The District Court Proceedings and What Gave Rise to Them
30The proceedings in the District Court related to 2 of 10 units that were to be built on a block of land at 140-148 Beattie Street, Balmain as part of a building development. The Plaintiff, Mr Ferizis, as a trustee for the Kallithea Trust, had negotiated to acquire options from Property and Equity Developments Pty Limited ("PED") and LNG Holdings Pty Limited ("LNG") to purchase units 7 and 8 in the Balmain development for $675,000 and $700,000 respectively. The cost of the options was $250,000 each, refundable together with interest if the options were not exercised. The option deeds were signed, and the Plaintiff paid the agreed amount of $500,000 by cheque, on 20 June 2003.
31As at 20 January 2003, Lyall Gorman was the sole director of LNG. It was an agreed fact that as at that date the shareholders of LNG were Mr Gorman and Mr Vaughan but this did not apparently take into account that, at this time, Mr Vaughan was an undischarged bankrupt. Mr Vaughan had filed a statement of affairs on 28 November 2000. The end date of the bankruptcy was 29 November 2003. It was also agreed that Mr Vaughan was appointed a director of LNG on 5 March 2002 and resigned on 23 August 2002 but the impact of his bankruptcy on his ability to hold such an office was not commented upon.
32As at 20 June 2003 Peter Dixon and Matthew Kelly were the directors of PED. At that same date, Ms Nash was not a director of LNG or PED but she did become a director of LNG between 3 and 20 November 2004.
33As it turned out, the options were not exercised and Mr Ferizis sought to recover the $500,000 plus interest. He was not able to recover anything from PED or LNG. As a result, in the District Court proceedings, Mr Ferizis sued Ms Nash, Mr Vaughan, Mr Dixon and Mr Kelly, as the First, Second, Third and Fourth Defendants respectively, alleging that they had each signed documents (which formed part of each option deed) which had the effect that they each guaranteed PED's and LNG's obligation to repay the sum of $500,000, originally paid under the option deeds and refundable if the options were not exercised, together with interest. Thus, from the Respondent, Ms Nash's, perspective, a major issue in the District Court proceedings was whether she, by signing the documents, had agreed to guarantee the repayment to Mr Ferizis.
34The other persons who played a part in the transaction which was the subject of the District Court proceedings were the solicitors for the parties to the option deeds. The solicitors acting for Mr Ferizis as trustee of the Kallithea Trust were George Shad & Partners and the solicitor with carriage of the matter was Mr James Lahood. The solicitors for PED and LNG were Hughes and Taylor and Ms Lynne Hughes was the solicitor with carriage of the matter.
35Evidence concerning how the documents came to be signed by Ms Nash on 20 June 2003 was given in the District Court proceedings by Ms Nash, Mr Ferizis, Mr Lahood, Ms Hughes and others. Further evidence relating to this issue was also given before the Tribunal by Ms Nash and Mr Ferizis and there were a number of documents recording parts of what occurred. In the Tribunal's assessment, Mr Ferizis was a careful witness who answered questions to the best of his recollection without embellishment or exaggeration. His evidence was assisted by his contemporaneous notes of conversations and dealings, was consistent with the documentary records from himself and others and was inherently credible. No significant part of his evidence was effectively challenged in cross examination before us. Despite some confusion on Mr Ferizis's part as to the exact dating and sequence of some events, the Tribunal has no hesitation in accepting his general account of what occurred.
36As to Ms Nash's evidence concerning what occurred in about May and June 2003, the Tribunal formed the view that Ms Nash was generally striving to avoid giving any evidence that would harm her case before the Tribunal while accepting what could not be reasonably denied from the documentary records. Some of her evidence, for example concerning why certain documents were signed or her level of involvement, appeared to the Tribunal to be inherently incredible. Some had changed from outright denials in the District Court to a claimed lack of recollection in the Tribunal. We shall deal with various unsatisfactory aspects of Ms Nash's evidence in more detail below. It is sufficient here to indicate that the Tribunal formed the opinion that it could not rely generally on Ms Nash's evidence of events and circumstances where they were in issue and were not confirmed by another witness or by the objective evidence found in the contemporaneous documents. On these bases, the Tribunal makes the findings set out below.
37By about May 2003 Ms Nash and Mr Vaughan had been in a domestic, personal relationship for some time. In addition, they were in a business relationship in which Mr Vaughan provided project management services for unit developments and Ms Nash provided funding or financing for those projects. In a brochure entitled "Property & Equity Developments Pty Ltd / Company Profile & Current Projects" dated March 2003, Mr Vaughan and Ms Nash were described as joint venture partners with PED in unit developments in Many Vale, Dee Why, Balmain and Chatswood.
38Mr Ferizis first met Ms Nash on 9 May 2003. At that meeting Ms Nash said to him: "I am a barrister and I work for the Director of Public Prosecutions, Graham is a developer. I have been in law for a long time and I have found that property development offers better rewards for less stress. We have developed a number of properties together successfully and are in the process of developing a few more. We allow investors to share in our developments and reward them handsomely. You or your clients can lend us funds or invest as equity partners." She gave him the PED brochure referred to above. On the second page under the heading "Company Structure" Messrs Dixon and Kelly were shown as part of PED, and Ms Nash and Mr Vaughan were described as joint venture partners.
39Mr Ferizis made some handwritten notes setting out a summary of his discussions and the various projects which were then apparently available. The notes recorded in part:
"Property & Equity Developments Pty Ltd
Joint Venture with
Christine Nash ) Mezzanine Funding provision
Graham Vaughan )
Peter Dixon
Matthew Kelly
..."
40Some discussion with Mr Ferizis ensued concerning various projects. Hughes & Taylor at the request of Ms Nash on 27 May 2003 forwarded to him a copy of a draft option for purchase of a unit development property in Hawkesbury Road, Dee Why. Mr Ferizis expressed interest in the Balmain project referred to in the PED brochure which was the proposed unit development at 140 - 148 Beattie St Balmain and he sought more information concerning that project. The telephone message book maintained by Mr Ferizis' office recorded telephone messages being left for Mr Ferizis by Ms Nash on Wednesday 28 May, Thursday 29 May and 2 June 2003. At about this time Ms Nash said to Mr Ferizis concerning the Balmain project: "We have these documents and also have a formal independent valuation on the project, I will gather them and bring them around".
41On or about 5 June 2003 Mr Ferizis was provided with a bundle of documents including a property report, a property profile, a valuation report as at 8 August 2002 and preliminary drawings for the Balmain project at 140 - 148 Beattie Street, Balmain. The developers were identified in paragraph 4.0 of the property report as PED "in a Joint Venture with LNG Holdings Pty Ltd" and that document also contained photocopies of pages 18, 20 and 22 from the PED brochure which related to the Balmain project. The valuation report was by Herron Todd White.
42Mr Ferizis had noticed that Ms Nash's and Mr Vaughan's names appeared outside the company structure as joint venture partners on page 2 of the PED brochure. He asked Ms Nash: "You are not directors of the company?" She said "Not of that company, we have another company and our two companies are joint venturers". He said to her "So who are Peter Dixon and Matt Kelly?" She said "They are builders with many years experience". He said "So what is your role?" She replied "We are joint venturers, they look after the construction and we look after the finances".
43On 5 June 2003 a message was left for Lynne Hughes, the solicitor, from Ms Nash which rather elliptically said "selling off plan, prepare a contract for Balmain 140 - 148 Beattie Street, Balmain" and then words "option deed" appeared. There were also three phone numbers written, one of which was Ms Nash's home phone number. Ms Hughes then had a telephone conversation with Ms Nash on the same day. It appears that Ms Nash also advised on that day that Mr Vaughan was buying out a share of LNG. There is no evidence that Ms Hughes was aware that Mr Vaughan was an undischarged bankrupt.
44On 12 June 2003, Ms Nash is recorded as having left a message that she had rung Mr Ferizis' office. On that day, Mr Ferizis advised Ms Nash that "My clients are interested in acquiring two units, number 7 and 8, and are prepared to lodge deposits of $250,000 on each, but on the condition that purchase prices would be $675,000 and $700,000 respectively as per the Herron Todd White valuation and not the list sale prices". Mr Ferizis's notes of this occasion recorded that she said that the valuation was 1 year old but nonetheless Mr Ferizis's clients could have them at the valuation price.
45Further to this on 13 June 2003 he advised Ms Nash that his clients would be proceeding with the deal as discussed the previous day and confirmed the proposed prices for the units. Mr Ferizis asked Ms Nash to supply him with a schedule of finishes and also a feasibility of the Balmain project. On 18 June 2003 he received a fax from Peter Dixon containing those details which had been copied to Ms Nash.
46Also on 13 June 2003 Ms Hughes recorded a telephone attendance from Ms Nash re Beattie Street Balmain in the following terms:
"Contracts need to go out Monday (buyer going o/s!)"
47She was requested to courier to Mr Ferizis' office at Bankstown contracts for units 7 and 8 for $675,000 and $700,000 respectively. The purchaser was the same in both cases, the Kallithea Trust. She was asked to note that there was to be a $250,000 release on "assignable option (i.e. replace "rescindable" with assignable)". On 16 June 2003, Ms Nash telephoned at 8.55am and advised that she was sending to Ms Hughes certain diagrams to put in the contract. On that day, Ms Nash also advised that Mr Ferizis was going to Greece on the following Friday, 20 June 2003. On the same day Mr Ferizis spoke to Ms Hughes by telephone and said he was not sure which solicitor was acting for him and requested that the options be couriered to him.
48At 9.15am on 18 June 2003, Ms Nash left a message at Mr Ferizis' office that "all papers you needed will be sent by courier after 10am today". At 12.15pm on that day she telephoned his office again and advised that the contracts were to come soon. At 3.45pm she requested that Mr Ferizis call her. She made a further request on 19 June for Mr Ferizis to call her.
49On 19 June Mr Ferizis had a meeting with the solicitor, Mr Lahood. The file note of this meeting recorded "Perused Deeds, explained effect and amendments we seek. He said to go ahead and exchange on the terms. He said Christine Nash and Victor [sic] Vaughan will attend and exchange contracts".
50On 19 June 2003, at 10.32 am Mr Lahood wrote to Hughes & Taylor in the following terms:
"We are instructed to seek your client's instructions with regard to the following:
(1) What is the debt to equity ratio for the development that our client is proposing to invest into;
(2) Whom are the registered mortgagees upon title?;
(3) Would the directors of the vendor companies provide personal guarantees for the investment that our client proposes?;
......
We advise that our client is travelling overseas tomorrow and is eager to have this matter resolved this day. We would be obliged if you could provide us with your client's instructions. We await your urgent reply."
51A telephone attendance record of Hughes & Taylor of 19 June 2003 appears to record a conversation relating to Mr Lahood's letter of 19 June 2003. It indicates that the client, whom we take to be Ms Nash, has spoken directly to Mr Ferizis in respect of the first two questions contained in a letter of 19 June. As to the third question, her instructions were that the directors of the vendor or grantor companies would not provide personal guarantees for the investment.
52Mr Ferizis was not sure whether it was on 18 or 19 June but he did recall having a telephone conversation with Ms Nash and requesting personal guarantees. Mr Ferizis's office telephone message book recorded that on 19 June at 12.20pm Ms Nash attempted to contact Mr Ferizis. She also appears that she left a message for Mr Ferizis at 4.40pm on that day.
53Mr Ferizis said that he spoke to Ms Nash on 18 or 19 June and that she agreed to provide the guarantee. When he spoke to her she said "Is the money ready as it is imperative to close the deal before you go overseas, otherwise other people will jump in and take it". Mr Ferizis said "The money is ready, however, the funds are provide by a Trust and I would need more security. I would need personal guarantees by all four directors". She said "We have never given personal guarantees. It is not the done thing". Mr Ferizis said "I spoke to the solicitor and he advised me against it unless there are personal guarantees". She said "Who is your solicitor? I will ring him and talk to him". Mr Ferizis said "Irrespective of that I will still need the guarantees. The money cannot be advanced without them". She said "I will talk to the others and get back to you".
54According to Mr Ferizis, Ms Nash rang Mr Ferizis the next day and said "We will provide you with personal guarantees on this deal, but it is not the done thing".
55There was also an undated telephone attendance note of Hughes & Taylor indicating the Ms Hughes spoke to Ms Nash and four names were provided namely Dixon, Kelly, Vaughan and Nash and email addresses for Mr Lahood, Mr Dixon, Mr Vaughan and Ms Nash. A further undated telephone conversation was also recorded between Ms Hughes and Ms Nash in which ACNs for LNG and PED were apparently sought. On the same page appeared the relevant ACNs for the two companies in the handwriting of Ms Hughes' secretary. On the word processing system of Hughes & Taylor it appears that there was created about this time an additional page for the option deed containing clauses 20 and 21 and a page containing only 4 signature blocks each in a form suitable for execution of a document as a deed for each of 4 named individuals, Messrs Dixon, Kelly and Vaughan and Ms Nash. The signature block for Ms Nash was as follows:
SIGNED SEALED AND DELIVERED )
By the said CHRISTINE NASH )
In the presence of: ) ....................
............................
56There is some difficulty with reconciling the dates as recalled by Mr Ferizis, the written request by Mr Lahood for personal guarantees, the dated telephone attendance records and the undated telephone attendance records. Nonetheless, Mr Ferizis's recollection and the objective documentary evidence suggest that despite being reluctant to give personal guarantees, Ms Nash did convey to Mr Ferizis the agreement of the four defendants to the District Court proceedings to sign personal guarantees in order to obtain the cheque for $500,000. Whether this occurred on 19 June or early on 20 June 2003 does not appear to be particularly significant.
57Mr Ferizis signed the option deeds as previously provided to him and gave Shad & Partners a cheque for $500,000. He then instructed them not to part with the funds without obtaining the personal guarantees. He left for overseas at about 4.00pm on 20 June 2003.
58Mr Lahood's file note for 20 June 2003 read "CW [which we take to mean conferred with], Christine Nash and Victor [sic] Vaughan - we went through options and made the amendments. Christine advised that she is a retired barrister. We checked amendments and deeds and effected exchange". The reference to "the amendments" appears to refer to a number of pages that were added to the option deeds just before they were signed, as there were no emendations to the wording of the deeds otherwise apparent.
59It is appropriate here to consider the form of the option deeds that were signed. Apart from the necessary differences caused by reference to unit 7 and its price in one deed and unit 8 and its price in the other, the deeds were in form largely if not exactly identical. They were signed in counterpart. The first 9 pages of each deed contained the heading to the deed, the recitals, definitions and clauses 1 to 19.2. The 10th page contained clauses 20 (headed "Repayment of Option Fee") and 21 (headed "Personal Guarantee of Directors of Grantor") and on the 11th page were the 4 signature blocks for Mr Dixon, Mr Kelly, Ms Nash and Mr Vaughan to sign. The 12th page contained a schedule setting out the details of the grantor, the grantee, the property and the price and option fee as well as the signature block for Mr Ferizis's signature. The next page, the 13th page (but in one copy the 14th page as the pages appear out of order in that copy) contained a continuation of the signature block for Mr Ferizis and the signature blocks for LNG and PED. The 14th page (except for the copy with the pages out of order) contained a statement about the cooling off period under s 66ZH of the Conveyancing Act 1919 and the 15th, 16th and 17th pages were various blank forms of notices that might be given under the deed.
60In the copies signed by Mr Ferizis, he initialled the first 9 pages and signed against his signature block on the 12th page. He had not initialled or signed the 10th, 11th, 13th, 14th, 15th, 16th or 17th pages. It appears that the 10th and 11th pages may not have been provided to Mr Ferizis prior to the time when he went through the deeds with Mr Lahood on 19 June 2003 and for this reason he did not initial those pages. The Tribunal finds that the insertion of these pages is likely to be the "amendments" referred to in both Mr Lahood's notes of his conference with Mr Ferizis on 19 June 2003 and his notes of his meeting with Ms Nash and Mr Vaughan on 20 june 2003. Nonetheless and in any event, it was not in contest before the Tribunal that the 10th page of each deed which contained clauses 20 and 21 was part of deed for the purposes of the hearing before us.
61On the counterparts signed by the other side to the transactions, Mr Dixon, Mr Kelly, Ms Nash and Mr Vaughan each signed the 4 signature block page, the 11th page, in both deeds. This page became know in both hearings as the "four signature page". In addition on the 13th page Mr Vaughan signed as a director of LNG (and in at least one version as "sole director/company secretary" of that company) and Messrs Dixon and Kelly signed as directors of PED.
62Although the wording of clause 21 headed "Personal Guarantee of Directors of Grantor" on the 10th page of each deed was not free from problems, we have proceeded on the basis that it is not appropriate for this Tribunal to consider that matter further, in the light of the express concession made during the hearing before the Tribunal that Rein DCJ had found that Ms Nash was a guarantor of the obligations under the option deeds.
63It is necessary now to consider some of the evidence given by Ms Nash as to how she actually came to sign the four signature page in each case. The Respondent affirmed an affidavit on 7 June 2006 in the District Court proceedings. At paragraph [120] and following of that affidavit, she gave an account of the meeting that took place at the offices of George Shad & Partners at Bankstown on 20 June 2003. Mr Lahood's file note of that meeting has been referred to already above. After driving to Bankstown together, Mr Vaughan and Ms Nash met Mr Lahood. Her evidence of what then occurred was as follows:
120. Lahood, Graham and I then set down at a table in the said offices of George Shad and Partners. Lahood then put 2 documents on the table that looked like option deeds.
Lahood then said words to Graham to the following effect:
"Before I give you the cheque, you need to sign these documents and you also need to get Matthew Kelly and Peter Dixon to sign the documents and bring them back to this office by today."
121. I then observed Graham signing the two option deeds.
122. Lahood and I then said words to each other to the following effect:
Lahood: "I have been given instructions that everybody has to sign these documents before I hand over the cheque, including you."
Me: "My signature is useless to you as I have no standing in relation to Balmain, as I am not a grantor and I am not a director of the grantor. I have no role in these documents."
123. Graham then said words to the following effect:
"Christine has nothing to do with Balmain."
124. Lahood and I then said words to each to the following effect:
Lahood: "Well sign them anyway so that I can give you the cheque."
Me: "Well it will be worthless to you because I have no reason to be signing these documents I have no role in these documents. However, if it means the cheque going to Graham, well then I will sign the documents."
125. I then signed the documents. Lahood witnessed my signing of the documents and also Graham's signing of the documents.
126. We then said words to each other to the following effect:
Lahood: "Before I hand over the cheque I also need to have Matthew Kelly and Peter Dixon's signatures on these documents and witnessed, but I need to have the documents back before George Ferizis gets on his plane at midday, so that I can ring George and tell him that its all done."
Graham: "How are we going to do this given that Matthew and Peter are not here?"
Me: "Well I, I can witness their signatures."
Graham: "Well, then give us the documents and we will drive over to Darling Harbour where Peter and Matthew have their office and get them to sign the documents and bring the documents back to you."
Lahood: "Well, Christine, if you witness them signing the documents, I can then say to George that the documents are properly witnessed."
127. Graham and I then drove to the offices of PED in Cockle Bay Wharf Sydney with the said option deeds and got Peter Dixon and Matthew Kelly to sign the documents.
128. Graham and I then drove straight away back to the offices of George Shad Partners.
129. Graham parked the car in the car park immediately adjacent to the office building where the said offices were located. I then waited in the car while Graham took the said option deeds into the said office building.
130. Graham then returned shortly thereafter with a cheque.
64It was common ground at the hearing that Mr Lahood did not witness the signing of the documents by Ms Nash in his office or elsewhere. It was also accepted that both Mr Lahood and Ms Nash gave evidence before the District Court that, to put it neutrally, was erroneous on this issue. Her signature on each of the four signature pages was witnessed by a Mr David Haywell, an assistant at Mr Dixon's architectural practice whose office was at Darling Harbour.
65A single cheque for $500,000 was provided to Mr Graham Vaughan following execution of the option deeds for Unit 7 and Unit 8. And, on 20 June 2003 the cheque was deposited into the trust account of Hughes & Taylor, the solicitors for LNG and PED.
66It was agreed between the parties before the Tribunal that under the terms of the option deeds Mr Ferizis could not call for the return of funds for 11 months. At the expiry of the 11 months, in the manner required by the Deeds, he advised he did not wish to exercise the options and called for the return of the money. He was not repaid.
67As explained above, Mr Ferizis commenced proceedings in the District Court by Statement of Liquidated Claim (No. 2804 of 2005) dated 7 July 2005 against four individuals, Ms Nash (as First Defendant), Mr Vaughan (Second Defendant), Mr Dixon (Third Defendant) and Matthew Kelly (Fourth Defendant). The latter two defendants entered no appearance and judgment was entered against them prior to the hearing.
68Both PED and LNG had been placed into liquidation by the time of commencement of the District Court proceedings.
69Ms Nash and Mr Vaughan filed a Defence on 30 September 2005. The documents were incorrectly stamped 30 September 2015. The Defence included a verification by each of the First and Second Defendants dated 30 September 2005. Also on 30 September 2005 Ms Nash filed a Statement of Cross-claim. The cross-claim was abandoned on the second day of the District Court hearing on 25 October 2006.
70The solicitor for the First and Second Defendants in the District Court proceedings was Stephen Velik of Velik Solicitors, Level 3, 55 York Street, Sydney. On 24 October 2006, the first day of the hearing, the Plaintiff, Mr Ferizis, was given leave to file an Amended Statement of Liquidated Claim. On 16 March 2007 Ms Nash filed, with leave of the District Court granted on 25 October 2006 and 14 March 2007, an Amended Defence.
71Mr Ferizis filed an affidavit sworn on 24 January 2006 and Ms Nash filed affidavits affirmed on 7 June 2006 and 29 June 2006. Mr Vaughan filed an affidavit affirmed on 29 June 2006. There was also other affidavit evidence relied upon by the parties.
72The District Court proceedings were heard before Rein DCJ on 24, 25, 26 and 27 October 2006, 12, 13, 14, 15, 16 and 19 and 22 March and 13 April 2007. Rein DCJ delivered judgment in the above matter on 27 April 2007.
73With that background, the Tribunal will consider in turn each of the remaining grounds relied upon by the Applicant in its Application for Original Decision.