing a bill of costs against the Liquidator of North Qld, if the costs orders against them personally. Parties to Deed Ventry Gray Emilios Demetriou Ventry Gray Emilios Demetriou Bobi Damcevski Janette Ashley Bobi Damcevski Janette Ashley Georgina Demetriou & SPC & Co Pty Ltd - we are instructed verbally they have agreed and will sign the Deed.
It is alleged by the Plaintiff that the agreement contained in the Heads of Agreement was conveyed to the Third Defendant and Fourth Defendant orally by Ms Kim Nguyen of Holding Redlich who was authorised by them to and did endorse the Heads of Agreement (POC [7]).
The mediation concluded at approximately 5:00pm 28 October 2016.
On 31 October 2016 Ms Nguyen sent an email to the First Defendant, Second Defendant, Third Defendant and Maria Demetriou stating (CB4 57): Dear all, Further to the mediation held last Friday, we attach a draft deed of settlement and release for your review. Could you please let us know if it is okay to send as a draft to Ventry and Bobi? We would like to send this to Ventry and Bobi tomorrow. Regards Kim Kim Nguyen | Lawyer
On 1 November 2016, Holding Redlich prepared the Deed of Settlement referred to in clause 5 of the Deed of Settlement (see for example CB4 8-49). For example on 1 November 2016 Ms Nguyen sent an email attaching a draft deed of settlement to the Plaintiff and Fifth Defendant (CB4 6): Without prejudice Dear Bobi and Ventry, Following the mediation last Friday, we attach a draft deed of settlement and release for your consideration. The deed is subject to instructions from Georgina Demetriou. Could you please review the deed and let us know if you have any comments. Regards, Kim.
On 2 November 2016, the Fifth Defendant sent a reply email to Ms Nguyen (CB4 20): Dear Miss Nguyen, Thank you for the first draft deed. I return the draft deed with various amendments endorsed by hand (similarly on a "without prejudice" basis). I believe my amendments are self-explanatory. If any hand-written amendment be illegible, please either e-mail or telephone me … and I will clarify the obscurity. Ventry Gray
On 4 November 2016 at 8:26am Ms Nguyen circulated to the Plaintiff and Fifth Defendant a further version of the draft deed of settlement incorporating the Fifth Defendant's changes and providing further marked-up amendments and comments including (CB4 34-5): In relation to the amendment to the release provided to Mr Demetriou, this was not agreed to at the mediation (i.e. the heads of agreement provides for mutual releases). Properly construed, the existing rights/obligations/liabilities of the parties are merged into this deed. The deed provides that if the settlement sum and interest is not paid to you within a certain period of time, you would have a right to sue under the deed or to exercise the security.
On 5 November 2016 at 9:21am the Fifth Defendant replied to Ms Nguyen's email with comments such as (CB4 50-1): Gray: There must be no delay in the provision of the mortgage. I suggest you e-mail me a draft mortgage by say 8 November (next Tuesday). I can call at your offices to sign the original documents once the terms are settled. I recognise that SPC cannot be responsible for delays in the registration process in the Queensland land registry. … Gray: What was agreed at the mediation was that Mr Demetriou would perform certain obligations - not merely that he would promise to perform them (the terms signed at the mediation do not contain the word "promise" or any equivalent word). The draft deed in the form it now takes requires that Mr Demetriou perform those obligations which is precisely what was agreed at the mediation. The significance of the deed is that for other parties, their respective obligations are performed by execution of the deed (the releases etc. are immediately operative). Where obligations are to be performed in the future (as in the case of Mr Demetriou) it is the actual performance of the obligation which is required, not merely a promise.
On 8 November 2016 the Fifth Defendant wrote an email to Ms Nguyen (CB3 148): Dear Miss Nguyen, How is progress on the deed of settlement and the SPC mortgage? Ventry Gray
On 4:09pm 9 November 2016 the Fifth Defendant confirmed via email with Ms Nguyen that he had received a draft deed and draft short minutes but no draft mortgage (CB3 147).
On 4:20pm Ms Nguyen replied: Dear Mr Gray The draft mortgage is attached. Could Mr Damcevski please return the short minutes of order to us by no later than noon tomorrow so the orders can be made in chambers?
On 10:32am 10 November 2016 the Fifth Defendant sent a further email to Ms Nguyen (CB3 145): The drafts of the deed of settlement and the mortgage are satisfactory to me. … I understand that Holding Redlich will lodge the mortgage for registration and will receive the registered copy of the mortgage following registration.
Ms Nguyen subsequently confirmed by email Holding Redlich would lodge the mortgage for registration and give the Fifth Defendant a copy of the mortgage (CB3 145).
On 10 November 2016 Ms Nguyen sent an email to the First Defendant, Second Defendant, Third Defendant and Maria Demetriou stating (CB4 70): Dear Janette, Mel, Georgina and Maria We attach a final copy of the deed of settlement and release with Bobi Damcevski and Ventry Gray. There are no substantive changes from the version previously sent to you. Could you please read through carefully and sign before a witness (the witness does not have to be a solicitor or a JP) in the space allocated for you on pages 9/10. Please then send us a scanned copy of the deed asap, so that it can be exchanged. Maria, we will shortly send you an email in relation to mortgage to be provided by SPC. Regards Kim Kim Nguyen | Lawyer
On 10 November 2016 Ms Nguyen sent a separate email to Maria Demetriou which included such statements as below (CB4 83): Dear Maria, We write to you in your capacity as sole director of SPC & Co Pty Ltd. As discussed at the mediation, one of the things agreed between the parties to settle the dispute between Emilios Demetriou, Janette Ashley, Georgina Demetriou and Ventry Gray and Bobi Damcevski, was for Emilios Demetriou to pay Ventry Gray a 'Settlement Sum' in the amount of $188,000 plus interest by 28 October 2018. It was further agreed by all parties, including SPC, that SPC would provide security over the 'Settlement Sum' plus interest over the Willows Golf Course by way of a registered mortgage. … To make it clear, we do not act for SPC or you (as a director of SPC) in relation to this mortgage. If you wish to seek separate legal advice in relation to this document or any consequences of this document, and have not already done so, you should take steps to do so today or tomorrow.
On 11 November 2016 Maria Demetriou replied to Ms Nguyen stating (CB4 83): Thank you for sending this over, however, I am unable to get a day off work on such short notice. I wouldn't [sic] like to get legal advice prior to signing this document, so I'm hoping to see one tomorrow or Monday. I will keep you updated. Thanks, Maria
On 15 November 2016 Ms Nguyen sent an email to Maria Demetriou (CB4 85): Thank you for your time this morning. Please see attached mortgage without the draft watermark. Once you have received legal advice and if you consider it fine to sign, please sign and have your solicitor witness the mortgage and return it to us by registered express post. Please also return the signed deed to us, scanned and send the original to us by express post.
On 15 November 2016 Maria Demetriou replied (CB4 99): Hi Kim, No problem at all, once I get legal advice, I will forward everything to you by registered express post. Thanks, Maria.
On 16 November 2016 Maria Demetriou sent a further email to Ms Nguyen (CB4 101): Hi Kim, I saw a solicitor yesterday, I've decided to go ahead with signing the papers so I will be sending them today via registered express post. If you need anything else from me, please let me know.
On or about 15 November 2016 the Fourth Defendant executed the mortgage over the Willows Golf Course referred to in clause 4 of the Heads of Agreement. However it is alleged to have refused to deliver the mortgage to the Fifth Defendant and have failed to execute the Deed of Settlement prepared by (POC [13]). The Fourth Defendant in turn alleges that the mortgage was prepared by Holding Redlich and was predicated upon there being a valid and effective Deed of Settlement entered into. The Fourth Defendant further states that the current registered proprietor of the property is Willows Golf Club Pty Ltd (Fourth Defendant's POD [13]).
On 29 November 2016 the Fifth Defendant sent a notice of default to the First, Second and Third Defendants alleging the Fifth Defendant had not received a registered first mortgage over the Willows Golf Course and specified 7 December 2016 as the time which he was to be provided with the mortgage (CB1 27). Ms Nguyen confirmed receipt of the correspondence on 29 November 2016 (CB1 29).
On 7 December 2016, the Plaintiff filed a Notice of Motion seeking specific performance orders of the Heads of Agreement. This Notice of Motion did not list SPC (the Fourth Defendant) or Mr Gray as parties (Exhibit A): 1. That the Plaintiff have leave to file this notice of motion in court on 9 December 2016. 2. That this notice of motion be made returnable instanter. 3. That the First Defendant, Emilios Demetriou, specifically perform his obligations to: (a) sign the deed of settlement referred to in clause 5 of the agreement between (inter alia) the parties to these proceedings made 28 October 2016 and (b) sign the mortgage to Ventry Gray over the Willows Golf Course securing to Ventry Gray the obligations of Emilios Demetriou under clauses 1,2 and 3 of that agreement. 4. That the First Defendant, Emilios Demetriou, forthwith pay the Plaintiff's costs of and incidental to this notice of motion and the order thereon on the indemnity basis. 5. Such further or other orders as may be just.
At 6:12am 9 February 2017 Ms Sutton of A C Lawyers sent an email to the Plaintiff, Fifth Defendant, Mr Haines and Ms Nguyen of Holding Redlich and solicitors attaching a deed of settlement and release and letter outlining the First Defendant's entitlement to proper accounting from the Plaintiff in respect of fees and disbursements (CB2a 367-82).
At 4:54pm 9 February 2017 the Fifth Defendant replied (CB2a 366): Dear Miss Sutton, 1. The parties, through their respective legal representatives at the time, had agreed on the terms of the deed and the mortgage to be executed pursuant to the settlement agreement dated 28 October 2016. So far as I am concerned, the terms of those instruments have been settled and there is no occasion to re-visit them. 2. The current notice of motion was filed because of Mr Demetriou's actions. Had he not taken the actions he did, the parties would not have been put to the trouble and expense to which they have been put in consequence of his actions. So far as i am concerned, Mr Demetriou should pay the costs of the other parties of and incidents to the notice of motion in the ordinary way.
At 5:03pm 9 February 2017 Ms Nguyen wrote to Ms Sutton stating (CB2a 351): Dear Ms Sutton Could you please provide a copy of our deed with the mark up of the changes Mr Demetriou has completed? Alternatively, could you please provide a word document copy of the deed signed by Mr Demetriou, so we can do a document compare and understand what changes have been made?
At 6:17pm 9 February 2017 Alan Pashut of A C Lawyers replied: Dear Kim The amendments to the Deed are highlighted in red on the attached document.
The 9 February A C Lawyers version of the deed of settlement was signed by the First Defendant (CB2a 370-82; T109/36-T110/49).
On 23 February 2017 the then sole director of the Fourth Defendant SPC Maria Demetriou retired as director and the First Defendant was appointed as director of the company (CB3 235).
On 23 March 2017, the First Defendant filed a Points of Defence in response arguing that a motion was the inappropriate mechanism to seek relief and both SPC and Mr Gray were not parties to the proceedings (CB2 49-51).
On 1 June 2017, the Plaintiff filed an Amended Statement of Claim (First Amended Statement of Claim) seeking again in effect specific performance of the Heads of Agreement (CB3 46-51). In this Amended Statement of Claim the First, Second, Third, Fourth and Fifth Defendants were joined, with paragraph 8 of the Particulars stating: The Plaintiff claims no relief against the Second, Third, Fourth and Fifth Defendants and they are parties hereto only by reason of the fact that the First Defendant asserts that they are necessary parties.
On 15 June 2017, the First Defendant filed a Notice of Motion attempting to strike out the First Amended Statement of Claim, although the First Defendant did not proceed with this motion.
The First Defendant has steadfastly refused to execute the Deed of Agreement.
On 16 June 2017 sale of the Willows Golf Course from SPC the Fourth Defendant to Willows Country Club Pty Ltd was effected for $1,000,000 (CB3 182-3).
On 26 July 2017 the Fifth Defendant filed a Notice of Motion seeking judgment against the First Defendant in the sum of $188,000 plus interest from 28 October 2016 to judgment date at the rate of 8% per annum. In this Notice of Motion all five Defendants were listed as parties (Exhibit B).
On 21 August 2017 the Plaintiff filed an Amended Statement of Claim (CB3 52-60) (Second Amended Statement of Claim) and again on 4 September 2017 filed an Amended Statement of Claim (CB3 61-9) (Third Amended Statement of Claim). Both were in substantively the same terms as the First Amended Statement of Claim.
On 30 August 2017 Parker J heard an application by the Fifth Defendant for summary judgment of the proceedings on a cross claim as filed by him.
On 7 September 2017 the Fourth Defendant filed a Defence to the Third Amended Statement of Claim (CB3 70-7).
On 8 September 2017 in Damcevski v Demetriou [2017] NSWSC 1224 Parker J delivered his judgment on the Fifth Defendant's application for summary judgment. His Honour dismissed the application for summary judgment, noting (at [22]-[26]): If that difficulty can be overcome, in my opinion, it is arguable that the Heads of Agreement falls into the third class in Masters v Cameron. As I have already mentioned and as will be clear from what I have quoted, it is a scanty document which lacks detail and precision. A particular feature is cl 4 dealing with security over the golf course land, which simply requires that an "appropriate security" be provided. This give rise to obvious potential issues in terms of agreement to agree: cf G Scammell and Nephew Ltd v HC and JG Ouston [1941] AC 251. The very fact that the Agreement does not appear expressly to have been structured on the basis of a correct or complete legal analysis in terms of Mr Gray's rights against Mr Damcevski and Mr Damcevski's rights against Mr Demetriou, together with its scanty nature, in my opinion, is capable of suggesting that the parties can only have contemplated a binding agreement once a formal deed was drawn up. Furthermore, cl 8 arguably may be seen as some sort of condition or fundamental term upon which the Agreement is based. If the Agreement is not in the third class, it is, in my opinion, arguably in the second class. Clause 1 does not specify any time for payment. Clause 6 is difficult, if not impossible, to reconcile with immediate payment (no direction has, in fact, been given by Mr Gray on the evidence before me). Furthermore, cl 5 is open to the interpretation that the release in question, even if it includes a release from Mr Gray to Mr Damcevski, only takes effect when the deed of settlement has been executed. Again, that was the way in which Holding Redlich drafted the deed. Mr Gray was driven to submitting that they had been wrong to frame the document in that way, but it is notable that this was not something which he rejected or commented on in his comments on the draft. In my opinion, it is open to argue that, even if the Heads of Agreement gave rise to a contractual relationship between at least Mr Gray and Mr Demetriou, it was subject to conditions which have not yet been fulfilled.
On 11 September 2017, the Fifth Defendant filed an Amended Statement of Cross Claim again seeking $188,000 plus interest.
On 19 September 2017 the Plaintiff filed a further Amended Statement of Claim (Fourth Amended Statement of Claim) against the First to Fifth Defendants seeking to enforce the clauses of the Heads of Agreement and other orders including judgment in the sum of $218,437 (CB3 78-91).
On 10 October 2017 the Fourth Defendant filed a Defence to the Fourth Amended Statement of Claim largely denying the Plaintiff's claim. This included the defence that the Heads of Agreement is devoid of consideration and did not bind the Fourth Defendant (CB3 92-7).
On 19 October 2017 the First Defendant filed a Defence to the Fourth Amended Statement of Claim (CB3 98-105).
On 2 November 2017 the Second Defendant also filed a Defence to the Fourth Amended Statement of Claim (CB3 106-112).
On 20 October 2017 the Plaintiff filed a defence to the Fifth Defendant's Amended Statement of Cross Claim seeking $188,000. On 8 December 2017 the Fifth Defendant filed a Reply to this defence.
On 22 December 2017 the Plaintiff filed their reply to the defence of their Fourth Amended Statement of Claim (CB3 113-19).
On 22 February 2018 the Plaintiff filed a Notice of Motion seeking an order pursuant to section 73 of the Civil Procedure Act 2005 (NSW) that the dispute between the parties had been compromised or settled as set out in the terms of a document headed "Heads of Agreement" dated 28 October 2016. The Plaintiff also sought orders giving effect to the Heads of Agreement, including the execution of a deed and judgment in the amount of $188,000 including interest (CB3 1-8).
On 27 February 2018 the First Defendant filed an Amended Notice of Motion seeking that the proceedings under section 73 be stayed pursuant to section 331(3) of the Legal Profession Act 2004 (NSW) or alternatively stayed under section 67 of the Civil Procedure Act 2005 (NSW) or alternatively dismissed under rule 13.4(1) of the Uniform Civil Procedure Rules 2005 (NSW) as frivolous or vexatious proceedings.
The Plaintiff filed an Amended Notice of Motion on 8 March 2018. This Amended Notice of Motion clarified that the $188,000 sought was judgment including interest in favour of the Fifth Defendant as against the First Defendant (CB3 9-14).
On 21 May 2018 I formed the view that the actual issues in dispute were not appropriate to be dealt with by way of a motion under section 73 of the Civil Procedure Act 2005 (NSW), and directed the parties to provide Points of Claim, Defences and any supporting evidence where relevant.
On 25 May 2018 the Plaintiff provided Points of Claim that claimed as from the time of the signing by the Plaintiff, the First Defendant, the Second Defendant and the Fifth Defendant of the Heads of Agreement and endorsed by the Third Defendant and Fourth Defendant "each of the parties to the proceedings entered into an immediately enforceable legally binding contract that is enforceable (inter alia) by Damcevski against Demetriou" (POC [8]).
On 30 May 2018 the Fourth Defendant filed their defence to the Points of Claim.
On 8 June 2018 I indicated to the parties that the proceedings relating to this judgment would concern solely whether or not the Heads of Agreement constitutes a legally binding arrangement between the parties.

Section 73 of the Civil Procedure Act 2005 (NSW)

In Gorczynski v Bendigo and Adelaide Bank Ltd [2016] NSWCA 170 Basten JA observed (at [6]) (citations omitted): Section 73 (and its analogues in other jurisdictions) has been understood to confer power on the court to deal with settlements in the proceedings to which they relate, rather than leaving the parties to commence separate proceedings to enforce a settlement. Accepting that to be the primary purpose of the provision, it is nevertheless expressed in broad terms as to the scope of the power conferred, terms which should not be read down by implied constraints. Rather, the breadth of the power as it operates in the Supreme Court is confirmed when it is read in the context of other powers conferred on the Court. Thus, s 56 of the Civil Procedure Act, to which the primary judge referred, states that the court must give effect to the overriding purpose of facilitating "the just, quick and cheap resolution of the real issues in the proceedings." In order to undertake that function, the court must have the necessary powers to assist it to identify what are the "real issues" in the proceedings. In order to determine what are the real issues in the proceedings it is necessary for the court to seek to ascertain the extent to which the parties can or have narrowed their dispute, so as to limit the proceedings to that part, if any, which remains unresolved. That was the course which the primary judge undertook. If any express power were required for the judge to act on her own initiative, the court had power to act "of its own motion" pursuant to s 86(3) of the Civil Procedure Act, subject always to according procedural fairness to each party.
Likewise in Ahmed v Chowdhury [2011] NSWSC 893 Slattery J said (at [4]): Before the enactment of Civil Procedure Act, s 73 there were different judicial views as to whether an alleged settlement of proceedings could be enforced by motion in the proceedings or whether a separate action needed to be commenced: Phillips v Walsh (1990) 20 NSWLR 206 at 210 and Roberts v Gippsland Agriculture & Earth Moving Contracting Co Pty Ltd [1956] VLR 555 at 557-562-7 and Darling Downs Investments Pty Ltd v Ellwood (1988) 18 FCR 510. Now Civil Procedure Act , s 73 resolves these different views and makes clear that the Court has jurisdiction to determine any dispute between the parties to the proceedings as to whether and on what terms the proceedings have been compromised: Civil Procedure Act, s 73(1)(a). Civil Procedure Act, s 73 probably preserves a discretion to require the enforcement of settlement claims to be brought in separate proceedings. Neither party advanced that procedure here.
This was cited with approval by Campbell JA in Grave v Blazevic Holdings Pty Ltd [2012] NSWCA 329 at [5].

The "four" categories of agreement

In Masters v Cameron (1954) 91 CLR 353 at 360-1; [1954] HCA 72, Dixon CJ, McTiernan and Kitto JJ said (citations omitted): Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common … Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own …
The Courts have subsequently recognised a fourth category of agreements to contract, where the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms: Sir Kim Lewison and David Hughes (eds), The Interpretation of Contracts in Australia (Thomson Reuters, 1st ed, 2012) [8.16.1].
In relation to the fourth category, in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628, McLelland J observed: There is in reality a fourth class of case additional to the three mentioned in Masters v Cameron, as recognised by Knox CJ, Rich J and Dixon J, in Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 at 317, namely, "… one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms". Their Honours refer to the speech of Lord Loreburn, in Love & Stewart v S Instone & Co (1917) 33 TLR 475 at 476, where his Lordship said that: "It was quite lawful to make a bargain containing certain terms which one was content with, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with the full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, none the less that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain." It seems to me that subject to the matters yet to be considered the present case falls into this fourth class as described in Sinclair, Scott & Co v Naughton.

Heads of agreement as binding

Whether or not the parties here intended the agreement to be immediately binding is to be determined objectively having regard to the language contained in the Heads of Agreement. The High Court has repeatedly affirmed this proposition: Allen v Carbone (1975) 132 CLR 528; [1975] HCA 14; Taylor v Johnson (1983) 151 CLR 422; [1983] HCA 5; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52; Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26.
The Heads of Agreement must of course be read in the light of the surrounding circumstances.
The High Court in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said (at [22] (citations omitted): The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Constructions Pty Ltd v State Rail Authority of NSW, Mason J set out with evident approval the statement of Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen: "In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating."
In International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at 160; [2008] HCA 3, Gleeson CJ remarked (citations omitted): In giving a commercial contract a businesslike interpretation, it is necessary to consider the language used by the parties, the circumstances addressed by the contract, and the objects which it is intended to secure. An appreciation of the commercial purpose of a contract calls for an understanding of the genesis of the transaction, the background, and the market. This is a case in which the Court's general understanding of background and purpose is supplemented by specific information as to the genesis of the transaction. The Agreement has a history; and that history is part of the context in which the contract takes its meaning.
Sir Kim Lewison and David Hughes (eds), The Interpretation of Contracts in Australia (Thomson Reuters, 1st ed, 2012) [3.14.5] provides: [T]he relevant background consists of facts that were actually known to both (or all) parties to the contract, or that are sufficiently notorious that it can be presumed they were so known. Facts which were known to only one of them will not be relevant. Nor is it sufficient to prove that facts were reasonably available, without demonstrating that their availability should lead to an inference being drawn that they were in fact known by both parties. It is, of course, the case that facts which were not known to either party at the date of the contract are not relevant to the construction of the contract, for if the facts were unknown they cannot have played any part in forming the presumed intention which is embodied in the contract. However, where a fact is known to one party and not to the other, in theory it may well have played a part in forming the intention of the party who knew that fact. However, unless a fact is known to both parties, it will not be admitted in evidence, because the court is seeking not the actual intention of one party to the contract, but the presumed mutual intention of both of them.
If the terms of such a document indicate that the parties intended to be bound immediately, effect must be given to it. Construction of a document may make it sufficiently clear that the parties were content to be bound immediately by the terms to which they had agreed, notwithstanding they contemplated further documentation: Masters v Cameron (1954) 91 CLR 353 at 360 (Dixon CJ, McTiernan and Kitto JJ); [1954] HCA 72; Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 at 110 (Ipp J); [2000] WASCA 27.
As McHugh JA (as he then was) said in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634: However, the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances: Godecke v Kirwan (1973) 129 CLR 629 at 638; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 332-334, 337. If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction. Even when a document recording the terms of the parties' agreement specifically refers to the execution of a formal contract, the parties may be immediately bound. Upon the proper construction of the document, it may sufficiently appear that "the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms": Sinclair, Scott & Co Ltd v Naughton (at 317).
McHugh JA also said at 635-6: Under the agreement each party was obliged to do all that was necessary on his part to enable the other party to have the benefit of the agreement concluded by the correspondence: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607. This included doing everything necessary to enable contracts to be exchanged by 18 April 1986: Godecke v Kirwan (at 641). If the parties agreed on additional terms, they would be added to the formal contract. If they did not, the formal contract would give effect only to the agreed terms and conditions of the correspondence. The case, therefore, is one where the parties were bound by the informal agreement but expected to make a further contract which by consent might contain additional terms: Sinclair, Scott & Co Ltd v Naughton (at 317).
As Walsh J (with whom Mason J agreed) had earlier pointed out in Godecke v Kirwan (1973) 129 CLR 629 at 639; [1973] HCA 38 (Godecke v Kirwan), an agreement which obliges a subsequent agreement to be entered into may contain covenants for example in the new agreement not included in the original contract. In expressing his agreement with the South Australian decision of Bray CJ in Powell v Jones [1968] SASR 394, Walsh J accepted that there was no reason in principle for holding that there cannot be a binding contract even if some matter is left to be determined by one of the contracting parties. His Honour took the view that because he was there looking at a clause which permitted the insertion of covenants and conditions (not inconsistent with those contained in the offer), he thought any new terms should also be limited by reference to the reasonableness of requiring the inclusion of those covenants and conditions. He thought that the clause meant that what was required must be reasonable in an objective sense and in the event that there was a dispute it was always a matter for a court to decide.
In Jingalong Pty Ltd v Todd [2015] NSWCA 7 at [78]-[82] Sackville AJA observed (with Meagher and Leeming JJA agreeing): The context in which the Settlement Agreement came into existence suggests that the parties intended to enter into a binding and immediate agreement. But there are more direct textual indications that the Settlement Agreement, objectively assessed, was intended to bind the parties immediately. The clearest indication is cl 8, which states that "These Heads of Agreement have effect unless any later deed is entered into by the parties". It is difficult to see what purpose cl 8 could have except to make it clear that the Settlement Agreement, notwithstanding its handwritten form and lack of detail, was intended to bind the three parties. To apply the classification stated by the High Court in Masters v Cameron at 360, cl 8 demonstrates that the parties reached finality in arranging the terms of their bargain and intended to be immediately bound to the performance of those terms, even though they contemplated that a more formal deed might subsequently be drawn up. The primary Judge assumed (at [80]) that cl 8 was intended to show that the Settlement Agreement was to have legal effect, although his Honour observed that "effect" does not necessarily mean "legal effect". Mr Nagle attributed little significance to cl 8 on the ground that it was "surplusage". In my opinion, neither his Honour's observation nor Mr Nagle's characterisation of cl 8 diminishes its significance as a statement of the parties' intention to be immediately bound. It is a basic principle of construction that a contract will be read as a whole and that a court will strain against an interpretation that renders a particular clause nugatory or of no effect: Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402 at 411 (Lockhart and Hill JJ); Sigiriya Capital Pty Ltd v Scanlon [2013] NSWCA 401 at [30] (Leeming AJ, Meagher AJ and Sackville AJA agreeing); K Lewison and D Hughes, The Interpretation of Contracts in Australia (2012, Law Book Co) at [7.03]. Clause 1 provides an additional indication that the parties intended the Settlement Agreement to be immediately binding. By using the expression "it is hereby agreed", the parties evinced an intention that Jingalong and Mr Pernice would be immediately bound by their agreement that Mr Pernice would buy and Jingalong would sell Lot 1 for the stipulated price of $350,000. Similarly, cl 5 of the Settlement Agreement implies that Mr Todd and Mr Pernice have reached a binding agreement, at least as between themselves, as to the contribution each is to make to the price to be paid by Mr Pernice to Jingalong. It is true, as Mr Todd submitted and the primary Judge pointed out, that the Settlement Agreement makes no provision for what was to happen in the event that either Mr Pernice or Jingalong did not complete the sale of Lot 1 by 13 May 2013, or if Mr Todd failed to make his agreed contribution of $206,000 to the purchase price. But having regard to the language of cll 1 and 8, the absence of any such provision does not detract from the conclusion that the Settlement Agreement was intended to be binding, any more than the absence of provisions specifying the consequences of non-compliance prevent an open contract of sale of land being given legal effect. Clause 7 of the Settlement Agreement, which states that the parties agree that on payment of the amounts referred to in cll 1 and 2, they will execute consent minutes, also does not detract from this conclusion. Whatever its significance for the effect of the Settlement Agreement on the causes of action pleaded by Mr Todd and Mr Pernice, it suggests that the parties intended to create immediate rights and obligations.

Admissibility of extrinsic evidence

It is uncontroversial that post-contractual conduct is admissible to determine whether a contract exists between the parties: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547-548 per Gleeson CJ (Hope and Mahoney JJA agreeing); Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25] per Heydon JA; Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 at [103] per Giles JA (Hodgson and Campbell JJA agreeing); Johnston v Brightstars Holding Co Pty Ltd [2014] NSWCA 150 at [121] per Basten JA (Gleeson JA agreeing).
More broadly in South Australia v Commonwealth (1962) 108 CLR 130 at 154; [1962] HCA 10 Windeyer J observed: An agreement deliberately entered into and by which both parties intend themselves to be bound may yet not be an agreement that the courts will enforce. The circumstances may show that they did not intend, or cannot be regarded as having intended, to subject their agreement to the adjudication of the courts. The status of the parties, their relationship to one another, the topics with which the agreement deals, the extent to which it is expressed to be finally definitive of their concurrence, the way in which it came into existence, these, or any one or more of them taken in the circumstances, may put the matter outside the realm of contract law.
In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352-3; [1982] HCA 24 Mason J (with Stephen and Wilson JJ agreeing) said: It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification. Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.
In Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 (Air Great Lakes) McHugh JA observed (at 336-7): Although Lewis v Brass seems to have escaped both criticism and overruling, I do not think that it can now be accepted as authority for the proposition that a subjective intention to contract is a necessary element in the formation of a contract. The weight of authority in favour of the objective theory is too great. But the decision is consistent with what I think is clearly the Anglo-Australian law, namely, that an intention to create a legally enforceable contract is a necessary element in the formation of a contract: see Cheshire & Fifoot, Law of Contract, 4th Aust ed (1981) at 92. Nor does the rejection of the subjective element in Lewis v Brass mean that the intention to create an enforceable contract can only be deduced from the terms of the document when a document has "integrated" the parties' negotiations and discussions. Thus a party may show that a document, which to all outward appearances constitutes a contract, is subject to a condition precedent. … Moreover, the court is entitled to look beyond the promissory words to the relationship of the parties for the purpose of determining whether they intended to create a legally enforceable contract. In Balfour v Balfour [1919] 2 KB 571 and Cohen v Cohen (1929) 42 CLR 91 it was held that agreements made between husband and wife were not legally enforceable. … The intention to create a legally binding contract although a matter to be proved objectively, may, nevertheless, in my opinion, be proved by what the parties said and did as well as by what they wrote. The intention may be proved in that way even in a case where the document is intended to comprise all the terms of their bargain. This is because the intention to be bound is a jural act separate and distinct from the terms of their bargain.

Shadow directors

The definition of "director" in section 9 of the Corporations Act 2001 (Cth) provides: "director" of a company or other body means (a) a person who: (i) is appointed to the position of a director; or (ii) is appointed to the position of an alternate director and is acting in that capacity; regardless of the name that is given to their position; and (b) unless the contrary intention appears, a person who is not validly appointed as a director if: (i) they act in the position of a director; or (ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes. Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company or body. Note: Paragraph (b)--Contrary intention--Examples of provisions for which a person referred to in paragraph (b) would not be included in the term "director" are: * section 249C (power to call meetings of a company's members) * subsection 251A(3) (signing minutes of meetings) * section 205B (notice to ASIC of change of address).
In Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2011) 81 NSWLR 47 at [214]-[215]; [2011] NSWCA 109 Young JA observed: In In Re Lo-Line Electric Motors Ltd [1988] Ch 477; (1988) 2 All ER 692 (hereafter Lo-Line), Browne-Wilkinson VC held that, for the purpose of considering the conduct of a person as a director with respect to whether a disqualification order should be made, the court can take into account the conduct as a de facto director. The effect of this change of focus was that in what became the common case of considering whether a "director" should be disqualified, it did not matter whether the person was a de facto or a shadow director and that the courts were confronted with the very difficult problem of identifying what tasks were the essence of being a director.

Plaintiff

The Plaintiff submits that the Heads of Agreement document signed on 28 October 2016 is an agreement binding upon all parties (Submissions [11]-[14]).
The Plaintiff submits a draft deed of release was prepared by Ms Nguyen of Holding Redlich and a deed of mortgage was entered into by the Fourth Defendant in accordance with the Heads of Agreement (Submissions [15]-[24]).
The Plaintiff therefore argues that it is plain all parties reached an agreement as set out in the Heads of Agreement with immediately binding and enforceable terms. The Plaintiff relies upon section 73 of the Civil Procedure Act 2005 (NSW) to therefore give effect to the agreement of the Heads of Agreement (Submissions [25]-[30]).
The Plaintiff further asserts that the Heads of Agreement falls within the first category of Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 (Masters v Cameron) (or alternatively the second class) and is a binding agreement (Submissions [31]-[35]). It is not an agreement to agree (Closing Submissions in Response to First Defendant [20]-[30]).
The Plaintiff and Fifth Defendant also provided joint closing submissions and in response.
In these submissions they assert the parties' post-contractual conduct is admissible to determine whether a contract exists between them (Closing Submissions [1]).
The Plaintiff and Fifth Defendant deny that the fact the Fourth Defendant no longer owns the Willows Golf Course (and cannot give a mortgage as required under clause 4 of the Heads of Agreement) does not absolve it from legal liability. Further the First Defendant acted as a shadow director of the Fourth Defendant and the Fourth Defendant is bound by the signed Heads of Agreement (Closing Submissions [2]-[7]).
With reference to Air Great Lakes the Plaintiff and Fifth Defendant submit it is clear the First Defendant intended and understood that the Heads of Agreement was a binding agreement to resolve the disputes between the parties as of 28 October 2016 (Closing Submissions [8]-[15]).
The Plaintiff and Fifth Defendant also invite a Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 (Jones v Dunkel) inference that as the First Defendant did not call Mr Haines of Holding Redlich his evidence if given could not contradict the Plaintiff's own evidence (Closing Submissions [16]-[20]).
The Plaintiff and First Defendant broadly criticise the evidence and credit of the First Defendant (Closing Submissions [21]-[22]) and assert at all times when the Heads of Agreement was signed the First Defendant was acting as a shadow director of the Fourth Defendant SPC (Closing Submissions [23]-[38]).
Again the Plaintiff and First Defendant reiterate the Heads of Agreement is a binding enforceable contract and deny, for example, that there is any inconsistency between its clauses 1 and 6 leading to it being an invalid contract. To the extent that there is an ambiguity in its terms these can be resolved by the Court (Closing Submissions [52]-[70]).
The Plaintiff and Fifth Defendant likewise deny any words such as "proof of" can be interpolated into clause 8 of the Heads of Agreement impliedly or otherwise and deny clause 8 acts as a condition precedent to the Heads of Agreement being binding (Closing Submissions in Response to First Defendant [1]-[8]). In fact by subsequent conduct the First Defendant affirmed the immediately binding nature of the Heads of Agreement including clause 8. This was done for example by signing a version of a deed on 9 February 2017 prepared by A C Lawyers (Closing Submissions in Response to First Defendant [9]-[12]). In any event the Plaintiff satisfied the obligations of clause 8 by providing the text message image of the relevant trust account (Closing Submissions in Response to First Defendant [13]-[19]).
The Plaintiff and Fifth Defendant submit the Heads of Agreement through the conduct of both Ms Maria Demetriou and the First Defendant is binding upon the Fourth Defendant (Closing Submissions in Response to Fourth Defendant [1]-[8]). The impossibility of SPC executing a mortgage under the Heads of Agreement does not render the relief sought by the Plaintiff and Fifth Defendant futile (Closing Submissions in Response to Fourth Defendant [11]).

First Defendant

The First Defendant denies that the Heads of Agreement signed on 28 October 2016 is an agreement binding upon the parties (Submissions [1]-[2]).
The First Defendant refers to previous applications of the Plaintiff before Parker J and a costs assessment application as evidence suggesting against the binding nature of the Heads of Agreement (Submissions [3]-[26]).
The First Defendant alleges the Heads of Agreement constitutes no more than an 'agreement to agree' falling within the third class of Masters v Cameron (or alternatively the second class) with the result that it is unenforceable (Supplementary Submissions [1]-[3]).
After outlining authorities (Supplementary Submissions [4]-[17]) the First Defendant submits the terms of the written Heads of Agreement evince an unambiguously clear intention on the part of those signatories that there were further essential terms to be agreed upon. Therefore the Heads of Agreement only established a framework or 'staging post' for future agreement (Supplementary Submissions [18]-[19]).
The Heads of Agreement is alleged by the First Defendant to be subject to performance by the Plaintiff of a number of conditions none of which were complied with in the time permitted. The First Defendant further alleges the Heads of Agreement expressed obligations which were in no way binding but suggestive of only a preliminary or provisionally agreed framework (Supplementary Submissions [20]).
The First Defendant refers to the judgment of Parker J on 8 September 2017 in Damcevski v Demetriou [2017] NSWSC 1224 wherein His Honour expressed a view that the Heads of Agreement likely fell into the third or second classes of Masters v Cameron (Supplementary Submissions [21]-[26]).
The First Defendant also surveys the specific clauses of the Heads of Agreement criticising them as lacking necessary precision as to the time for payment, being preliminary terms subject to later conditions being satisfied (Supplementary Submissions [27]-[49]).
The First Defendant ultimately suggests the Heads of Agreement is not enforceable on the basis that its very form and expression points to its 'provisional' nature (Supplementary Submissions [50]).
The First Defendant draws particular attention to clause 8 as unsatisfied by the Plaintiff on the evidence reinforcing the conclusion that the Heads of Agreement is merely an 'agreement to agree' that has been unsatisfied (Closing Submissions [1]-[23]).
Clause 5 indicates further that the Heads of Agreement was not to be binding until execution of a later deed (Closing Submissions [24]-[27]). Clause 7 likewise points to another substantive obligation only becoming effective at a later date subject to the condition precedent of the discontinuance of proceedings (Closing Submission [28]-[29]).

Second Defendant

Mr Fasullo solicitor mentioned on behalf of the Second Defendant. He did not make submissions written or otherwise as his client's position was essentially aligned with the Plaintiff and Fifth Defendant (T2/1-12).

Third Defendant

The Third Defendant (although represented in Court by Mr Chapman) made no appearance nor attempt to participate in the proceedings. She provided no evidence or submissions oral or otherwise (T17/40-T18/13).

Fourth Defendant (SPC)

The Fourth Defendant submits leave is necessary to commence and maintain the present proceedings against it in the terms of section 500(2) of the Corporations Act 2001 (Cth) (Closing Submissions [3]).
The Fourth Defendant submits that it is no longer registered proprietor of the property known as the "Willows Golf Club" and that it is not possible for it to execute any mortgage in favour of the Fifth Defendant (Submissions [1]-[6]).
At the time of the Heads of Agreement being entered into the Fourth Defendant denies it was a "client" of either the Plaintiff or the Fifth Defendant (Submissions [7]-[20]).
The Fourth Defendant further submits that it or the then director Ms Maria Demetriou never gave authority to Holding Redlich to enter into the Heads of Agreement on its behalf (Submissions [21]-[23]; POD [7(c)]).
The Fourth Defendant denies any mortgage prepared by Holding Redlich was delivered as part of any obligation on the part of the Fourth Defendant arising under the terms of the Heads of Agreement (Submissions [24]). The Fourth Defendant also suggests draft deeds prepared by Holding Redlich included amendments going beyond issues contemplated by the Heads of Agreement (Submissions [25]).
The Fourth Defendant alleges the Heads of Agreement is within the third class (or alternatively the second class) of Masters v Cameron (Submissions [26]). The Fourth Defendant denies Holding Redlich acted on its behalf and denies there is a valid and effective binding contractual agreement justifying the Plaintiff's claimed relief (Submissions [28]-[31]). In any event the Fourth Defendant suggests any relief sought by execution of a mortgage over the Willows Golf Club would be futile as it no longer owns the property (Submissions [30]).
The Fourth Defendant denies any question of "shadow directors" is relevant to the proceedings and asserts there is no pleaded case that the First Defendant somehow acted as a director or shadow director of the company (that is SPC) (Supplementary Submissions [1]-[4]). The First Defendant was not a shadow director of the Fourth Defendant particularly as at 28 October (Closing Submissions [5]-[9]).
The Fourth Defendant ultimately asserts at no time at the mediation of 28 October 2016 was it represented by the Plaintiff or the Fifth Defendant. It was not a party to the mediation or proceedings (Supplementary Submissions [5]-[8]).
The subsequent conduct of the Fourth Defendant does not support a finding that the Heads of Agreement was immediately binding (Closing Submissions [10]-[12]).
Any order for specific performance would be rendered futile as no monetary relief is sought against the Fourth Defendant and it no longer owns property to mortgage (Closing Submissions [13]).
The Fourth Defendant invites an inference that the Fifth Defendant did not give evidence and that his evidence would not have assisted the Plaintiff's motion (Closing Submissions [15]).

Fifth Defendant

The Fifth Defendant denies that the Heads of Agreement is void for lack of consideration as valuable consideration was offered by the Fifth Defendant in the form of release of a claim honestly asserted (Submissions [5]-[7]).
The Fifth Defendant asserts that the Heads of Agreement is an immediately binding and enforceable contract. This is because it clearly shows an immediately operative intention to terminate the dispute between the parties (Supplementary Submissions [1]-[3]; Submissions [8]-[35]). This is also because the subsequent actions of the parties constitute admissions by conduct (Supplementary Submissions [4]). The deed of release or settlement contemplated by the Heads of Agreement was to operate as no more than a formal documentation of the liabilities and releases contained in the Heads of Agreement (Submissions [36]-[45]).
The Fifth Defendant further submits the Heads of Agreement falls within the first class of Masters v Cameron (Supplementary Submissions [6]-[8]).
The Fifth Defendant denies the First Defendant has any capacity to terminate the Heads of Agreement (Supplementary Submissions [9]-[15]).
The Fifth Defendant submits the requirements of clauses 8 and 9 of the Heads of Agreement have been satisfied and do not otherwise justify termination of the Heads of Agreement (Supplementary Submissions [16]-[24]).

Plaintiff

The Plaintiff swore eight affidavits on 8 December 2016, 23 February 2017, 14 July 2017, 18 August 2017, 15 March 2017, 1 June 2018, 1 June 2018 and 10 June 2018.
In his first affidavit (8 December 2016) (CB1 20-29) the Plaintiff outlined how he signed the 28 October 2016 Heads of Agreement.
He was informed by the Fifth Defendant that he had not received a registered first mortgage over the Willows Golf Course by 25 November 2016 or any time afterwards.
The Plaintiff had not received a duly executed deed of settlement as referred to in clause 5 of the Heads of Agreement.
On 7 December 2016 he submitted an advance copy of his Notice of Motion dated 7 December 2016 to Ms Nguyen of Holding Redlich and Andrew Christopoulos of A C Lawyers.
In his second affidavit (23 February 2017) (CB1 30-60) the Plaintiff provided annexures setting out a correspondence between Ms Nguyen and the Fifth Defendant wherein she provided a draft unsigned mortgage the Fifth Defendant was to receive over the Willows Golf Course.
In his third affidavit (14 July 2017) (CB2a 108-114, 118-133, 351-382) the Plaintiff provided a number of documents of email communications between Marsdens solicitors for the First Defendant and his firm Corporate Civil Legal between 8 December 2016 and 6 July 2017.
In his fourth affidavit (18 August 2017) (CB2b 420-97) the Plaintiff explained how he sent a text message to his brother Elvis Damcevski on 28 October 2016 from the mediation requesting the trust account ledger of his firm showing the $65,000 paid to him by the First Defendant.
As he was in the mediation rooms on St James Court House he had no facility to print the image of the trust account his brother sent him via text.
Instead the Plaintiff gave his phone to Mr Haines of Holding Redlich stating "here is a copy of my trust account. The Law Society audits my trust account every year".
The Plaintiff denied anyone on behalf of the First Defendant has ever suggested to him he had not complied with clause 8 of the Heads of Agreement. At no time was the Plaintiff ever requested to provide any invoices or other documents referred to in clause 9 of the Heads of Agreement.
In his fifth affidavit (15 March 2017) (CB3 143-51) the Plaintiff again attached as annexures emails between the Fifth Defendant and Ms Nguyen.
In his sixth affidavit (1 June 2018) (CB4 105-64) the Plaintiff recounted the history leading to SPC (the Fourth Defendant) being incorporated on or around 24 September 2010 by the First Defendant.
The Plaintiff said the First Defendant said to him "I now have a company called SPC. My daughter, Maria, is named as director but I will be the real director". The Plaintiff then set out the relationship between SPC and his firm.
This included an amount of $410,190.90 deposited into the 4159 trust account of the Plaintiff's firm by the Fourth Defendant. The Plaintiff produced a trust ledger for this account at the mediation on 28 October 2016.
The Plaintiff also described a number of financial transactions that occurred in 2015 in relation to the First Defendant and the payment of the Fifth Defendant's fees.
In his seventh affidavit (1 June 2018) (CB4 165-89) the Plaintiff outlined how the parties to these proceedings engaged in a mediation commencing at 2:00pm 28 October 2016 and at the conclusion of which the Heads of Agreement was signed by the First Defendant, Second Defendant and Fifth Defendant (endorsed by the Third Defendant and Fourth Defendant). The solicitors Mr Haines and Ms Nguyen from Holding Redlich were present at the mediation acting for the First, Second and Third Defendants.
During the morning of 28 October 2016 the Fifth Defendant telephoned the Plaintiff and told him that Mr Haines had requested he prepare a summary of deposits and payments and trust account ledgers at the mediation.
At 11:44am the Plaintiff accordingly transmitted by fax a one-page summary of his deposits and 11 pages of trust account ledgers to the Fifth Defendant. However when he arrived at the Fifth Defendant's chambers he realised the 4074 trust ledger was missing from the fax.
At the mediation the drafting and amendment of the Heads of Agreement took approximately one hour. Mr Haines prepared the original document. During the negotiations the Plaintiff texted his brother Elvis Damcevski asking for a copy of the 4074 trust ledger. He received an image of the ledger by text at 4:38pm that day.
The Plaintiff passed his phone displaying the text message image to the Fifth Defendant and then Mr Haines. Mr Haines looked at the text message and said "OK" in the presence of the mediator. The mediator then returned the phone to the Fifth Defendant who then returned the Plaintiff's phone.
Although he does not specifically recall the Plaintiff he believed he handed the 11 pages of trust account statements previously faxed to Mr Haines. At all times thereafter showing Mr Haines his phone text image of the 4074 trust ledger the Plaintiff understood he had discharged his obligations under clause 8 of the Heads of Agreement. At no time prior to 8 December 2016 or thereafter did any party to the Heads of Agreement make further enquiries about the trust account ledger 4074.
On 28 October 2016 the Plaintiff reminded Holding Redlich that he had discharged his obligation under clause 9 of the Heads of Agreement when he had sent an email to Ms Nguyen tax invoices on 24 March 2016. At no time did any party to the Heads of Agreement request another copy or make further enquiries of him regarding clause 9.
In his eighth affidavit (10 June 2018) (CB4 332-49) the Plaintiff provided further evidence in reply outlining the First Defendant's role in creating the Fourth Defendant SPC.
The First Defendant told the Plaintiff "I have got a new company called 'SPC & Co Pty Limited' as the special purpose company you suggested. I will make my daughter, Maria, a director".
The Plaintiff also provided further details as to the mediation that commenced at 2.00pm on 28 October 2016.
At the start of the mediation Registrar Flaskas stated "the purpose of the mediation was to allow the parties to reach a final settlement involving no further court proceedings" and the parties or their representatives made brief statements before the respective parties retired to separate rooms.
Sometime later possibly 30 minutes Mr Haines and Ms Nguyen from Holding Redlich came to the room where the Plaintiff and the Fifth Defendant were located. They discussed with them some possible settlement terms before returning to the room where the First, Second and Third Defendants were.
Sometime later Mr Haines and Ms Nguyen brought into the room where the Plaintiff and Fifth Defendant were sitting the Heads of Agreement in its original form. After some discussions wherein Mr Haines and Ms Nguyen moved between the two rooms handwritten changes were made to the original Heads of Agreement. This process of changing the document by handwriting happened at least once but may have happened twice.
The Plaintiff, First Defendant, Second Defendant, Fifth Defendant and Ms Nguyen then signed the Heads of Agreement. The Plaintiff thought that he and the Fifth Defendant signed the Heads of Agreement first.
It was during the course of this multiple signing, but after 4:38pm, when the text message from Elvis Damcevski containing the 4074 trust account image was received on the Plaintiff's mobile phone. The Fifth Defendant showed the phone to Mr Haines who was in a separate room with the First Defendant, the Second Defendant, the mediator and Ms Nguyen. The Plaintiff was in the corridor to where they were and saw his phone being shown to Mr Haines and the First Defendant.
Shortly before or at 5:00pm the Heads of Agreement was signed and the parties left the court building.
At no stage prior to or after this mediation or afterwards were there discussions between the parties that the Plaintiff's tax invoices for between 2009 and 2015 were disputed. Mr Haines said to the Plaintiff "could you provide the documents that showed $65,000 was applied to legal fees Mr Demetriou agreed to me to ensure $65,000 was not applied to any other matter unrelated to Mr Demetriou". When clause 8 was originally drafted in the Heads of Agreement the trust account ledger 4074 for the $65,000 was not available as it had been omitted from the pages the Plaintiff faxed to the Fifth Defendant's chambers.
The Plaintiff was only ever asked or required to produce only "the trust account ledgers with all deposits made" and no persons has ever disputed to the Plaintiff the adequacy of the documents he produced at the mediation.
The Plaintiff's trust account is audited by the Law Society every year. He reiterated that at no time prior to 8 December 2016 or thereafter did Mr Demetriou or anybody on his behalf specify that the documents he provided to Holding Redlich on or before 28 October 2016 did not satisfy the requirements of clause 8 of the Heads of Agreement.
In cross-examination by Mr Chapman (for the First and Third Defendants) the Plaintiff accepted that he had advised the First Defendant to set up SPC as a company to acquire mortgages (T32/18-20). However it was not his idea as the arrangement came out of discussions generally (T32/25-26).
The Plaintiff denied that the First Defendant had been asking for an amount of $65,000 from him for some time (T33/42-45). The Plaintiff said the first time he was asked about the $65,000 was when Holding Redlich was retained (T33/47-49).
He admitted that the first time he was asked for tax invoices which he provided to Holding Redlich on 16 or 19 February 2016 which was some time before the mediation of 28 October 2016 (T34/11-28).
He denied that the issue of the $65,000 had been raised by the First Defendant prior to when Holding Redlich was retained (T36/5-11).
He denied it was false evidence that he showed Mr Haines the 11 page trust account ledgers and SMS image of the 4074 trust account (T36/18-33).
He denied he gave false evidence that at no time prior to the mediation, during or afterwards the mediation the First Defendant had requested tax invoices in relation to clause 9 of the Heads of Agreement (T48/26-35). The Plaintiff believed clause 9 had already been complied with at the date of the mediation as he had provided the required tax invoices (T49/12-25).
The Plaintiff affirmed that at no time prior to or after the mediation did the parties make issue with his tax invoices (T49/29-49).
In cross-examination the Plaintiff admitted to the best of his recollection and belief Georgina Demetriou (the Third Defendant) was not at the mediation (T50/25-29).
In cross-examination by Mr Prowse (for the Fourth Defendant) the Plaintiff admitted he knew Ms Maria Demetriou was a director of the Fourth Defendant SPC (T51/6-9). However he admitted he never conducted an ASIC search on SPC to determine precisely whether Ms Demetriou was a director or otherwise (T51/30-35).
The Plaintiff denied that at the mediation his retainer with the Fourth Defendant had not yet ceased (T52/17-19).
The Plaintiff admitted the handwritten Heads of Agreement was edited including additions by the Fifth Defendant (T53/47-50).
It did not occur to the Plaintiff to delete clause 8 of the Heads of Agreement even though it was his belief he had already complied with its obligations (T56/14-19).
The Plaintiff denied that at the mediation he still had a retainer with the Fourth Defendant SPC. He said that SPC had terminated its retainer with him (T59/41-50).
When cross-examined that Holding Redlich did not represent the Fourth Defendant at the mediation the Plaintiff replied that the document speaks for itself (T60/19-20).

Mr Darren John Vardy

Mr Vardy swore one affidavit on 8 May 2018 (CB3 225-6).
He is the Liquidator of the Fourth Defendant. He has reviewed the books and records of the Fourth Defendant.
There is no record of any retainer having been entered into with Holding Redlich in relation to an attendance at a mediation on 21 October 2016 or at any other time.
There is no record of any resolution of the Fourth Defendant to authorise the retention of Holding Redlich in respect to any litigation either actual or anticipated.
In cross-examination by Mr Stevens (for the Plaintiff) Mr Vardy admitted that he had acted as both an administrator and liquidator of the Fourth Defendant SPC and that in his enquiries he had found that the books and records of the company were deficient (T65/6-19).
Mr Vardy had spoken to Ms Maria Demetriou at some point after preparing a liquidator's report and she was not able to provide him with any documentation regarding the acquisition or leasing of the Willows Golf Course (T66/26-35). During his investigations of the Fourth Defendant the majority of his dealings thus far had been with the First Defendant not Ms Demetriou (T66/37-40).
Mr Vardy admitted the incorporation of the Fourth Defendant occurred at the instructions of the First Defendant (T67/37-44). Ms Demetriou was involved in the incorporation of the Fourth Defendant insofar as she was appointed director of the company and signed the necessary documentation (T67/46-48).

First Defendant

The First Defendant swore one affidavit on 7 June 2018 (CB4 1-52) that was read in these proceedings.
His affidavit was largely directed to refuting the assertions made by the Plaintiff in his affidavit of 1 June 2018.
The First Defendant denied that it was his idea to incorporate the Fourth Defendant SPC. He also denied that it was his idea to install his daughter as a director. Rather he said that it was the Plaintiff who suggested to him to incorporate the Fourth Defendant and to install someone who he could trust as director. On that basis, the First Defendant nominated his daughter Ms Maria Demetriou.
The First Defendant recalled the process of drafting the Heads of Agreement took far less time than 1 hour as the Plaintiff suggests. It was more like 10 to 15 minutes. The mediation was conducted late on a Friday afternoon and it seemed very clear to him that everyone just wanted to jot down the outline of a settlement which would be detailed in a later deed.
The First Defendant denied being shown the text message of the 4074 trust account at the mediation. He denied he was shown the 11 pages of trust account statements referred to by the Plaintiff.
Following the mediation on 28 October 2016 Holding Redlich prepared a draft deed of settlement and release and on 1 November 2016 circulated a copy to the parties. On 2 November 2016 the Fifth Defendant circulated (including to Holding Redlich) a further version with his handwritten changes.
On 4 November 2016 at 8:26am Ms Nguyen circulated a further version of the draft deed which incorporated the Fifth Defendant's changes and provided further marked-up amendments. On 4 November 2016 at 9:21am the Fifth Defendant circulated an email with his further proposed amendments.
The First Defendant said he has never received the information required to be provided by the Plaintiff by clause 8 of the Heads of the Agreement and for that reason he was not prepared to sign any version of the deed of settlement that released the Plaintiff.
In cross-examination by the Fifth Defendant the First Defendant admitted when SPC (the Fourth Defendant) became the owner of the Willows Golf Course he effectively represented SPC in any business dealings related to the golf course (T75/32-39).
He admitted that he knew more about the affairs of the Fourth Defendant than his daughter Ms Maria Demetriou (T76/23-35). When Ms Demetriou ceased to be a director it was his idea (T77/14-19).
He could not recall at the mediation whether he was asked who the directors of the Fourth Defendant were (T77/47-48).
He admitted at the mediation Ms Nguyen telephoned Ms Demetriou but he denied speaking to his daughter (T77/50-T78/10). He denied the telephone call was made on loudspeaker (T78/12-13).
He could not recall much of how the Heads of Agreement came to be written out but remembered Ms Nguyen writing it (T78/47-49).
He remembered signing the Heads of Agreement but said he read it carelessly not carefully before he signed it (T79/4-8). He was in a lot of pain as he had come out of surgery on his hips (T79/10-14). Mr Haines however discussed with him the Heads of Agreement and he was happy with it (T79/16-27).
As far as the First Defendant was aware he did not know whether or not Mr Haines had any knowledge of anything to do with SPC the Fourth Defendant prior to the mediation on 28 October 2016 (T80/35-44).
The First Defendant was aware Ms Maria Demetriou signed a mortgage over the Willows Golf Course as director of the Fourth Defendant but denied ever discussing it with her as they were a bit estranged (T81/1-33).
In cross-examination by Mr Stevens (for the Plaintiff) the First Defendant admitted he discussed with the Plaintiff the incorporation of the Fourth Defendant and continued to instruct him in respect of litigation involving the Fourth Defendant (T83/6-23).
The First Defendant admitted he had been in dispute with the First Defendant and Fifth Defendant regarding fees owing (T87/6-12).
He was aware prior to the mediation that Mr Haines had requested the Plaintiff to produce some documents but does not know what documents were produced (T87/43-49).
He admitted the mediation commenced and the mediator said to him and others present that this was an opportunity to bring these proceedings to an end (T88/28-30). He admitted the purpose of the Heads of Agreement was to bring to an end the litigation that he had been involved in with the Plaintiff (T89/9-11).
It was his view at the mediation that the Fourth Defendant ought to be bearing the costs of the Fifth Defendant's fees in respect of the acquisition of the golf course (T89/50-T90/3).
Despite his previous affidavit evidence he could remember whether or not Mr Haines dictated the terms of the Heads of Agreement to Ms Nguyen or not (T91/19-T92/4). He admitted the document titled Heads of Agreement went back and forth once or twice between the parties (T95/21-24). The document was subject to further interlineations and then people signed it (T95/40-43).
The First Defendant recalled the handwritten notation about the acquiescence of the Third Defendant and Fourth Defendant. He was told Ms Nguyen had spoken to his daughter Ms Maria Demetriou but was not aware how they got his daughter's number although it could have been on the Second Defendant Ms Ashley's phone (T96/32-50). Her mobile phone number could have come from him (T97/8-9).
After the mediation he did not recall copies of the signed document being distributed and denied ever receiving a copy of the Heads of Agreement (T97/26-36).
When he signed the document he had the expectation that SPC would be paying the Fifth Defendant's fees. He had not spoken to his daughter but Ms Ashley (the Second Defendant) had given him the expectation that SPC would pay the fees (T98/24-42).
The First Defendant agreed he had instructed Holding Redlich to prepare a deed of settlement and mortgage as required by the Heads of Agreement and that they did so (T108/22-39).
The First Defendant admitted there was a signature at CB2a 381 of a draft deed of settlement and release and that he instructed his lawyers to send that document to the Plaintiff, the Fifth Defendant, Ms Nguyen, Mr Haines and others (T110/1-49). He was willing to enter into the document to meet what was required in the Heads of Agreement (T111/3-15).
It was also his expectation that Holding Redlich would prepare a deed of mortgage to bring into effect payments to the Fifth Defendant (T112/20-30).
He obtained the Willows Golf Course with a loan from a friend secured over his factory (T114/8-29).
In re-examination the First Defendant said at the time of signing the Heads of Agreement he was expecting $65,000 that he was chasing from the Plaintiff for a year or more (T115/6-7). It was his understanding it was subject to receiving information on the $65,000 (T115/9-34). He denied ever seeing any trust account ledger at the mediation (T115/38-T116/5).

Ms Kim Nguyen

Ms Nguyen did not provide sworn affidavits in these proceedings but appeared for examination and cross-examination as a subpoenaed party as a solicitor for Holding Redlich.
In examination by the Fifth Defendant Ms Nguyen identified that the blue writing in the Heads of Agreement was her handwriting. The black handwriting on the bottom of the back of the Heads of Agreement was also her handwriting (T100/33-46).
Ms Nguyen had a five minute conversation with Ms Maria Demetriou concerning the Fourth Defendant where she explained that Holding Redlich did not act for SPC, that it was a matter for Ms Demetriou whether to agree to the mortgage, but that her father had said that SPC would give over a mortgage. Ms Demetriou replied her father advises her on any issues to do with SPC and if her father said to give her a mortgage then that's fine (T101/20-28). However the First Defendant did not speak to Ms Demetriou on the phone or otherwise during this conversation (T101/30-31).
Mr Haines and Ms Nguyen were in a separate room when they composed the Heads of Agreement (T101/20-24). After the mediation they drafted the settlement release and a week or two later they drafted the mortgage. Ms Nguyen drafted part of it but not all of it (T102/37-49).
Ms Nguyen admitted to communicating with Ms Maria Demetriou about the mortgage by email including advising her to obtain legal advice. However she was never contacted by a solicitor purporting to act on behalf of Ms Demetriou (T103/1-16).
Ms Nguyen ceased to represent the First Defendant in early December 2016 (T103/47-49).
In cross-examination by Mr Prowse (for the Fourth Defendant) Ms Nguyen denied Ms Demetriou ever said to her that she was a university student and did not have the money to obtain legal advice (T104/5-29). She denied in large part Ms Demetriou's account of the conversation on 28 October 2016 (T104/43-46).
She rejected the proposition that she did not read Ms Demetriou the Heads of Agreement (T104/31-32).
In cross-examination by Mr Stevens (for the Plaintiff) Ms Nguyen stated she did not recall whether the mediator said to the parties the purpose of the mediation was to bring to an end the litigation on foot. She could not recall whether the Heads of Agreement was copied by the mediator (T105/33-40).
She could not recall whether the Plaintiff was asked to produce a particular trust ledger or ever showed Mr Haines his mobile phone (T105/49-T106/5).

Ms Maria Demetriou

Ms Demetriou swore an affidavit on 7 June 2018 (CB4 53-104).
She is a former director of the Fourth Defendant having previously been appointed on 24 September 2010 and having ceased to be a director on 23 February 2017.
On 28 October 2016 she received a phone call from Ms Nguyen who identified herself to be a solicitor from Holding Redlich. Ms Nguyen told Ms Demetriou that the Fifth Defendant had agreed that if a mortgage be drafted that allowed him to exercise his rights to sell a part of the golf course to obtain monies owed to him, he would allow the Plaintiff to pay the money owed by 28 October 2016.
Ms Nguyen also told Ms Demetriou that Holding Redlich does not represent SPC or Ms Demetriou. She told Ms Demetriou to seek separate legal advice.
Ms Demetriou replied "I am a university student and I do not have the money to obtain legal advice".
Ms Nguyen replied "That is your decision to make whether you do or not. I will email you the documentation for your review". Ms Demetriou did not authorise or tell Ms Nguyen to do anything on behalf of the Fourth Defendant.
A few weeks later Ms Demetriou received a further telephone call from Ms Nguyen. She said words to the effect "I'm going to send you a mortgage to sign. You should get legal advice". Ms Demetriou replied "I am a student, I can't afford legal advice".
On 10 November 2016 Ms Demetriou received an email from Ms Nguyen attaching a final copy of the deed of settlement and release.
On 15 November 2016 Ms Nguyen again emailed a draft mortgage to Ms Demetriou. On 15 November 2016 Ms Demetriou advised her that she would obtain legal advice regarding the documents sent to her and send them to her by registered post. On 16 November 2016 she emailed Ms Nguyen informing her that she was going to sign the documents that day. Ms Demetriou took the documents and signed them in front of a solicitor who from memory was Muhammad Chaudhry from MIC Lawyers Auburn. She then sent the documents to Holding Redlich.
At the time of returning the signed mortgage to Holding Redlich Ms Nguyen said to Ms Demetriou "We will hold the mortgage and it will only be handed over once the Deed of Settlement has been agreed and executed by all parties".
Ms Demetriou has no recollection in signing as a director of SPC the deed of settlement and release.
As far as she is aware Ms Demetriou has never been provided with the signed Heads of Agreement or was aware that it was drafted and signed at the mediation.
In cross-examination by the Fifth Defendant Ms Demetriou admitted when she became a director of the Fourth Defendant she was 20 and working as a medical receptionist (T124/22-30).
She admitted her father effectively said to her "I want you to be a director of this company" (T125/4-6). She never met with any other director of the Fourth Defendant (T125/19-21). She rarely had dealings with the tenants of the Willows Golf Course (T125/23-36).
She did not know who were the creditors of the Fourth Defendant but had access to its account and generally checked the account every so often (T126/39-49).
She does not recall what time or day of the week it was when Ms Nguyen called her on 28 October 2016 but remembers making some notes of the conversation but that she did not know where they were (T128/38-48).
When Ms Nguyen called her she explained to her that the agreement would only be binding based on her decision whether or not to sign the mortgage. However she denied Ms Nguyen read out the terms of the agreement to her (T130/5-17).
Ms Demetriou said when on the phone to Ms Nguyen she requested the opportunity to speak with her father but was told he was in the mediation (T130/35-49). If her father was happy or wished her to enter into the mortgage she would have done what he wanted her to do (T131/26-28).
After the mediation she had spoken to her father about the deed of settlement and mortgage. When she signed the mortgage on or about 15 November 2016 she understood her father was in agreement that she should sign on behalf of SPC (T132/1-5).
Upon signing the mortgage she saw a Mr Chaudhry of MIC Lawyers who did not give her advice on the mortgage but witnessed her signature (T133/38-49).
She was prepared to sign the mortgage because she understood it was what the First Defendant wanted and was prepared to take the risk of doing so without legal advice. She did not ask her father for the $400 she was told it would cost to obtain legal advice (T134/36-42).
She also signed the deed of settlement as she understood her father wanted her to sign both of them (T135/20-31).
In cross-examination by Mr Stevens (for the First Plaintiff) Ms Demetriou accepted it was fair to say in all matters relating to the Fourth Defendant she followed her father's direction and she did not otherwise involve herself with the Fourth Defendant (T136/23-34).
She allowed her father to deal with the day to day matters and access the account of the Fourth Defendant (T137/25-43). She otherwise left payments, tax returns and other decisions relating to the golf course to her father (T138/10-35).
She would not have signed the mortgage unless she understood her father had said it was okay (T138/49-T139/1). She did discuss the mortgage with her father where he said it was up to her whether she signed it, but she understood it was his view that he would like her to sign the mortgage (T139/32-38).
She was most concerned about her mother and that she would not incur any liabilities in relation to this litigation (T139/40-47).
With respect to both the mortgage and deed she signed Ms Demetriou spoke to her father about it and understood that was what he wanted to be done (T141/16-30).
When Ms Demetriou was on the phone to Ms Nguyen she trusted her to convey to her her father's wishes accurately (T142/25-26).
Ms Demetriou denied that she agreed on the telephone to Ms Nguyen that she would sign the mortgage (T143/26-29). But she accepted she had a conversation along the lines that her father advised her on all matters regarding SPC the Fourth Defendant (T142/43-T144/1).
She accepted the proposition that her father did advise her on all matters regarding the Fourth Defendant (T144/3-10).

Consideration

In my opinion objectively viewed there was a binding agreement in that the parties intended to be bound as and from the 28 October 2016. There are many reasons why I am satisfied the parties so intended.
First the context is important. The parties in dispute had formerly been lawyer and client. At some point therefore they had trusted the other in a relationship of intimate confidence. By agreeing to a mediation before a third party mediator they clearly wanted in good faith to attempt to resolve their differences. The dispute was within a narrow ambit, namely outstanding legal fees and in particular the fees of the Fifth Defendant, who had been retained as counsel.
The mediation had all relevant persons in attendance or readily available and each principal protagonist had legal representation.
The mediation was not perfunctory. It was conducted during an afternoon. Its purpose as expressly stated was undoubtedly for the parties present to arrive at an agreement and resolve the dispute if they could.
At the end a document entitled importantly "Heads of Agreement" came into existence no doubt developed and drafted with the assistance of lawyers.
The language used in this Heads of Agreement is indicative of a binding arrangement. I have already referred to the heading on the document, but the word "agreed" is used in clause 1 and the word "agreement" is used in clause 8. Everyone relevantly present signed the document and the plaintiff and the Fifth Defendant initialled each amendment or interlineation to the document.
Subject to one matter concerning the Fourth Defendant which will require separate detailed consideration the document in my view does not lack clarity or certainty. As consistent with the principles in for example Godecke v Kirwan the Heads of Agreement set out the principal terms which were to be immediately binding on the parties and nothing remained to be done that was not scoped with sufficient certainty and agreed upon in the document. Nothing more could have been agreed upon.
The parties agreed on the amount outstanding to the Fifth Defendant at $188,000 which as I have said was the focus of the mediation. Interest was agreed at 8% on a compound basis from the date of the mediation 28 October 2016. There was a clear intention that the First Defendant was to be the sole debtor not his wife (the Third Defendant) nor his former business partner (the Second Defendant). The deed of settlement and release was scoped out in clause 5. There is no doubt in my mind what the deed was to achieve and who was to be a party to it.
The $188,000 was to be paid by part payments so long as in multiples of $10,000 unless the Fifth Defendant otherwise directed in writing. I note there is no timeframe stipulated on the Heads of Agreement as to when the amount was to be paid. However I do not think the lack of deadline or timeframe is fatal to the document for uncertainty. The incentive to pay was clearly the compound interest of the $188,000 of 8% to be paid importantly from the date of the mediation.
Clause 8 speaks of the "agreement" being based on $65,000 being properly owed, with importantly added in different handwriting in black ink "as appearing in trust account records, evidence to be provided by Bobi by 11.11.16". It is tolerably clear that the parties agreed, in my view, that the production of the appropriate trust account entries relating to the $65,000 was the means by which this clause was to be satisfied. The Plaintiff had already provided invoices and trust ledger statements relating to other amounts earlier in the year but as I accept the Plaintiff's evidence trust ledger account 4074 relating to $65,000 had been omitted inadvertently from the documents provided. The role in part of the Plaintiff in the mediation was to provide these trust account ledgers.
The Plaintiff whose evidence I accept said that he contacted his brother Elvis Damcevski late in the afternoon and his brother sent to the Plaintiff's phone an image copy of the relevant page from his trust ledger which dealt with the $65,000 and where the amount had been applied (the 4074 trust account ledger statement). The Plaintiff said the phone was shown to Mr Haines and the First Defendant (CB4 334). I accept that on the phone was an image of the 4074 trust ledger and the application of the $65,000. I am satisfied Mr Haines (and Ms Nguyen) were at the mediation as agents of the First, Second and Third Defendants.
I reject in large part the First Defendant's evidence. For example I reject his account that he was never shown the text message of the 4074 trust account at the mediation. I reject his denial that he was shown the 11 pages of trust account statements. I also reject the First Defendant's statement that he only read the Heads of Agreement carelessly, and his account that Ms Nguyen received his daughter's number from perhaps the Second Defendant's phone. I reject his account that the Second Defendant had given him the expectation that SPC would pay the fees owed to the Fifth Defendant.
In fact I am satisfied the idea that SPC, the Fourth Defendant, would provide security for the fees came from the First Defendant. It was put to him that at the mediation it was his idea that SPC give a mortgage, where the First Defendant replied "I'm not sure" (T70/34-45). I do not accept this evidence. To the extent that the First Defendant attempted to distance himself from the mediation and the Heads of Agreement again I reject his evidence.
The First Defendant said he never saw the account entries. As noted I reject his evidence. I am fortified in that view in part because of the failure to call Mr Haines whose evidence I infer could not have assisted the First Defendant. In addition I am satisfied all concerned accepted that production of the $65,000 trust ledger page satisfied clause 8, as there is no evidence that despite Ms Nguyen and / or Mr Haines set about to prepare the deed and mortgage that either of them prior to or immediately after 11 November informed the Plaintiff that he had failed to comply with clause 8. By providing the phone image of the 4074 trust account the Plaintiff satisfied clause 8 and indeed Mr Haines and Ms Nguyen were evidently satisfied with this as well as legal representatives.
Two items were left outstanding and not finalised on the day of the mediation. They were the preparation of a deed and a mortgage. I have already expressed the view that the deed contemplated was scoped sufficiently in clause 5. No one suggested what was in clause 5 lead to any uncertainty as such. Indeed the solicitors obviously felt no differently in setting about the task of bringing a relatively simple deed into existence. Its purpose as scoped on the Heads of Agreement was to resolve "every claim known and unknown" now and into the future between the parties The deed was to formalise the agreement and its key structure was already agreed upon. Following the execution of the deed proceedings were to be discontinued.
Likewise the mortgage which was prepared and eventually signed by Ms Maria Demetriou and returned. It was again a very simple document whereby SPC the Fourth Defendant secured the debt owed.
That brings me to the position concerning the Fourth Defendant SPC. Ms Maria Demetriou's directorship was as a direct result of an invitation or request from the First Defendant, her father. On the evidence Ms Demetriou did not undertake any independent consideration prior to her accepting the position. Although a student at the time she sought no legal advice, did not seek to undertake any course in director's duties and obligations and all of the evidence is that in relation to any decision-making she followed her father's direction and merely carried out his wishes. His wishes were her entire frame of reference.
Apart from visiting the Willows Golf Course once and checking the bank account of the Fourth Defendant from time to time her actions in relation to it were on any view of it indeed perfunctory.
I am satisfied on any matter of substance in relation to the company she merely followed her father's directions and sought simply an assurance what she was being asked to do was what he wanted to happen.
I am satisfied, notwithstanding Ms Maria Demetriou's evidence to the contrary, Ms Nguyen read to Ms Demetriou over the phone the handwritten terms of the Heads of Agreement in their final form. I accept Ms Nguyen's account that Ms Demetriou said to her that her father advised her on any issues to do with the Fourth Defendant and if her father said to give a mortgage then that would be fine. I am also satisfied Ms Demetriou did not independently address the question of what was or was not in the best interests of the Fourth Defendant SPC. Her only concern was whether what she was told was to be the Fourth Defendant's role in the settlement was what her father wanted. I am satisfied her father wanted the Fourth Defendant to enter into the Heads of Agreement.
I reject Ms Demetriou's evidence as to what occurred in her conversation with Ms Nguyen on the date of the mediation. Ms Demetriou said she made notes but would not know where they are now. I am satisfied she may have made notes about the detail of the agreement and the role of the Fourth Defendant. Her only issue of concern I am satisfied was whether her father was content for the Fourth Defendant to provide security for the amount he agreed he owed as per the agreement.
Given the strained and estranged relationship between her parents she would I am satisfied have been comforted by the fact that her father was apparently shouldering the entire burden of the debt and her mother (the Third Defendant) was entirely and happily out of the picture. She also knew that the Fourth Defendant had nothing whatsoever to do with her mother and had no difficulty, in my view in agreeing for the Fourth Defendant to provide security.
I am satisfied Ms Demetriou's father effectively controlled the Fourth Defendant SPC as she understood it and so I am satisfied she conveyed her willingness to Ms Nguyen that the Fourth Defendant provide security. Her father who was at the mediation must have been the genesis of the idea that the Fourth Defendant would provide security. He was after all directing in my view the Fourth Defendant's affairs and did so on the day of the mediation. In this sense he was a "shadow director" at all relevant times as in he acted in the position of a director of the Fourth Defendant or (as is evident with Ms Demetriou) the director of the Fourth Defendant was accustomed to act in accordance with his instructions or wishes.
It is plainly obvious that the first Ms Demetriou heard of the idea of the Fourth Defendant SPC providing security was when Ms Nguyen rang her. That confirms beyond any doubt in my view that on the day of the mediation the First Defendant was directing and orchestrating the affairs of the Fourth Defendant and Ms Maria Demetriou went simply along with these directions. The First Defendant was careful to ensure that in agreeing to himself be the sole debtor responsible he had a safety net of the security provided by the Fourth Defendant. He also clearly agreed to exclude his estranged wife and former business partner from any future liability, until for reasons unexplained he got cold feet.

Conclusion

As I have already said, in my opinion objectively viewed the parties intended to enter into a legally binding agreement on 28 October 2016. Those parties were the Plaintiff and the First, Second, Third, Fourth and Fifth Defendants.
The agreement was set out in the Heads of Agreement with two outstanding outcomes to occur. First the preparation and signing of the deed of release and settlement by the parties and second a mortgage to be provided by the Fourth Defendant.
In light of my findings I will hear the parties on the final form of any orders and declarations sought and on the question of costs if those cannot be agreed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 June 2018

Legal Profession Act 2004(NSW)

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Judgment (23 paragraphs)

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Cases Cited (47)

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