F6086 No. 6749 of 2005 Plaintiff v Defendant

CONTRACT - Contract not executed by all named parties - Whether concluded agreement reached - Part performance - Subsequent conduct - Enforceable agreement established.

CORPORATIONS LAW - Non-compliance with company constitution - Procedural irregularities - Whether irregular share transfer, resignation of director and appointment of director should be declared not invalid - Declarations made - Corporations Act 2001 (Cth), s 1322(4)(a).

TRADE PRACTICES - Misrepresentation as to a future matter - Whether misleading - Whether failure of another person, knowing of the misrepresentation, to correct it constituted false or misleading conduct - False or misleading conduct established - Fair Trading Act 1999 (Vic), ss 4(1), 9(1).

For the First and Second Defendants (until 29 January 2008)

The Second Defendant appeared in person from 30 January 2008

1 The principal matter to be resolved in the proceedings before the Court concerns a fight for the ownership and control of the lands known as 61 Buckley Street, Footscray and 63-67 Buckley Street, Footscray ("the Buckley Street properties").

2 There are two proceedings before the Court. In the principal proceeding, the plaintiffs are Antonio Gangemi and his company Bloomingdale Holdings Pty Ltd. Mr Gangemi is a builder and a property developer. He utilised Bloomingdale as the vehicle for his relevant investments and ventures. Unless it is necessary to specify that Mr Gangemi's conduct was through Bloomingdale, I will refer only to the conduct of Mr Gangemi.

3 The third defendant Pasquale (Percy) Lanciana is a property developer and businessman. He has known Mr Gangemi since he was at school with Mr Gangemi's brother. They were once close friends, with Mr Lanciana acting as best man at Mr Gangemi's wedding in early 2001. They are now enemies.

4 Mr Gangemi alleges that in early 1997 he and Mr Lanciana agreed to go into business together as joint developers of properties, sharing all of the profits and losses. Mr Gangemi alleges that, in furtherance of this joint endeavour, he was given a 50 per cent shareholding in two of the corporate vehicles utilised for these ventures, Pre Need Services Pty Ltd and Clapana Pty Ltd. Mr Gangemi was also appointed as the sole director of these companies.

5 Mr Lanciana accepts that he engaged in some joint developments with Mr Gangemi. However, Mr Lanciana contends that other developments which Mr Gangemi alleges were joint developments between them were in fact undertaken by him on his own account, and that the only involvement of Mr Gangemi in those developments was as a builder. Mr Lanciana denies that Mr Gangemi ever held any shares in Pre Need or Clapana. Mr Lanciana contends that, at all relevant times, he owned or controlled all of the issued shares in Pre Need and Clapana, and that the only reason Mr Gangemi was appointed as a director of Pre Need and Clapana was because he (Mr Lanciana) was prohibited from being a director by reason of criminal convictions.

6 The first defendant 63 Buckley Street Pty Ltd ("63 Buckley") is the owner of the Buckley Street properties. 63 Buckley was incorporated at the request of Mr Gangemi and Mr Lanciana as the vehicle for an investment by them in the Buckley Street properties and the project to develop them ("the Buckley Street project"). Upon its incorporation, Mr Gangemi became the sole shareholder in, and the sole director and secretary of, 63 Buckley. Mr Gangemi contends that this position remains to this day. The central dispute in the proceeding is whether this is so. Mr Lanciana contends that Mr Gangemi transferred ownership and control of 63 Buckley to him in September 2003 and that subsequently, in 2005, he transferred ownership and control of 63 Buckley to the second defendant Kourosh Jafari.

7 The second defendant Kourosh Jafari is also a property developer. Prior to the disputes giving rise to the principal proceeding, he was a friend of Mr Gangemi. Mr Jafari invested either $300,000 or $350,000[1] for a 25% interest in the Buckley Street project. Following his dealings with Mr Lanciana in 2005, he contends that he is entitled to sole ownership and control of 63 Buckley and, accordingly, is entitled to develop the Buckley Street properties for his sole benefit.

8 The fourth defendant Richard Osborne was a very close friend of Mr Gangemi. Mr Osborne acted as the master of ceremonies at Mr Gangemi's wedding in early 2001. Mr Osborne alleges that he agreed with Mr Gangemi to invest $200,000 for a 12.5% interest in the Buckley Street project, upon certain conditions. In broad summary, Mr Osborne contends that he invested $200,000 in the Buckley Street project on condition that this amount, together with interest of $50,000, would be repaid to him by Mr Gangemi if the necessary planning permit to develop the Buckley Street properties was not obtained within 18 months of him investing. Mr Osborne alleges that no permit was obtained within this time and that Mr Gangemi is accordingly indebted to him in the sum of $250,000 plus interest. Mr Osborne's claims are made in a separate proceeding which was tried together with the principal proceeding. Mr Gangemi denies Mr Osborne's allegations and contends that the $200,000 invested by him was paid unconditionally to purchase a 12.5% interest in the Buckley Street project.

9 As I have said, the central issue to be determined is the identification of the person or persons entitled to ownership and control of 63 Buckley. Mr Gangemi contends that the Buckley Street properties are held by 63 Buckley upon a trust for him (Bloomingdale), Lanciana, Jafari and Osborne. Mr Jafari, with the support of Mr Lanciana, contends that he is the sole beneficial owner of 63 Buckley and the Buckley Street properties. Mr Lanciana makes no claim to any interest in 63 Buckley or the Buckley Street properties. Mr Osborne's principal claim is his debt claim against Mr Gangemi. As an alternative, Mr Osborne seeks a declaration that he is entitled to a 12.5% interest in the Buckley Street properties as beneficiary of any trust found by the Court.

10 Following discussions between Mr Lanciana and Mr Gangemi, the land situate at 63-67 Buckley Street was purchased by Mr Gangemi "or nominee" in mid 2001 with settlement due in July 2002. The land situate at 61 Buckley Street was purchased by Mr Gangemi "or nominee" in April 2002, with settlement due in September 2002. Prior to settlement, 63 Buckley was nominated as the purchaser of each of the Buckley Street properties. The deposits for the purchase of these properties were paid from Pre Need funds.

11 In the first half 2002, Mr Osborne advanced the sum of $200,000, and Mr Jafari advanced the sum of either $300,000 or $350,000, to Mr Gangemi, Mr Lanciana or persons or entities associated with them or one of them. It was agreed at some stage that the funds advanced by Mr Osborne and Mr Jafari would be applied by Mr Gangemi and Mr Lanciana towards the Buckley Street project. In return, Mr Jafari would obtain a 25% interest in the Buckley Street project and Mr Osborne would obtain a 12.5% interest. There is a dispute as to whether Mr Osborne's investment was subject to conditions.

12 The Buckley Street properties remain undeveloped.

13 As I have said, upon its incorporation Mr Gangemi was the sole director and secretary of, and shareholder in, 63 Buckley. Mr Gangemi contends that this position has never altered. He disputes the validity of all changes to the shareholding in, and officeholders of, 63 Buckley which have been notified to the Australian Securities and Investments Commission ("ASIC"). The end result of these changes is that Mr Jafari is recorded in ASIC's records as the sole director and secretary of, and shareholder in, 63 Buckley.

14 Mr Gangemi's principal contention is that the parties agreed that their respective interests in the Buckley Street project would be held through unit holdings in the "Buckley Street Unit Trust", which he alleges was created by a trust deed dated 1 February 2003. Mr Gangemi contends that this position remains and seeks declarations to give effect to his contentions. Consequent upon those declarations, Mr Gangemi seeks orders that the Buckley Street Unit Trust be wound up, for the sale of the Buckley Street properties and for the distribution of any net proceeds of sale to the unit holders in proportion to their unit holdings. Alternatively, Mr Gangemi seeks a declaration that 63 Buckley holds the Buckley Street properties on a constructive trust for him (Bloomingdale), Lanciana, Jafari and Osborne; and seeks consequential orders winding up that constructive trust.

15 Following notices served on Bloomingdale under s 89A(3) of the Transfer of Land Act 1958 (Vic), Mr Gangemi and Bloomingdale commenced their proceeding in order to substantiate caveats lodged on behalf of Bloomingdale prohibiting dealings by 63 Buckley in the Buckley Street properties. These caveats have had the effect of delaying Mr Jafari in his endeavours to develop the Buckley Street properties. In the meantime, Mr Jafari has been funding the obligations of 63 Buckley to the mortgagee of the Buckley Street properties.

16 Mr Lanciana denies Mr Gangemi's claims. He contends that, although it was intended that the Buckley Street Unit Trust would come into existence, the trust deed was never executed. Further, he contends that Mr Gangemi did not contribute any money to the acquisition of the Buckley Street properties. Although he denies that the Buckley Street Unit Trust ever existed, Mr Lanciana's final position, in evidence although not in his pleadings, is that the parties were interested in the Buckley Street project in the proportions of their intended unit holdings. However, Mr Lanciana contends that this position changed when Mr Jafari and Mr Osborne indicated that they wanted their investments to be repaid, and Mr Gangemi agreed to transfer all of his (Bloomingdale's) interest in the Buckley Street project to Mr Lanciana.

17 Mr Lanciana's principal contention is that, following a settlement conference in September 2003 between him and Mr Gangemi, Mr Gangemi executed a document titled "Heads of Agreement" in which Mr Gangemi agreed (amongst other things) to resign as a director and secretary of 63 Buckley, to transfer his shares in 63 Buckley to Mr Lanciana, to transfer any units held by him in the Buckley Street Unit Trust (if in existence) to Mr Lanciana and to withdraw his caveats over the Buckley Street properties. Mr Lanciana alleges that, pursuant to the Heads of Agreement, Mr Gangemi signed documents resigning as a director and secretary of 63 Buckley, transferring his shares in 63 Buckley to him and withdrawing his caveat over the property at 63-67 Buckley Street.[2] Mr Lanciana alleges that he then became the sole shareholder in, and director and secretary of, 63 Buckley and caused further shares in 63 Buckley to be issued to him. Thereafter, in the belief that these transactions were efficacious, he agreed with Mr Jafari to transfer his shares in 63 Buckley to Mr Jafari, to resign as a director and secretary of 63 Buckley and appoint Mr Jafari in his place.

18 Mr Gangemi admits that he signed the Heads of Agreement, a handwritten resignation of his position as director and secretary of 63 Buckley and an incomplete share transfer form. He denies that he signed the withdrawal of Bloomingdale's caveat over 63-67 Buckley Street and alleges that the withdrawal of caveat lodged by Mr Lanciana is a forgery. Mr Gangemi alleges that his signature to all of these documents, including the withdrawal of caveat if in fact he did sign it, was procured by duress. Further and alternatively, Mr Gangemi contends that the Heads of Agreement are void and unenforceable because they have not been signed by all intended parties and are incomplete in essential respects.

19 Mr Gangemi also alleges that if the Heads of Agreement were ever binding they ceased to have effect before Mr Lanciana purported to transfer ownership and control of 63 Buckley to Mr Jafari. In this respect, Mr Gangemi contends that Mr Lanciana is either estopped from relying upon the Heads of Agreement or any transactions pursuant to them, or that the Heads of Agreement were terminated or abandoned by the parties.

20 On these grounds, Mr Gangemi pleads that the transactions whereby Mr Lanciana transferred ownership and control of 63 Buckley to Mr Jafari are invalid and of no effect, and that Mr Jafari is wrongly claiming to be in control of 63 Buckley, wrongly denying the existence of the Buckley Street Unit Trust and has wrongly dealt with the Buckley Street properties by further encumbering them with the payment of Mr Jafari's personal debts.

21 Mr Lanciana disputes the claims of duress, forgery, estoppel, termination and abandonment. As to the duress claims, he contends that if (which is denied) Mr Gangemi's signature was obtained by duress he has, with full knowledge of the duress and with the benefit of legal advice, elected to affirm the Heads of Agreement and the transactions by him pursuant to them in resigning as a director and secretary of 63 Buckley, transferring his shares in 63 Buckley to Mr Lanciana and withdrawing Bloomingdale's caveat over 63-67 Buckley Street; and by other conduct subsequent to this in which Mr Gangemi and his lawyers have acknowledged the efficacy of, and relied upon, the Heads of Agreement.

22 Mr Jafari denies Mr Gangemi's allegations and relies upon his dealings with Mr Lanciana as giving him full ownership and control of 63 Buckley, in the absence of any trust obligation. Alternatively, Mr Jafari contends that Mr Gangemi is estopped from denying that he is entitled to full ownership and control of 63 Buckley. In this regard, Mr Jafari alleges that Mr Gangemi told him in or about September 2003 that he was "out of the [Buckley Street] project" and that Mr Jafari was free to deal with Mr Lanciana. In this context, Mr Jafari alleges that he told Mr Gangemi that he intended to acquire full ownership and control of 63 Buckley from Mr Lanciana and that Mr Gangemi raised no objection to the proposed purchase by Mr Jafari.

23 Further, Mr Jafari claims damages from Mr Gangemi on a number of grounds, including alleged false and misleading conduct inducing him to invest in the Buckley Street project, damages resulting from the actions of Mr Gangemi in causing Bloomingdale to lodge caveats over the Buckley Street properties and damages for breach by Mr Gangemi of his duties as a director of 63 Buckley.

24 As I have said, Mr Osborne is both a defendant in the principal proceeding and a plaintiff against Mr Gangemi in his own proceeding seeking to recover of a debt of $250,000 and interest. In the event that Mr Osborne is successful in his debt claim, Mr Gangemi claims contribution or indemnity from Mr Lanciana in respect of any judgment sum. It is only if Mr Osborne fails in his debt claim that he makes an alternative claim for a declaration that the has a 12.5% interest in the Buckley Street properties.

III. DEMEANOUR AND GENERAL CREDIBILITY OF THE PARTIES

25 The evidence is in many respects confused and incomplete. This is to be expected. There are four parties, each with a different story to tell. The critical events occurred between four and ten years ago. The parties were in frequent oral contact on many issues, both business and personal. At many relevant times, the parties dealt with each other as close friends. The parties did not adhere to formalities such as holding company meetings and passing resolutions. There are virtually no contemporaneous file notes. In these circumstances, it is unlikely that the parties would have a clear and specific recollection of particular conversations.

26 The solicitors for the parties were involved at relevant times in respect of significant issues. None of the solicitors gave evidence. Nor were any file notes made by solicitors as to relevant events available or placed in evidence. Evidence from the solicitors would have been of great assistance in resolving a number of the factual disputes which arise on the evidence.

27 As a result of these matters, it is necessary to treat the evidence of oral recollection with caution, and, wherever possible, to determine factual disputes by reference to the probabilities arising from the whole of the evidence, in particular from contemporaneous documents and non-contentious established facts. However, there are some issues where the demeanour and general credibility of the parties assumes a greater significance.

28 Mr Gangemi gave evidence over many hours. At times, he endeavoured to portray himself as an unsophisticated businessman who did not pay any attention to details. At other times, he sought to rely upon his business acumen and experience. Although his recollection of critical conversations was poor, he was nevertheless prepared to forcefully deny the evidence of others which was unhelpful to his case. He was consistently evasive on important matters and often dissembled. For example, he said that he was confused or did not understand unambiguous questions on issues which I am satisfied he well understood. He gave many inconsistent responses to the same or similar questions, often within seconds or minutes of the issue first being raised with him in cross-examination. He hid in generalities, conclusions and non-committal responses. I am satisfied that he gave false evidence on a number of important issues. The reasons for this will become apparent when the facts are considered below.

29 In contrast, Mr Lanciana was generally an impressive witness. He gave direct answers. He made numerous concessions against his interest. His evidence was consistent in nearly every respect. He presented as a hard-nosed businessman who was aggressively entrepreneurial. On the other hand, he was careless when it came to recording financial transactions and corporate dealings.

30 It was submitted on behalf of Mr Gangemi that Mr Lanciana was nevertheless a witness who lacked any credibility because he "is a thoroughly disreputable and dishonest person". In this regard, reliance was placed upon a number of matters, most of which were candidly admitted by Mr Lanciana and some of which were the subject of his own evidence-in-chief.

31 I accept that there are a number of collateral matters involving misleading, unethical or dishonest conduct by Mr Lanciana.

32 Mr Lanciana's has a history of criminal convictions, including a conviction for theft of a person's wallet in order to use his identity to set up a false electricity account for the purposes of stealing electricity in order to grow marijuana.

33 The evidence establishes that, on a number of occasions, Mr Lanciana has engaged in misleading conduct in order to minimize or avoid taxation or stamp duty on relevant transactions.

34 Mr Lanciana acted as a de facto director of a number of companies, in particular Pre Need, at times when he was, by reason of his criminal convictions, disqualified by s 206B(2) of the Corporations Act 2001 (Cth) from managing corporations. In this respect, he was assisted by Mr Gangemi, who knowingly acted as a "puppet" director of companies under the effective control and management of Mr Lanciana, when he knew that Mr Lanciana was disqualified from managing those companies by reason of his criminal convictions. This conduct reflects poorly on Mr Gangemi, as well as Mr Lanciana.

35 Mr Lanciana admitted forging Mr Gangemi's signature on a number of credit applications relating to the supply of materials or services to Pre Need or Clapana. Mr Lanciana gave evidence that he signed Mr Gangemi's signature with Mr Gangemi's consent, because Mr Gangemi was unavailable to sign the necessary credit applications. Taking the evidence as a whole, I think that it is extremely unlikely that Mr Gangemi gave his consent to Mr Lanciana signing his name to the credit applications. I find that he did not do so. The evidence establishes that, although he was the sole director at relevant times, Mr Gangemi left control of all of the financial dealings of Pre Need and Clapana to Mr Lanciana, and did not seek to involve himself in their financial affairs until he became concerned about their tax liabilities and the use by Mr Lanciana of company funds for personal purposes, in about April 2003. I find that Mr Lanciana did forge Mr Gangemi's signature when suppliers requested director's guarantees. Whilst there is no evidence that any of these guarantees were ever called upon, these are serious matters which reflect poorly on Mr Lanciana as a person and a witness.

36 The Court will refer these matters to the Attorney-General to take any necessary action or make any necessary referrals to the appropriate statutory authorities.

37 In my view, the credibility of Mr Gangemi and Mr Lanciana should, wherever possible, be determined on an issue by issue basis having regard to the probabilities affecting that issue. Where an issue cannot be determined on the probabilities, I will consider the demeanour and the credibility of Mr Gangemi and Mr Lanciana respectively on that issue. If there is no reason to prefer the evidence of one against the other on this ground, I will determine the issue by reference to the general demeanour and credibility of Mr Gangemi and Mr Lanciana. In doing so, I will prefer the evidence of Mr Lanciana to that of Mr Gangemi. Although there are a number of established collateral matters indicating that Mr Lanciana is prepared to engage in dishonest or misleading conduct, his evidence as a whole accords more with the probabilities. With minor exceptions, it was consistent throughout. As I have said, the same cannot be said of Mr Gangemi. He gave evasive evidence, dissembled when it suited him and gave inconsistent evidence on important matters. I am satisfied that he told deliberate untruths in respect of a number of matters, in particular concerning signatures which he has falsely denied are his and in connection with the settlement of his disputes with Mr Lanciana by the document titled "Heads of Agreement" dated 9 September 2003. These matters are considered in detail below.

38 Further, I find that Mr Gangemi gave false evidence in making allegations of forgery against Mr Lanciana. In my view, Mr Gangemi deliberately seized upon admissions made by Mr Lanciana, that he forged Mr Gangemi's signatures on some credit applications, as a springboard for making a number of allegations of forgery against Mr Lanciana in connection with other documents which do not suit Mr Gangemi's case.

39 In considering any contention by Mr Gangemi that a document purportedly bearing his signature was not in fact signed by him, but contains a forgery of his signature, it is necessary to take account of the following matters.

40 First, there are many examples of Mr Gangemi's genuine signature in evidence - both in photocopy and original form. Further, there are many examples of Mr Gangemi's genuine signature on affidavits sworn by him and filed in the proceeding. I informed the parties that I would examine Mr Gangemi's signature on these affidavits and would take them into account in deciding any issue as to whether a purported signature of Mr Gangemi is in fact his genuine signature or is a forgery. The parties consented to this course.

41 Further, I asked Mr Gangemi to put forward a selection of original documents containing his genuine signature, signatures purporting to be his but where he was uncertain as to whether they were in fact his genuine signature and signatures that he contends are forgeries. As a result, an original documents folder containing 27 documents bearing signatures in these categories was prepared and marked as an exhibit.[3] I have examined all of the signatures in evidence, both original and photocopy, in an endeavour to ascertain whether Mr Gangemi's genuine signature is consistent and therefore able to be recognised by a non-expert such as myself. Having done so, I have reached the firm conclusion that Mr Gangemi's genuine signatures contain many variants and inconsistencies. There are full versions, short versions and versions in between. There is much inconsistency within each of these versions. There are even material differences between Mr Gangemi's signatures when affixed at the same time and on the same page of documents.

42 Second, there are a number of documents in evidence which Mr Lanciana admits contain his forgery of Mr Gangemi's signature. I have examined these and compared them to the documents in the original documents folder and to copy documents in evidence where no dispute arises as to the authenticity of Mr Gangemi's signature. To my eye, there is a very material difference between the admitted forgeries and the alleged forgeries. The admitted forgeries are obviously amateurish and bear no resemblance to any version of Mr Gangemi's signature. The alleged forgeries have many similarities to Mr Gangemi's genuine signature.

43 Third, I raised in the course of openings in the case whether any expert handwriting evidence would be called to assist the Court to determine allegations by Mr Gangemi that his signature had been forged on particular documents. I was told by counsel for Mr Gangemi that no expert evidence would be called. The matter rested there until Mr Gangemi was cross-examined. In cross-examination, counsel for Mr Lanciana asked Mr Gangemi if he knew Mr Neil Holland, a handwriting expert. Mr Gangemi said that he knew of Mr Holland and that he was a handwriting expert. Counsel for Mr Lanciana asked Mr Gangemi if any documents relevant to this case had been given to Mr Holland for his examination. Mr Gangemi replied that they had been.

44 Following this evidence, an application to re-open Mr Gangemi's case to call expert handwriting evidence was foreshadowed, but ultimately not proceeded with. In the first instance, Mr Gangemi's counsel sought leave to show original exhibits containing Mr Gangemi's signature or purported signature to a handwriting expert for the purpose of further examination, with a view to expert evidence being prepared and an application made to call that evidence. Orders were made permitting the original exhibits to be shown to the handwriting expert. Further, other documents were shown to the handwriting expert. However, following this further examination, no application was made to call any expert evidence.

45 In these circumstances, I infer that the expert document examiner engaged on behalf of Mr Gangemi could not give evidence which would have assisted him to establish his allegations of forgery. In this regard, I note that it was at one stage proposed to make application to re-open Mr Gangemi's case to call his solicitor to explain why the handwriting expert was not called to give evidence. However, no such application was made.

46 Mr Osborne presented as an honest witness. With a few exceptions, he gave direct answers to all questions put to him and willingly made concessions against his interest. His evidence was consistent throughout. There are some aspects of Mr Osborne's evidence which are mistaken. However, in general, I prefer his evidence to that of Mr Gangemi where there is direct conflict. The reasons for this will become apparent.

47 Mr Jafari gave evidence in difficult circumstances. By the time he entered the witness box, his legal representatives had withdrawn due to lack of funding. Further, his difficulties were increased because English is obviously not his first language. As a result, Mr Jafari gave a number of confused or non-responsive answers to questions. I am satisfied that this was not due to any deliberate evasion, but was caused by a lack of understanding of the questions. This was particularly so when cross-examined by junior counsel for Mr Gangemi who spoke in a rapid fashion with varying degrees of audibility. At times, this caused me difficulties in comprehending the question asked.

48 Once Mr Jafari understood the question, he gave consistent evidence. He impressed me as a witness who was doing his best to recall relevant events.

49 It must be said that there were a number of occasions where Mr Jafari made emotional speeches and sought to argue his case, often venting his frustration at what he perceived as the failure of his counsel (when still acting for him) to bring out in cross-examining Mr Gangemi, matters he believes were important. In my view, these occasional lapses by Mr Jafari do not affect his credibility as a witness. He was an unrepresented witness giving evidence in a language foreign to him in circumstances where he had some dissatisfaction with his previous representation and was intimidated by the fact that the two parties with opposite interests to him, Mr Gangemi and to a lesser extent Mr Lanciana, were both represented by senior and junior counsel. In my view, Mr Jafari's dissatisfaction with his legal representatives, as expressed, was without any real substance. However, I am satisfied that his dissatisfaction was subjectively genuine.

50 As appears below, I have in general preferred the evidence of Mr Jafari to that of Mr Gangemi where there is direct conflict. Mr Jafari's evidence was specific and generally consistent. Mr Gangemi's evidence was often inconsistent and unspecific, often amounting to no more than conclusions or denials. I am not prepared to find that Mr Jafari lied to me on any matter, let alone on a consistent basis as contended for by Mr Gangemi. Of course, I accept that Mr Jafari is or may have been mistaken as to some matters. However, on critical matters, I accept his evidence.

51 As will become apparent, there are a substantial number of important factual issues in dispute. As I have said, the evidence is in many respects confused and incomplete, and at times points to polar outcomes. In resolving the factual disputes, there are some incongruities in the evidence that I will identify. It is not possible to make all of the facts fit together with complete consistency. Where this is so, I have made findings on the evidence when considered as a whole.

(1) Prior dealings between Mr Lanciana and Mr Gangemi

52 As I have said, Mr Gangemi alleges that in early 1997 he and Mr Lanciana agreed to go into business together as joint developers of properties, sharing all of the profits and losses. Mr Gangemi alleges that, in furtherance of this joint endeavour, he was given a 50 per cent shareholding in two of the corporate vehicles utilised for these ventures, Pre Need Services Pty Ltd and Clapana Pty Ltd. Mr Gangemi was also appointed as the sole director of these companies. Mr Lanciana accepts that he engaged in some joint developments with Mr Gangemi. However, Mr Lanciana contends that other developments which Mr Gangemi alleges were joint developments between them were in fact undertaken by him on his own account, and that the only involvement of Mr Gangemi in those developments was as a builder.

53 Mr Lanciana denies that Mr Gangemi ever held any shares in Pre Need or Clapana. Mr Lanciana contends that, at all relevant times, he owned or controlled all of the issued shares in Pre Need and Clapana, and that the only reason Mr Gangemi was appointed as a director of Pre Need and Clapana was because he (Mr Lanciana) was prohibited from being a director by reason of criminal convictions.

54 Prior to the acquisition of the Hoddle Street properties, there were a number of other properties acquired by Pre Need, Clapana or other companies controlled by Mr Lanciana for the purposes of development or investment. These included properties at Kororoit Creek Road, Williamstown (a townhouse development); a property in Walter Street, Williamstown (which was sold for a capital gain); a property in Anchor Place, Prahran (which was the subject of an apartment development by Clapana); a property in Mitchell Street, Maidstone (a factory site which is rented on a negatively geared basis); a property in Stevedore Street, Williamstown (an investment property comprising vacant land); a property in Bute Street, Footscray (upon which a townhouse development was completed) and a property in Hoddle Street, Richmond (which was developed as residential apartments).

55 Insofar as these properties involved building works, those works were performed under the supervision of Mr Gangemi.

56 Mr Lanciana contends that Mr Gangemi's only involvement in the Kororoit Creek Road project and the Anchor Place project was as a builder, and that he was paid $1,000 per week for this. Mr Lanciana contends that Mr Gangemi had no interest whatsoever in the Walter Street property. Mr Gangemi denies this and says he was an equal partner with Mr Lanciana in the Kororoit Creek Road, Walter Street and Anchor Place properties. Mr Gangemi alleges that this flowed from his equal shareholding in Pre Need and Clapana.

57 Mr Lanciana acknowledges that the Mitchell Street property, the Stevedore Street property, the Bute Street properties and the Hoddle Street property were all acquired as joint undertakings by him and Mr Gangemi, with each of them being equally entitled to share in the profits and equally obliged to share in the losses. Their interests were held, or were intended to be held, through unit holdings in separate unit trusts established or intended to be established for each of those properties.

58 The Bute Street properties were developed in conjunction with Mr Brendan Blott, the solicitor acting for Mr Lanciana and Mr Gangemi at that time. Mr Blott has been paid some money towards his share of the profit on that development. However, no other profit entitlements have been distributed, and the final accounts for the Bute Street properties have not been finalised. The undistributed profits are held by Pre Need.

59 At all relevant times until Mr Lanciana and Mr Gangemi fell out and commenced their dispute in or about April 2003, Mr Brendan Blott of the legal firm Wilckens and Roche represented Mr Lanciana, Mr Gangemi, Pre Need, Clapana and related interests. After Mr Gangemi and Mr Lanciana fell out, Peter Johnson, who operated from the same offices as Wilckens and Roche and in association with that firm, acted for Mr Lanciana. Mr Gangemi then engaged Alderuccios, solicitors, to act on his behalf.

60 Mr Lanciana and Mr Gangemi conducted their relations on a very informal basis. Mr Gangemi attended to all building and development matters, including applications for permits and the like. Mr Lanciana attended to all administrative, accounting and financial matters. The central company in the business arrangements between Mr Lanciana and Mr Gangemi was Pre Need. Mr Lanciana "pooled" all of the income from the various projects, including those which he acknowledges were joint projects with Mr Gangemi, in Pre Need.

61 Putting to one side the assertion by Mr Gangemi that he was entitled to share equally with Mr Lanciana in the profits (and losses) of all of the projects, it is apparent that Mr Gangemi made no demand for a formal accounting or distribution of profits in respect of projects as they were completed. Whether or not Mr Gangemi was interested in all of the developments, or only those of them which are acknowledged by Mr Lanciana as being joint developments, it is clear that they were content to "roll" the profits from one joint project to the next, with a view to extracting those profits at some time in the future.

62 At the time the Buckley Street properties were acquired, there had been no formal profit distribution in respect of any prior projects. On Mr Lanciana's case, the only potentially distributable profit was in respect of the Bute Street properties, which had been completed and sold. The Mitchell Street and Stevedore Street properties were investments only, and had not realised any profit.[4] Mr Lanciana and Mr Gangemi were no doubt hoping for large profits from the Hoddle Street development, which was the largest development yet undertaken by them. This is how things stood when the Buckley Street properties were acquired.

63 The prior dealings between Mr Lanciana and Mr Gangemi in respect of projects other than the Buckley Street project, and concerning Mr Gangemi's claim that he was entitled to one half of the issued shares in Pre Need and Clapana, give rise to a whole host of collateral issues. It is unnecessary to decide those collateral issues in this proceeding. This is because it must be kept firmly in mind that this proceeding concerns only claims made by the parties in connection with the Buckley Street project. The case presented at trial on behalf of Mr Gangemi focussed heavily on these collateral issues. There were two reasons for this.

64 First and foremost, evidence and cross-examination on behalf of Mr Gangemi was directed to these collateral issues because Mr Lanciana pleaded in his defence that Mr Gangemi had made no financial contribution towards the acquisition of the Buckley Street properties, or to development costs (such as consultants and permit fees) paid by Pre Need for the benefit of the Buckley Street project. The case was pleaded and opened on behalf of Mr Lanciana on the basis that Mr Gangemi could not establish the existence of the Buckley Street unit trust and that, accordingly, Mr Gangemi having contributed nothing towards the Buckley Street project, he was entitled to no interest in it.

65 However, in his oral evidence, Mr Lanciana abandoned that position. He conceded that Mr Gangemi had in fact made substantial contributions to the acquisition of the Buckley Street properties and the development costs of the Buckley Street project. This concession was properly, although belatedly, made. Mr Gangemi made his contribution in a number of ways:

(1) Mr Gangemi was a joint guarantor with Mr Lanciana for the finance facility which was utilised to complete the acquisition of the Buckley Street properties.

(2) All of the development costs expended in connection with the Buckley Street project were paid from Pre Need funds. Any profits which had been realised from prior projects in which Mr Gangemi was interested (for example, the Bute Street development) were contained within Pre Need. In that sense, Mr Gangemi contributed to the development costs which were paid by Pre Need.

(3) Each of Mr Gangemi and Mr Lanciana undertook obligations towards Mr Osborne and Mr Jafari in respect of their advances towards the Buckley Street project.

(4) Mr Gangemi invested a considerable amount of his time in connection with the acquisition of the Buckley Street properties and the proposed development of them, including in connection with engaging consultants and prosecuting the application for a planning permit.

66 As appears hereafter, I am satisfied that it was agreed between Mr Gangemi and Mr Lanciana that they would take an equal share in the Buckley Street project, through whatever structure (trust, company or partnership) was ultimately agreed between them and any other participants in the project.

67 In these circumstances, it is unnecessary to determine the extent of Mr Gangemi's interest as a shareholder in, or in the assets of, Pre Need or Clapana at any time. Those issues are to be determined in other proceedings between Mr Gangemi and Mr Lanciana.

68 The second reason why evidence and cross-examination on behalf of Mr Gangemi was directed at collateral issues arising out of the dealings between him and Mr Lanciana otherwise than in respect of the Buckley Street project was to raise a plethora of credit issues directed at undermining the credibility of Mr Lanciana as a witness. It is unnecessary to resolve all of these issues, and the evidence is in any event incomplete in respect of many of them. They have been taken into account by me in assessing Mr Lanciana's general credibility as a witness.

69 Mr Lanciana and Mr Gangemi pursued an aggressive property investment and development strategy. The profits of projects were "rolled into" one another and projects overlapped. There was a constant need for funds, with Mr Lanciana juggling funds between different projects and entities and mixing the funds from his own projects, or those of his wife, with projects jointly undertaken by Mr Gangemi. No attention was given to the proper separation of funds and the keeping of separate accounts for different projects. Until they fell out in early 2003, Mr Gangemi showed no interest in the way in which Mr Lanciana managed the finances. I infer that he believed that all was going well, and that profits would eventually begin to flow from the various projects. Further, during this time, Mr Gangemi was acquiring assets from the projects, for example, an apartment in the Anchor Place project on terms that Pre Need paid Mr Gangemi's interest payments for some time. In addition, Pre Need paid for some renovations to one of Mr Gangemi's properties.

70 At some time in late 2001, Gangemi and Lanciana discussed the need to obtain funds to progress the Hoddle Street project. Mr Lanciana told Mr Gangemi that he too should be trying to obtain funds for Hoddle Street and other joint projects, and that he "should not always leave everything to me". In this context, Mr Gangemi approached Mr Osborne, and later Mr Jafari, and sought funds from them.

71 Mr Osborne met Mr Gangemi in about 2000 when they were both holidaying in Malaysia. Mr Gangemi told Mr Osborne that he was a property developer in Melbourne and that he owned a pre-cast concrete yard. A close friendship developed between the two men, and they commenced socialising together often. They met for coffee most days and, when Mr Gangemi married in early 2001, Mr Osborne acted as the master of ceremonies at his wedding.

72 During the course of their conversations, Mr Gangemi kept Mr Osborne informed about his property development activities. I infer that this was, initially, just part of normal conversation between friends.

73 At some stage in 2001, Mr Gangemi told Mr Osborne that he had a plan to develop the site of an old car yard in Footscray into a residential unit development. This is the property at 63-67 Buckley Street. Mr Gangemi told Mr Osborne that he intended to do this in conjunction with Mr Lanciana.

74 Later in 2001, I infer after Mr Lanciana had asked Mr Gangemi to assist with obtaining funding, Mr Gangemi asked Mr Osborne if he wanted to "put money in" to the project to develop "the old car yard". Following this approach by Mr Gangemi, there were many conversations between the two men about Mr Osborne investing in the Buckley Street project.

75 As a result of these conversations, Mr Osborne alleges that an agreement was reached between him and Mr Gangemi for Mr Osborne to make a conditional investment in the Buckley Street project. In his evidence of this agreement, Mr Osborne did not give evidence of specific words said in particular conversations. He said there were many conversations concerning the proposal that he invest, and that he and Mr Gangemi spoke almost daily at this time concerning the proposal and other matters. They were close friends and he trusted Mr Gangemi. The best that Mr Osborne could do was give evidence of his recollection of the terms of the agreement reached during the many discussions. As appears below, Mr Osborne's recollection is generally consistent with, and is no doubt assisted by, some handwritten notes made by Mr Gangemi, and supplemented by Mr Osborne, in May 2003 on the back of a truck rental invoice. Of course, in May 2003, the recollections of Mr Osborne and Mr Gangemi of their discussions in late 2001 and early 2002 are likely to have been more reliable than their present recollections.

76 Mr Osborne's evidence concerning the result of these discussions is contained in the following evidence given by him in chief:

Could you please tell His Honour, as carefully and with as much detail as you recall, the content of the discussions which occurred between you on the one part and Mr Gangemi on the other in that period?---Yes. I said that I would contribute the amount of $200,000, which ended up being $199,000 because there was a $1,000 first month's interest that was taken out, on certain provisos, that being that I would be given a charge over Mitchell Street, that I would be paid my monthly interest that was being accrued from the bank for the $200,000 that if a permit was obtained within 18 months of me giving the money to Mr Gangemi, I would obtain a 12.5 per cent interest in the development and if the permit was not obtained within 18 months, I would be given my $200,000 back, and interest sum of $50,000 and also interest paid of about $1,000, between rate at the time, and also legal into fees and any other fees associated with putting the charge on Mitchell Street, and also the property at Buckley Street would be purchased unencumbered.

Mr Osborne, that's exhausted your memory on the discussions as best you are able?---Yes.

HIS HONOUR: Am I correct in this, Mr Osborne, that the evidence you've just given as to your recollection of the result which was reached after discussions over a period of a number of months?---That was the main crux of the reason why I would hand over the $200,000.

How many conversations were there between you and Mr Gangemi which gave rise to those matters being agreed between you?---That would be hard to answer because we used to meet every night for a coffee, but I would say in quite a few occasions we would discuss the business.

Yes?---But again it's hard to know because we met socially most nights.

Was there an element of negotiation involved, that is, as to the terms upon which you would advance moneys?---No.

Who proposed the terms that you say were agreed?---I proposed the terms and Mr Gangemi agreed to them. I wasn't interested in a piece of dirt that didn't have a permit. It was only worth something if it had a permit. That's why the clause was put in, 18 months.

How did you come to specify a charge over the Mitchell Street property? How did you know about the Mitchell Street property?---At the point that I gave my money over to Mr Gangemi, Buckley Street wasn't settled, so a charge couldn't be put on that property. So he suggested as an alternative to put in on the Mitchell Street property.

77 Mr Osborne maintained this position throughout his evidence.

78 Subsequently, Mr Osborne paid two cheques totalling $199,000 in order to make his investment. There is much dispute about the circumstances surrounding the drawing and banking of these cheques. The reason only $199,000 was advanced was because Mr Osborne deducted $1,000 as the approximate amount of the first month's interest payable by him on his loan of $200,000 on the security of his house. Thereafter, until in or about September 2003, Pre Need paid Mr Osborne each month an amount equal to Mr Osborne's interest payment due on his loan of $200,000. The payments were usually made by cheque handed to Mr Osborne by Mr Gangemi.

79 Mr Osborne said that he gave a cheque for $86,040 payable to Mr Gangemi on or around the date of the cheque (6 February 2002). Mr Gangemi denies this, and says that he knew nothing of the first Osborne cheque until after Mr Osborne had provided it to Mr Lanciana and Mr Lanciana had organised for that cheque to be banked.

80 In his witness statement, Mr Gangemi denied any involvement in, or knowledge of, the circumstances in which the first Osborne cheque was requested or delivered. The denial was very particular, and includes denials of events which Gangemi says have only recently come to his attention. It is necessary to set out the full content of Gangemi's denial in respect of the first Osborne cheque:

In early 2002 Lanciana obtained two cheques from Osborne for $86,040.00 and $112,960.00 respectively. I was not present when Lanciana obtained the cheques from Osborne. I have learned recently that Lanciana paid the cheque for $86,040.00 into an account that I believe was styled as follows 'Mahmood, Mehmood & Gangemi'. I did not pay the cheque into that account. I do not know who paid the cheque into that account but the cheque was deposited into that account without my knowledge. I had agreed to open an account with Mahmood and Mehmood who were mortgage brokers whom Lanciana and I had engaged to raise $6.8 million required to construct the 16 apartment development at 129 Hoddle Street, Richmond Victoria and for the proposed development at Buckley Street. $4.8 million was to be applied for the Hoddle Street development and the balance was for the commencement of the Buckley Street development. I did not know until recently that a cheque for $86,040.00 had been processed through that joint account. I only learned this after I inspected documents discovered by Osborne ... It appears that this cheque was processed through the said joint account and the proceeds thereof were transferred from that account to the said mortgage brokers.[5]

81 In cross-examination, Mr Gangemi held to his denial.

82 Mr Lanciana's evidence was as follows. In early February 2002, there was an urgent need for funds, in particular for the Hoddle Street project. At this time, he was trying to arrange funding for the Hoddle Street project from a group of Asian investors. One of the brokers trying to arrange a loan was Sam Trantino. Another was Luan Tranh Phan. Through Mr Trantino, he and Mr Gangemi became aware that the Asian investors required a fee equal to 1 per cent of the proposed loan to accompany the loan application for approximately $8.6 million. The amount required was $86,040, which was to be banked into a joint bank account in the name of the Asian investors and Mr Gangemi. Mr Gangemi was involved in dealings with Mr Trantino in connection with opening a joint account with HSBC Bank Australia in the name "Mahmood, Mehmood & Gangemi".

83 Mr Lanciana said that he raised the urgent need for funds with Mr Gangemi in early February 2002 and asked Mr Gangemi whether he could assist with obtaining an advance from Mr Osborne or Mr Jafari. As a result of this discussion, Mr Lanciana said that Mr Gangemi gave him Mr Osborne's telephone number. Mr Lanciana then telephoned Mr Osborne and asked him whether he could provide any of the funds he had agreed with Mr Gangemi to lend. Mr Lanciana said that Mr Osborne responded favourably to this request and that he then asked Mr Osborne for an advance of $86,040 by a cheque payable to Mr Gangemi.

84 In cross-examination, Mr Osborne agreed that it was Mr Lanciana who telephoned him and asked for the initial advance in respect of his agreement with Mr Gangemi. However, Mr Osborne denied that Mr Lanciana asked him for a specific sum of money.

85 As I have said, the first Osborne cheque is dated 6 February 2002. On that day, Mr Gangemi attended at an office of HSBC Bank together with one of the proposed investors (Ms Mahmood), Mr Trantino and Mr Phan. They attended in order to open the joint account in the name of "Mahmood, Mehmood & Gangemi". They met with a female bank officer.

86 Mr Gangemi's initial position was that the joint account was opened prior to 6 February 2002 with a sum of $1,000 deposited by the finance brokers. Further, his initial position was that Mr Trantino did not attend at the HSBC Bank with him when he attended to open the account. This evidence was inconsistent with the contemporaneous documents dated 6 February 2002, and Mr Gangemi's counsel later cross-examined Mr Trantino on the basis that the account was opened on 6 February 2002 and that Mr Trantino was present at the time. When it was put to Mr Gangemi that Mr Trantino was present, and recalls Mr Gangemi handing across a cheque of about $80,000, Mr Gangemi said that Mr Trantino would be lying if he gave that evidence. Earlier, Mr Gangemi had said "I've never seen Mr Trantino at the HSBC Bank". This is one of many examples of Mr Gangemi giving definite evidence where he either has no recollection or a vague recollection, and he perceived that a definite recollection would suit his case. By the time Mr Trantino gave evidence, it was accepted by Mr Gangemi and his legal advisers that he and Mr Trantino were present together at the HSBC Bank on 6 February 2002 when the joint account was opened.

87 Mr Trantino gave evidence. He said that he met Mr Gangemi and Mr Phan at the HSBC Bank at about 1.30 pm on 6 February 2002. The time is recorded in his diary and there was no cross-examination to the effect that this was a false time. Mr Trantino gave evidence that he recalls that Mr Gangemi "pulled a cheque out of his pocket and handed a cheque over". He said that he did not actually see the cheque "but it would have had to have been for 1 per cent of the total amount of the loan".

88 In cross-examination, Mr Trantino maintained his evidence. He said that "a cheque was definitely handed over". Mr Trantino was cross-examined as to the circumstances in which his statement was taken. The purpose of the cross-examination was to question whether words had been put in his mouth by the person taking the statement. Mr Trantino said that he was asked what transpired at the HSBC Bank on 6 February 2002 and that, in response, he mentioned that a cheque had been handed over. He stated firmly that this was "something I recalled myself".

89 Mr Phan gave evidence. He recalled the meeting on 6 February 2002 at the HSBC Bank. In his witness statement, he gave evidence that all of those in attendance were taken into a small room and met with a representative of the HSBC. He said:

There was signing in order to open a bank account. No cheque was handed over when the bank account was being opened and Gangemi did not produce a cheque at that meeting.

90 When Mr Phan was cross-examined, it became apparent that his evidence is simply that he has no recollection of a cheque being handed over. Nor could he recall other events which obviously happened, such as Mr Gangemi producing his passport in order to give sufficient proof of his identification. His recollection was that the meeting lasted about half an hour, that there were forms to sign and that he recalled both Ms Mahmood and Mr Gangemi signing documents. When it was put to him that it was possible that Mr Gangemi handed over a cheque during the course of the discussions and events and that that he did not see Mr Gangemi do so, he responded "if he did, I did not see that".

91 Mr Phan was cross-examined about the circumstances in which he came to give evidence. He said that he received a telephone call from Mr Gangemi and that Mr Gangemi asked him "did I remember him depositing a cheque that day". Mr Phan agreed with the proposition that Mr Gangemi put this question to him in a leading fashion and suggested to him that "I didn't deposit a cheque that day".

92 In these circumstances, Mr Phan's evidence is of little weight. It amounts to no more than his recollection of attending when the joint account was opened, that there were discussions on that day, documents handed over, documents signed over the course of about half an hour and that he does not recall Mr Gangemi handing over a cheque during that process. This is to be contrasted with the positive recollection of Mr Trantino that a cheque was handed over by Mr Gangemi.

93 The documents produced by the HSBC Bank support the conclusion that Mr Gangemi attended at the HSBC Bank and handed over the first Osborne cheque. The application form signed by Ms Mahmood and Mr Mahmood stated that they were applying to open a "call deposit account" with an initial deposit of $86,040 by cheque numbered 012 drawn on the Commonwealth Bank. This is the number of the first Osborne cheque. However, these details are absent from the application form signed by Mr Gangemi and it is possible that these details were filled out later.

94 The most significant document produced by the HSBC Bank is the original deposit slip recording the payment of the first Osborne cheque into the joint account. Most of the handwriting on the deposit slip is the same as the handwriting on the forms signed by Mr Gangemi when he attended to open the joint account. Further, the deposit slip contains a signature in the box titled "Paid in by". That signature appears to be Mr Gangemi's.

95 Mr Gangemi denies that his signature appears on the deposit slip. Of course, if it is his signature, it would establish that he had possession of the cheque at some stage and that it was he who paid it into the joint account. I have examined the original deposit slip and compared it with a number of original signatures which Mr Gangemi admits are his. Further, I have compared the signature on the deposit slip with signatures which Mr Gangemi alleges are forgeries. Based on my review of the signatures, I find that the signature on the deposit slip is that of Mr Gangemi. This finding is supported by the following matters.

96 First, Mr Trantino gave evidence that he recalled Mr Gangemi hand over a cheque at the time the account was opened. Mr Trantino gave his evidence directly and forcefully. I accept this evidence.

97 Second, Mr Osborne gave evidence that he recalls handing the first cheque to Mr Gangemi. In circumstances where there was admittedly a close friendship between Mr Osborne and Mr Gangemi, it is much more likely that Mr Osborne would hand a cheque for a significant sum of money to Mr Gangemi, with whom he had dealt, and not Mr Lanciana.

98 Third, the fact that the deposit slip is, in large part, completed in the handwriting of the bank officer who wrote the handwritten portions of the documents signed by Mr Gangemi at the time he opened the joint account is significant.

99 Fourth, Mr Gangemi's evidence concerning the HSBC deposit slip was most unsatisfactory. It was infected with advocacy and his own conclusions, which are wrong, as to the identify of the person whose handwriting appears on the deposit slip. In his evidence-in-chief, Mr Gangemi said that, "Some of the numerals I believe are Brendan Blott's, our former solicitor, and some of the handwriting is actually Richard Osborne's handwriting". In cross-examination, Mr Gangemi said that he could "absolutely" identify Mr Blott's handwriting on the deposit slip. He said that Mr Blott had written the BSB number and the account number and that he could absolutely "identify that these account details had been written in Mr Blott's handwriting". Mr Gangemi's evidence in this regard was contained in the following exchange:

Where is Mr Blott's?---Mr Blott's, it's actually the numbers. If you look at the BSB number and the account number, very distinctive the number 2. I've been doing a lot of research on Blott's handwriting, and the actual numbers are---

This is just your opinion based on some research, not from a long period of dealing with Mr Blott?---It was a long period of dealing with Mr Blott. I have a lot of original documents from Mr Blott and that's how I ascertained - when I finally got a copy of this pay-in slip I knew that it's not my signature - sorry, it's not my handwriting whatsoever.

And you say it's not your signature either?---No, sir, no.

100 Further, Mr Gangemi said that he believed Mr Osborne had written the names "Richard & Natalie Osborne" under the description of "Drawer" on the deposit slip and was "more positive" that Richard Osborne had written the names "M Mahmood & A Mehmood & A Gangemi" in the "Name of Account" box on the deposit slip. He did not say how he was able to express this opinion.

101 I reject Mr Gangemi's evidence in this regard. It demonstrates Mr Gangemi's unreliability as a witness, and his preparedness to give whatever evidence he thought was necessary to advance his case. In my view, he was simply trying to confuse the issues with respect to the deposit slip in an endeavour to support his denial that he had anything to do with the deposit slip and, in particular, that he signed it.

102 My reasons for rejecting Mr Gangemi's evidence on this issue are as follows. At the time Mr Gangemi first gave his evidence on this issue, there was only a photocopy of the deposit slip in evidence. Later, the original deposit slip and legible photocopies of the application forms and other documents completed in handwriting by the HSBC Bank officer were produced to the Court. It is obvious from an examination of the documents that the bank officer who completed the account opening documents has written most of the handwriting on the deposit slip which Mr Gangemi attributes to either Mr Osborne or Mr Blott. In particular, the figure "2" is consistent throughout the bank forms and the deposit slip, with the exception of the account number which is in different handwriting and colour ink. I infer that the different handwriting is that of another bank officer and was made when the first Osborne cheque was processed later in the afternoon. There is no reason to suppose Mr Blott had anything to do with the deposit slip or that he wrote anything on it.

103 Fifth, in finding that Mr Gangemi signed the deposit slip, I take into account his general lack of credibility as a witness. The reasons for this appear throughout these reasons. Given the probabilities, I am not prepared to prefer Mr Gangemi's evidence to the sworn evidence of Mr Osborne and Mr Trantino. In all the circumstances, I find that Mr Osborne gave the first cheque to Mr Gangemi and that Mr Gangemi gave the cheque to the HSBC Bank officer at the time he opened the joint account.

104 By a deed of charge dated 21 February 2002, Clapana (in its capacity as trustee of the Mitchell Street Unit Trust) and Mr Gangemi and Mr Lanciana (in their capacities as unit holders in the Mitchell Street Unit Trust) granted a charge to Osborne over the Mitchell Street property. The charge was executed by Mr Gangemi as sole director and secretary of Clapana and on his own behalf. Mr Lanciana and Mr Osborne also signed the deed of charge. The deed of charge is a most unsatisfactory document. Although it was prepared by a solicitor, Mr Blott, it makes no reference to the moneys secured by the charge. It states simply that "the parties have by an agreement of even date arranged to create a charge over the property".

105 In his witness statement, Mr Gangemi said that he was responsible for instigating the charge to Mr Osborne. Mr Gangemi said that he instigated the charge because he was "surprised and embarrassed" to learn that Mr Osborne had paid the first Osborne cheque to Mr Lanciana at a time when "the purchase of the property at 63-67 Buckley Street had not been settled and the Buckley Street Unit Trust, in respect of which Osborne was to subscribe for units, had not been established". Mr Gangemi said in his witness statement that he discussed this with Mr Lanciana and "asked him why he had taken Osborne's money at that time". According to Mr Gangemi, Mr Lanciana replied that Pre Need would credit the amount of the first Osborne cheque to Mr Osborne's subscription for units in the Buckley Street Unit Trust once it was established. In these circumstances, Mr Gangemi said that he persuaded Mr Lanciana to agree to provide a charge in favour of Osborne over the Mitchell Street property.

106 The difficulty with this evidence of Mr Gangemi is that it depends upon acceptance of his evidence that he had no involvement in the procurement and payment of the first Osborne cheque. For the reasons given above, I do not accept his evidence in this regard.

107 Mr Osborne was cross-examined about the charge. He said that it was part of the original arrangement which he reached with Mr Gangemi that he would be given a charge over 63-67 Buckley Street. At the time of the first Osborne cheque, Mr Osborne knew that the purchase of 63-67 Buckley Street had not then been settled. Accordingly, he asked Mr Gangemi for security. He knew that security was not provided before he paid the cheque. He said that he paid the cheque in the absence of security being first obtained because he was giving his money to his best friend and he "trusted him wholeheartedly". Subsequently, in circumstances which Mr Osborne cannot recall, the executed charge was provided to him for signature. At this time, Mr Osborne learnt from Mr Gangemi that the Mitchell Street property was owned by Clapana on behalf of Mr Gangemi and Mr Lanciana.

108 Mr Lanciana was cross-examined about the charge. At the time the charge was created, Mr Lanciana says that he believed that Mr Osborne was a mere lender to him and Mr Gangemi, on the basis that they would pay the interest incurred by Mr Osborne on the moneys advanced by him. Mr Lanciana explained his recollection of the circumstances giving rise to the charge in the following way.

... because it was a loan, the concern was that if something happened to Gangemi and myself, where would Mr Osborne be in respect to his money, and it was agreed, although there are varying accounts of who came up with the idea and everyone seems to be taking credit for it, but the end result was it was agreed there would be a charge over Mitchell Street to protect Mr Osborne's funds that he had contributed and was about to contribute. Otherwise the case - if we died in a car accident, where would he be?

So you are accepting that you were equally liable with Mr Gangemi for the $86,000?---At that time that point in time it was a loan and I felt responsible for it too, yes.

It was a loan to the two of you?---It was a loan for us to use at Hoddle Street, yes. That's how I interpreted it all the way until I heard different.

109 The circumstances in which the charge was arranged raises a credit issue. It is strictly unnecessary to decide it. However, I prefer the evidence of Mr Lanciana and Mr Osborne to that of Mr Gangemi. This is principally because Mr Gangemi's evidence is inconsistent with my findings concerning Mr Gangemi's involvement in procuring and depositing the first cheque into the joint account with HSBC Bank.

110 Later in February 2002, Mr Osborne wrote a further cheque for $112,960 payable to Mr Gangemi ("the second cheque"). Someone, probably Mr Lanciana, banked this cheque to the credit of an account maintained by Pre Need in the name of "Victorian Precast Panels". This cheque was dishonoured. The bank brought this to the attention of Mr Lanciana. Mr Lanciana says that he spoke with Mr Gangemi about this and then rang Mr Osborne and told him the cheque had been dishonoured. Mr Osborne was concerned. Both Mr Osborne and Mr Lanciana said that Mr Lanciana did not ask Mr Osborne for a replacement cheque during this conversation. Mr Osborne says that it was Mr Gangemi who thereafter asked him to provide a replacement cheque, in the same amount, but payable to "Victoria Pre Cast Panels". I find this evidence difficult to accept. For the following reasons, it is much more likely that both Mr Osborne and Mr Lanciana are mistaken about the replacement cheque.

111 First, the bank informed Mr Lanciana that the second Osborne cheque had been dishonoured. Mr Lanciana says that he then spoke with Mr Gangemi about this. This is more probable than not. It was important to Mr Lanciana that the funds were obtained, and the dishonour would have concerned him. It is natural that he would have discussed this with Mr Gangemi. Following his conversation with Mr Gangemi, Mr Lanciana spoke with Mr Osborne and informed him that the cheque had been dishonoured. Mr Osborne was concerned about this. Given that Mr Lanciana had spoken with Mr Gangemi, it is more probable than not that it was Mr Lanciana who asked Mr Osborne for the replacement cheque. There would otherwise be no purpose for Mr Lanciana to have telephoned Mr Osborne.

112 Second, the probabilities favour Mr Lanciana specifying that the replacement cheque should be made payable to Victoria Pre Cast Panels. This is because Mr Lanciana had control of the finances and it was he who made decisions as to which account should be credited with funds as the need arose.

113 I find that Mr Lanciana requested the replacement cheque from Mr Osborne and that Mr Osborne provided that cheque directly to him, and not to Mr Gangemi.

114 However, I accept Mr Osborne's evidence that the second Osborne cheque, which was made payable to Mr Gangemi personally, was handed by him to Mr Gangemi. There is no reason to disbelieve Mr Osborne when he says that he recalls giving the second Osborne cheque to Mr Gangemi. Mr Osborne and Mr Gangemi were very close friends at the time. It was Mr Gangemi who had persuaded Mr Osborne to invest in the Buckley Street project. At this time, it is unlikely that Mr Osborne would have dealt directly with Mr Lanciana, to the exclusion of Mr Gangemi, in respect of such a large sum of money.

115 In about September 2002, Mr Jafari discovered that the Buckley Street properties had been purchased subject to a mortgage. This was contrary to his understanding and he was annoyed. He spoke with Mr Osborne and told him about the mortgage. Mr Osborne said he did not know the properties were mortgaged and was unhappy that they were. A meeting was arranged between Mr Lanciana, Mr Gangemi, Mr Jafari and Mr Osborne that night. Mr Jafari said that he wanted the mortgage paid out or he wanted his money back. Mr Lanciana and Mr Gangemi said that they could not pay the mortgage out.

116 Mr Jafari said that he repeated his wish to withdraw from the project in a later meeting between him and Mr Osborne, and Mr Osborne replied to the effect "I feel the same. As far as I'm concerned my money is a loan and I want it back".[6] Mr Osborne cannot recall saying this to Mr Jafari, but does not deny he may have done so.

117 In his witness statement, Mr Osborne said that shortly after he was informed by Mr Jafari about the mortgage, he told Mr Gangemi that he wanted out of the project and that he wanted his money back. Mr Osborne said that Mr Gangemi did not pay his money back but:

He instead told me that he would write out the details of what our agreement was. He also told me that the project would still go ahead and that he could still get the permit within the 18 month period.

In May 2003, Gangemi did write out those details. The document written by Gangemi was created one day in Richmond after I had been with Gangemi to return a truck which he had rented from Thrifty.[7]

118 There are some difficulties with this evidence of Mr Osborne. First, Mr Osborne said in his witness statement that he asked for his money back when he learnt that the properties were mortgaged. In contrast, in his oral evidence, Mr Osborne said that he "went to Mr Gangemi and expressed my concern that there was a mortgage over the property ... He assured me that everything was fine and I was happy with that". In re-examination, Mr Osborne said that he did not seek to remove his money from the Buckley Street project when he learned that the property was mortgaged because:

I had a discussion with Mr Gangemi about the mortgage which from memory he denied that there was one on it at the time. Then he assured me that the mortgage was not my responsibility at all and that things will progress as we hoped they would. So at that time I had no reason to distrust him at all and I believed what he was saying.

119 Second, the clear indication given in Mr Osborne's witness statement is that Mr Gangemi's promise to "write out the details of what our agreement was" was given shortly after Mr Osborne discovered that the Buckley Street properties were mortgaged. This was in or about September 2002. There is no explanation in Mr Osborne's witness statement as to the delay between this time and May 2003, when Mr Gangemi finally wrote out the details as promised.

120 In my view, Mr Osborne's oral evidence accords with the probabilities.

121 As will appear, by May 2003 Mr Gangemi and Mr Lanciana had commenced a serious falling out. There was a heated meeting at the Pre Need offices, attended by Mr Gangemi, Mr Lanciana, Mr Jafari and Mr Osborne.[8] It was clear to all present that Mr Gangemi and Mr Lanciana could no longer work together. By this time, Mr Osborne was most concerned about his investment. It is in my view more probable that it was at this time that Mr Osborne asked Mr Gangemi for his money back and, in response, Mr Gangemi either offered to write down the terms upon which Mr Osborne had invested or Mr Osborne asked him to do so. Mr Gangemi said that, at this time, "Mr Osborne was very concerned and I sympathised with him". I accept this statement by Mr Gangemi. He and Mr Osborne were still good friends at this time.

122 Mr Osborne says that, on or about 12 May 2003, he assisted Mr Gangemi when he returned a rental truck to the Thrifty Car Rental office in Richmond. Mr Osborne said that he followed Mr Gangemi in his car whilst Mr Gangemi drove the rental truck to the Thrifty office. According to the invoice issued by Thrifty to Mr Gangemi, the truck was returned on 12 May. Once Mr Gangemi had returned to the truck, and obtained his copy of the invoice, Mr Osborne said that Mr Gangemi sat in the passenger seat of Mr Osborne's car and, at that time, Mr Osborne asked him to write out the terms upon which Mr Osborne had invested. According to Mr Osborne, Mr Gangemi then wrote out the terms of Mr Osborne's investment on the back of the Thrifty invoice ("the Thrifty note").

DEED IS MADE THE _________ DATE 4/3/02

BY ANTONIO GANGEMI OF UNIT 6-3 ANCHOR PLACE PRAHRAN 3181

AT THE REQUEST OF ________ RICHARD OSBORNE OF ADDRESS 95 Richardson Street Albert Park

61 BUCKLEY ST. FOOTSCRAY 3011, CERT OF TITLE VOL,. 8224 FOL 243

63-67 BUCKLEY ST. FOOTSCRAY 3011, CERT OF TITLE VOL. 2805 FOLIO 988

VOL. 8592 FOLIO 907. VOL. 8195 FOLIO 152. VOL. 8355 FOLIO 746.

THE PROPERTY WILL BE DEVELOPED BY THE REGISTERED PROPRIETOR 63 BUCKLEY STREET PTY LTD ACN 099 836 361

* PLAN-PERMIT FOR MIN 26 UNITS WITHIN 18 MONTHS OF MONEY PAYED (sic)

* INTEREST PAYED (sic) BY PRE NEED SERVICES AUSTRALIA

* YOU WOULD RETAIN 12½% IF PERMIT WITHIN 18 MONTHS

MONEY REPAYED (sic) BACK WITH 25% NET RETURN $250,000

* COST OF ESTABLISHMENT FEES & CHARGES. + LEGAL FEES ASSOCIATED WITH CHARGE ETC.

124 Mr Osborne said that Mr Gangemi hand wrote all of the Thrifty note except for the date, Mr Osborne's address, the symbol and words "+ LEGAL FEES ASSOCIATED WITH CHARGE ETC." and the words, symbol and figures in the box at the end of the Thrifty note. For convenience, these are in bold type in the above quote. Mr Osborne said that he wrote these things, appearing in bold above, on the Thrifty note in the presence of Mr Gangemi immediately following the preparation of the document by Mr Gangemi.[9]

125 Mr Osborne dated the Thrifty note 4 March 2002, because that is the date he paid the replacement cheque for the second Osborne cheque.

126 Mr Gangemi accepts that the bulk of the Thrifty note is in his handwriting but says that, in addition to the portions which Mr Osborne admits he wrote, Mr Osborne also wrote "18 MONTHS" on three occasions on the Thrifty note. These are italicised in the quote above. Mr Gangemi does not say that he remembers Mr Osborne writing "18 MONTHS" on three occasions on the Thrifty note. He says that the handwriting of "18 MONTHS" is not his. I do not accept this evidence. I have examined the original of the Thrifty note. There is nothing to indicate that the handwriting of "18 MONTHS" is materially different from the other handwriting which is admittedly that of Mr Gangemi. I find that Mr Gangemi wrote "18 MONTHS" on the Thrifty note.

127 Mr Gangemi also said that he does not believe the percentage symbol "%", which is adjacent to the figure "12" on the Thrifty note, was written by him; because he uses "dots" and not "circles" when writing the symbol for percentage. Nothing turns on this.

128 Mr Gangemi also said that he was not sure if the figure "26" in the first condition stated on the Thrifty note was written by him. Again, nothing turns on this.

129 There are more important factual issues concerning the Thrifty note. First, Mr Gangemi denies that the Thrifty note was written in Mr Osborne's car, or that Mr Osborne ever assisted him in the return of a rental truck by following him to the Thrifty office and then driving him to his onward destination. However, although he was prepared to deny Mr Osborne's account of the place where the Thrifty note was written, Mr Gangemi himself had no recollection of where the document was written. Further, although Mr Gangemi cannot recall where the Thrifty note was written, he gave evidence of a positive recollection that Mr Osborne wrote nothing on the Thrifty note in his presence: "I can recall there was nothing written (by Osborne), no. The only notes on that note were mine".

130 Second, and of greatest importance, Mr Gangemi denies that the Thrifty note was written to record the terms of Mr Osborne's investment in the Buckley Street properties. In his evidence-in-chief, Mr Gangemi said that Mr Osborne became very concerned after the heated arguments in May 2003 at the Pre Need offices between him and Mr Lanciana and "everybody in that room". Mr Gangemi described those arguments as "very heated arguments, very, very - got out of control". As I have said, in this context, Mr Gangemi said that Mr Osborne was very concerned and he sympathised with him. As a result, Mr Gangemi said that Mr Osborne approached him "at some time", which I infer was shortly after these heated arguments.

131 Mr Gangemi said that Mr Osborne said that his solicitor had told him that the charge over Mitchell Street "means nothing unless an agreement goes with it". Mr Gangemi said that he replied "I can't give you an agreement, all I can do is give you a few notes, go to Lanciana and see if he will write you up something". Mr Gangemi said that the Thrifty note was written for this purpose only: "That's basically all it was. Just to make some points and tell him (Lanciana)". Mr Gangemi says that it was in this context, that "for some unknown reason I wrote something on the back of the Thrifty note". By "some unknown reason" I took Mr Gangemi to be referring to the fact that the notes were written on the back of the Thrifty invoice. In that regard, Mr Gangemi said that the Thrifty note would have been placed by him in his diary and, in the usual course, given by him to his accountant. Mr Gangemi said that he usually carried his diary with him, inside an attaché case. Although it was not put, I infer that Mr Gangemi carried documents of current relevance to him in his attaché case.

132 In cross-examination, Mr Gangemi sought to further downplay the significance of the Thrifty note. He described the Thrifty note as "just taking down some notes about his (Mr Osborne's) concerns" following the heated argument at the Pre Need offices. Mr Gangemi "absolutely" denied that the Thrifty note was intended to reflect his earlier discussions and the terms of the agreement reached between him and Mr Osborne in those discussions.

133 I accept Mr Gangemi's evidence that Mr Osborne told him that his solicitor had said that the charge over Mitchell Street "means nothing unless an agreement goes with it". I have previously referred to the deficiency of the charge in this regard. Any solicitor consulted about the charge is likely to have given that advice. Further, the fact that the Thrifty note refers to Clapana is a strong indication that Mr Gangemi wrote the note with the purpose of linking it to the charge granted by Clapana to Mr Osborne over the Mitchell Street property. However, I do not accept Mr Gangemi's evidence that the Thrifty note was not, and was not intended to be, a record of the agreement previously reached between him and Mr Osborne prior to the second Osborne cheque being paid. My reasons are as follows.

134 First, the Thrifty note was always likely to be a critical document in the case between Mr Osborne and Mr Gangemi. In his further amended statement of claim, Mr Osborne alleged that the agreement between him and Mr Gangemi was made on or about 6 February 2002, which is the date of the first Osborne cheque. The particulars of this allegation made it clear that the Thrifty note was a document written on the back of the Thrifty invoice dated 12 May 2003 and that it was "prepared by Gangemi and delivered to Osborne as recording the terms and conditions of the Agreement".[10] Further, the particulars state that the date on the Thrifty note "is recorded as 4 March 2002". This is the date of the replacement cheque for the second Osborne cheque.

135 In these circumstances, the failure of Mr Gangemi to include in his witness statement any evidence concerning the purpose of the Thrifty note, or the circumstances in which it was prepared, is significant. The only evidence of Mr Gangemi about the Thrifty note in his witness statement is as follows:

Not all of the handwriting on the document is mine and I did not sign or date the document. I believe that the document contains some notes taken by me during a conversation held between myself and Osborne. The document was amended at some later stage and dated by someone else. I do not know who made the amendments or who dated the document.[11]

136 The above evidence is silent as to the purpose for which Mr Gangemi now says that he wrote the Thrifty note. There is no mention of the "notes" being made so that Mr Osborne could "go to Lanciana and see if he will write you up something". Further, the witness statement is silent as to which parts of the Thrifty note were written by Mr Gangemi and which parts he alleges were someone else. It was put to Mr Gangemi in cross-examination that he was deliberately vague and brief in his witness statement concerning the Thrifty note, so that he could wait and see what Mr Osborne said in his witness statement before committing himself to a position in respect of these matters. Mr Gangemi did not accept that this was so. I reject his evidence in this regard. I find that the statements in Mr Gangemi's witness statement concerning the Thrifty note were deliberately brief and lacking in detail, in order to give Mr Gangemi an opportunity to see what Mr Osborne said in his witness statement, or in opening, before committing himself to a position.

137 Second, if accepted, the purpose which Mr Gangemi gave in evidence for the preparation of the Thrifty note is in any event not inconsistent with Mr Osborne's evidence that the purpose of the Thrifty note was to record the terms upon which he had invested in the Buckley Street project. It matters not whether it was intended that Mr Osborne would take the Thrifty note to Mr Lanciana for the purpose of Mr Lanciana preparing, or arranging for the preparation of, a more formal agreement to link with the charge given by Clapana. The critical issue is whether the Thrifty note records the terms of that which had previously been agreed but not documented.

138 Third, Mr Gangemi could offer no rational alternative explanation as to the purpose of the six conditions listed on the Thrifty note. The only explanation that he gave was that "Richard (Osborne) could have gone to Lanciana and requested that he accept some of these notes and write up an agreement if he needed to. I can't give you a specific reason for it".

139 Fourth, the language used in the Thrifty note is consistent with the note written as a record of terms previously agreed between Mr Gangemi and Mr Osborne. In particular:

(1) The note records that Mr Osborne had previously "advanced the amount of $200,000 to be applied towards purchase of the properties". (emphasis added)

(2) The first condition is that a permit be obtained "within 18 months of money payed (sic)".

(3) The second condition, records "interest payed (sic) by Pre Need Services Australia". This had already happened. From the time Mr Osborne made his investment, Pre Need had paid interest to Mr Osborne.

(4) The third and fourth conditions should be read together. They obviously record an agreement which had previously been reached between Mr Gangemi and Mr Osborne:

* YOU WOULD RETAIN 12½% IF PERMIT WITHIN 18 MONTHS

* IF PERMIT NOT ISSUE WITHIN 18 MONTHS MONEY REPAYED

(sic) BACK WITH 25% NET RETURN $250,000" (emphasis added)

(5) The sixth condition refers to a charge being given to Mr Osborne over the Mitchell Street property and over 63-67 Buckley Street. As appears above, a charge had already been given to Mr Osborne over the Mitchell Street property, in substitution for a charge over 63-67 Buckley Street, because the purchase of 63-67 Buckley Street had not been settled at the time Mr Osborne made his second payment.

140 Fifth, Mr Gangemi said that he had no intention of deceiving Mr Lanciana when he wrote the Thrifty note. In the absence of any rational explanation being given by Mr Gangemi as to why the note contains the conditions written by him, I infer that those conditions were a record of what Mr Gangemi had previously agreed with Mr Osborne. Mr Gangemi gave no evidence that the conditions were some new agreement reached between him and Mr Osborne once Mr Osborne expressed his concerns following the falling out between Mr Gangemi and Mr Lanciana and the resulting heated meetings.

141 Sixth, Mr Osborne did not approach Mr Lanciana with the document and have him prepare a formal agreement. The Thrifty note was not shown to Mr Lanciana until a year or so later, when Mr Osborne obtained legal representation and made formal demands for payment.

142 Finally, Mr Gangemi does not remember writing the Thrifty note:

I remember having the chat with Richard regarding making some notes. I do not recall, I don't remember the actual day, evening, whatever time it was, that we sat down, I just don't recall.

Is this the case, that apart from remembering that you sat down and had a general chat with Richard Osborne in response to his concerns and made some notes, that you have no recollection of the preparation of these notes?---I'm just - Your Honour---

Is that the position, or not?---Sorry, I don't have that much recollection about the document itself, that's correct.

143 It was submitted on behalf of Mr Gangemi that I should accept Mr Gangemi's evidence and reject Mr Osborne's concerning the purpose of the Thrifty note. Reliance was placed upon the following matters:

144 It was submitted that Mr Osborne originally sought to pretend that the Thrifty note had been created in 2002. It was submitted that Mr Osborne did this by dating the document 4 March 2002, because Osborne's original pleading did not refer to the fact that the Thrifty note was created in 2003 and because Mr Osborne's affidavit of documents described the Thrifty note as dated 4 March 2002 and discovered the Thrifty tax invoice as a separate document. I reject these submissions. Mr Osborne has adequately explained why he dated the document 4 March 2002 (the date of his final payment) and Mr Osborne's amended pleading, filed in September 2007 well in advance of the trial, made it plain that the Thrifty note was not created in 2002. It was never part of Mr Osborne's case that the Thrifty note was a contemporaneous record of an agreement between him, Mr Gangemi and Clapana.

145 It was submitted that the Thrifty note could not have been intended to record the terms of the agreement reached between Mr Osborne and Mr Gangemi prior to Mr Osborne making his investment, because the Thrifty note refers to the property at 61 Buckley Street. 61 Buckley Street was not purchased until after Mr Osborne had made the whole of his investment. There is no merit in this submission. By the time the Thrifty note was prepared, 61 Buckley Street had been included in the Buckley Street project. Mr Osborne's interest in that project, conditional or otherwise, had been agreed at 12.5%. There is no dispute about that. In these circumstances, it is natural that, in seeking to record the terms of Mr Osborne's investment, 61 Buckley Street would be included in the description of the property to be developed. The Thrifty note is an informal document written by two businessmen. They are likely to have included a reference to the proposed development, in which Mr Osborne admittedly had an interest, as that development stood at the time.

146 It was submitted that Mr Osborne's evidence that the Thrifty note was written in his car is unlikely to be true, because the Thrifty note contains the ACN numbers of Clapana and 63 Buckley, and gives the full title particulars of the Buckley Street properties. I accept that it is unlikely that Mr Gangemi would have been able to recall the ACN numbers of Clapana and 63 Buckley or the title particulars of the Buckley Street properties. However, this is not fatal to Mr Osborne's account of the Thrifty note being written in his car. Mr Gangemi had his attaché case with him and I infer that he had the relevant particulars at hand in one or more documents in that case, for example a planning application in respect of the Buckley Street properties and documents concerning Clapana's development of the Hoddle Street project. Both of the projects were current at the time. In any event, if Mr Osborne is mistaken as to the Thrifty note being written in his car, that is not fatal to his case. For the reasons given above, the probabilities favour the Thrifty note being prepared to record the arrangements reached between Mr Gangemi and Mr Osborne in late 2001 and early 2002.

147 It was submitted, or at least suggested in cross-examination, that the Thrifty note is unlikely to record any agreement by Gangemi because, in May 2003, it was not possible for a permit to be obtained by 4 September 2003, which was 18 months after the final payment by Mr Osborne on 4 March 2002. I do not accept this submission. In May 2003, Mr Gangemi was admittedly sympathetic to Mr Osborne's plight and wanted to assist him to secure his position under the charge. That could only be done by recording the agreement as to the circumstances in which the charge would become enforceable.

148 There is no evidence that the parties considered replacing the Mitchell Street charge with a charge over the Buckley Street properties, which had then been acquired. By May 2003, Mr Osborne knew that the Buckley Street properties were heavily mortgaged and it is unlikely that Mr Osborne would have accepted a replacement charge over the them in substitution for his charge over the Mitchell Street property. It is more likely that Mr Osborne wanted an additional charge over the Buckley Street properties, and the Thrifty Note provides for this.

149 Mr Jafari and Mr Gangemi were friends in the early 1990's. They lost contact at some stage during that decade. In approximately October 2001, after the contract to purchase 63-67 Buckley Street was entered into, Mr Gangemi telephoned Mr Jafari "out of the blue" and they met for a drink. Mr Gangemi explained to Mr Jafari that he and Mr Lanciana had completed a number of property developments as partners and were then involved in the Hoddle Street project. Further, Mr Gangemi told Mr Jafari that he and Mr Lanciana had purchased 63-67 Buckley Street and intended to develop it as apartments.

150 Following this drinks meeting, Mr Jafari and Mr Gangemi resumed their friendship. They met regularly and became close friends. They met at each other's residences and at cafes and also at the Hoddle Street project site. They talked regularly on the telephone. During these conversations, Mr Jafari says that Mr Gangemi said things were going well for him, that he was making lots of money, that the Hoddle Street project was "going to make millions", that he was looking for a Ferrari and made other statements seeking to portray himself as a very successful and wealthy property developer. Mr Gangemi denies that he said the particular things attributed to him by Mr Jafari, but admits that he told Mr Jafari that he and Mr Lanciana "had done well and we have been successful". Having observed Mr Gangemi give his evidence I think it is more likely than not that Mr Gangemi did make a number of statements to Mr Jafari designed to impress Mr Jafari as to his financial position. Having been asked by Mr Lanciana to contribute towards finding funding for the projects in which they were involved, I infer that this was the reason Mr Gangemi telephoned Mr Jafari "out of the blue". Mr Gangemi was looking to Mr Jafari to contribute money to the projects. In this context, it was in the interests of Mr Gangemi and Mr Lanciana that Mr Gangemi present a prosperous and successful image to Mr Jafari, who he saw as a potential provider of funds to the projects.

151 Mr Jafari was at this time developing some town houses. He had recently finished developing two town houses. He was interested in property development. He had never been involved in any apartment developments of the size being undertaken by Mr Lanciana and Mr Gangemi at Hoddle Street, or of the size which was intended for Buckley Street. I find that Mr Jafari was interested in progressing his relationship with Mr Gangemi, and in developing a relationship with Mr Lanciana, in order to advance his own business interests. I find that Mr Jafari was interested in becoming involved in development projects with Mr Gangemi and Mr Lanciana, who he believed were successful, and that he wanted to learn from them how to go about large scale apartment developments. This led him to place a remarkable amount of trust in Mr Gangemi, who he saw as a close friend, and to a lesser extent Mr Lanciana.

152 In their discussions, Mr Gangemi informed Mr Jafari about further details of the proposed development of 63-67 Buckley Street. The prospect of Mr Jafari becoming an investor in the Buckley Street project was raised, but no agreement to this effect was reached until after Mr Jafari became aware of the proposal to include 61 Buckley Street in the Buckley Street project.

153 When the property at 61 Buckley Street came onto the market, Mr Jafari became more interested in becoming an investor in the Buckley Street project. Mr Gangemi told him that he and Mr Lanciana were talking to an agent about purchasing 61 Buckley Street. There was some preliminary discussion between Mr Jafari and Mr Gangemi about the amount to be paid by Mr Jafari if he proceeded with an investment. This discussion was based upon an investment of $200,000 for each 12.5% interest. This was in accordance with the amount which Mr Osborne had agreed to invest for a 12.5% interest. During these discussions, Mr Jafari said that, if he invested, he would need to raise the money on the security of a property and that he could not afford to meet the interest payments whilst the development was proceeding. Mr Gangemi responded that he and Lanciana would take care of the interest payments if Mr Jafari decided to invest. Once again, this demonstrates that Mr Gangemi was seeking to persuade Mr Jafari to invest, so that he could fulfil the request from Mr Lanciana that he assist with raising funds.

154 Prior to any agreement as to the basis upon which Mr Jafari would invest in the Buckley Street project, Mr Jafari was asked to advance $120,000 as a loan for the Hoddle Street project. Mr Jafari wrote a cheque for $120,000 payable to Pre Need and this cheque was banked on 21 March 2002.

155 Mr Gangemi denies that he had any involvement in the loan by Mr Jafari of $120,000 to Pre Need. He says that all of the dealings were between Mr Jafari and Mr Lanciana. I do not accept this evidence. Both Mr Jafari and Mr Lanciana have given detailed evidence as to the circumstances surrounding the payment of $120,000 by Mr Jafari to Pre Need. Mr Gangemi's denial of any involvement in these events depends upon his denial that his signature appears as a witness to Mr Lanciana's signature on a letter of acknowledgement of the loan of $120,000 from Mr Jafari. The letter of acknowledgement is dated 21 March 2002 and is written on Pre Need letterhead. It is in the following terms:

I, Percy Lanciana being an authorised representative of Clapana Pty Ltd acknowledge that on the 21st of March 2002 a sum of $120,000.00 was borrowed from Kourosh Jafari.

The agreement is that these funds are to be lent for an unspecified period, at an interest rate of 10%, to be paid at the end of the loan period.

156 The evidence of Mr Jafari was as follows. In or about mid March 2002 he spoke with Mr Gangemi and Mr Gangemi said words to the effect:

You have agreed to be a party in the Buckley Street project. Percy and I have an immediate, desperate need for money but only for a short period ... to put into the Hoddle Street project. ... can you lend us $120,000 for now which will be used for Hoddle Street, but that money will be counted towards your contribution for the Buckley Street project. ... we will pay you 10% interest until then ... everything will be in writing.[12]

157 Mr Jafari says that he agreed to make the loan and Mr Gangemi asked him to make out a cheque to Pre Need. Mr Jafari then delivered the cheque to Mr Gangemi at the Hoddle Street site and they travelled to the Pre Need offices. Mr Gangemi handed the cheque to Mr Lanciana and the letter of acknowledgment was prepared. It was signed by Mr Lanciana and witnessed by Mr Gangemi. By this time, Mr Jafari knew that Clapana was the company "running the Hoddle Street project".

158 I accept the evidence of Mr Jafari in this respect. It is generally corroborated by the evidence of Mr Lanciana. Further, at this time, Mr Gangemi and Mr Jafari were close friends. Mr Jafari did not really know Mr Lanciana. It is unlikely that Mr Jafari would have been prepared to lend $120,000 at the request of Mr Lanciana, without any involvement of Mr Gangemi. Further, no rational reason has been suggested for Mr Lanciana to forge Mr Gangemi's signature on the letter of acknowledgement. Finally, on this issue, I have examined the signature of Mr Gangemi on the letter of acknowledgement. I am not satisfied that it is a forgery as Mr Gangemi alleges. It is consistent with other signatures which are admittedly those of Mr Gangemi.

159 In or about the first week of April 2002 Mr Gangemi told Mr Jafari that he and Mr Lanciana had entered into a contract to purchase 61 Buckley Street. Mr Jafari and Mr Lanciana each say that they then met with Mr Jafari again at the "Vegie Bar" restaurant in Fitzroy. At this time, Mr Lanciana believed that Mr Jafari had not yet committed to investing in the Buckley Street project. In any event, both Mr Jafari and Mr Lanciana say that at this meeting there was detailed discussion of the Buckley Street project. Although the evidence is not consistent about all aspects of this meeting, both Mr Jafari and Mr Lanciana agree that the meeting concluded on the basis that Mr Jafari would invest $350,000 for a 25% interest in the Buckley Street project and that the $120,000 already advanced would be credited towards that investment.

160 Mr Gangemi accepts that there was a meeting at the Vegie Bar at which he, Mr Lanciana and Mr Jafari agreed that Mr Jafari would invest $350,000 for a 25% interest in the Buckley Street development. However, Mr Gangemi says that there was only one meeting at the Vegie Bar between him, Mr Lanciana and Mr Jafari. Mr Gangemi says that this meeting occurred in approximately September 2002 in the following circumstances. According to Mr Gangemi, the arrangement with Mr Jafari at this time was that he would pay $400,000 for his 25% interest in the Buckley Street project, and that it was at this meeting that this sum was negotiated down to $350,000. Mr Gangemi says that he had no involvement in the advances by Mr Jafari of $350,000 prior to this meeting, with all relevant dealings being directly between Mr Lanciana and Mr Jafari.

161 I prefer the evidence of Mr Lanciana and Mr Jafari to that of Mr Gangemi. As appears above, I find that Mr Gangemi was involved in and knew of the advance of $120,000 by Mr Jafari to Pre Need by the first cheque. As appears below, I find that Mr Gangemi was also involved in and knew of the further advances made by Mr Jafari. Mr Gangemi, Mr Lanciana and Mr Jafari agree that Mr Jafari's investment was agreed to be $350,000 for a 25% interest, and that this agreement was reached at a meeting at the Vegie Bar. I find that this meeting and agreement occurred in or about the first week of April 2002, shortly after the contract to purchase 61 Buckley Street was signed.

162 Mr Jafari gave evidence that he invested in the Buckley Street project on the understanding that the Buckley Street properties would be purchased unencumbered, and that he would not have invested if he had known the properties were to be mortgaged. Mr Jafari said that Mr Gangemi told him at the Vegie Bar meeting in early April 2002, in the presence of Mr Lanciana who did not correct him, that the properties would be purchased unencumbered from the advances made by Mr Jafari and Mr Osborne, together with further funds to be contributed by Mr Lanciana and Mr Gangemi amounting to "several hundred thousand dollars". Each of Mr Gangemi and Mr Lanciana denied this evidence. Each of them said that they at all times intended that the Buckley Street properties would be purchased with substantial mortgage finance.

163 I accept Mr Jafari's evidence in this regard. I am satisfied that Mr Jafari invested in the Buckley Street properties on the faith of statements made by Mr Gangemi in the presence of Mr Lanciana, which Mr Lanciana did not correct and thereby adopted, that the properties would be purchased unencumbered. Mr Jafari is no fool. He is unlikely to have agreed to invest $350,000 for a 25% share of properties in which the equity was only $236,000. (The total purchase price of the Buckley Street properties was $740,000; the finance on those properties, secured by mortgage on the properties, was $504,000; leaving a net equity of $236,000). Furthermore, Mr Jafari's case in this regard is supported by a relatively contemporaneous document. In March 2003, Mr Jafari's solicitor sought to have Mr Gangemi and Mr Lanciana execute a deed acknowledging that Mr Jafari had invested $350,000 in the Buckley Street project on the basis of an agreement that the Buckley Street properties were and would remain unencumbered. Although this deed was not executed, the fact that Mr Jafari put forward such a document through his solicitor provides support for his case on this issue.

164 Mr Lanciana said that, following the meeting at the Vegie Bar in which it was agreed that Mr Jafari's investment would be $350,000 for 25% of the Buckley Street development, Mr Gangemi approached him and said he needed $50,000 for "personal reasons". Mr Gangemi then asked Mr Lanciana if he could have access to $50,000 from the funds to be provided by Mr Jafari. Mr Lanciana said that he agreed to Mr Gangemi obtaining $50,000 from Mr Jafari on a basis "that we would sort out later".[13]

165 In his witness statement, Mr Jafari said that the discussion concerning the $50,000 cash investment was a discussion between him, Mr Lanciana and Mr Gangemi at the Pre Need factory. According to Mr Jafari, both Mr Gangemi and Mr Lanciana asked for a loan of $40,000 to $50,000. According to Mr Jafari:

They said to me that they were desperate for money as they had a cash flow problem. They could not pay their workers. They said that they sometimes paid workers in cash.

At some point during this conversation Gangemi told me: 'Presently, I am short of cash. As you know, all my money is tied up in property and Hoddle Street.' Gangemi then said: 'This is temporary until we get paid from the jobs we have done.'

Gangemi and Lanciana each said that the moneys I lent would be credited towards the Buckley Street development project, just like the $120,000 I had already given them.

I still trusted Gangemi and Lanciana, especially Gangemi. Gangemi and Lanciana talked in terms of a cash flow problem. I believed them when they said that it was temporary. I could see the pre-cast concrete factory was a hive of activity. Trucks were constantly coming in and out. The Hoddle Street project was under construction. Panel walls had been erected.

In and between April 2002 and May 2002 I paid $50,000 cash to Gangemi by way of two payments of $20,000 and one payment of $10,000. I borrowed about $35,000 of this from family members and friends.

The first payment I made was in the sum of $20,000 in cash which I gave to Gangemi at his apartment in Anchor Place, Prahran. This was a week or two after Gangemi and Lanciana had asked me for the money. About $15,000 of this was mine and the rest was borrowed.

When I gave him the money, I said 'I'm trying to get more for you.' Gangemi said 'I really appreciate this. You are a true friend.'

I gave Gangemi another $20,000 at his apartment. This was around April 2002.

In early May 2002 I gave Gangemi a further $10,000. I gave this to Gangemi at the Hoddle Street site. I said 'This is all I can do until I get the rest of the money for Buckley Street from my bank.'[14]

166 In cross-examination, Mr Jafari said "it would have been both" Mr Lanciana and Mr Gangemi who asked for the cash, but that "I can't recall exactly".

167 Mr Gangemi denies any knowledge whatsoever of any payment of cash by Mr Jafari towards his investment in the Buckley Street project. Mr Gangemi said that in April 2002 Pre Need had sufficient funds, by accessing its overdraft, to pay its employees as their wages became due. Mr Gangemi said that the first time that he became aware that Mr Jafari alleged he had paid $50,000 to him in cash was in late March 2007 when he read Mr Jafari's affidavit filed in this proceeding in connection with an application to remove Bloomingdale's caveats from the Buckley Street properties.

168 The three accounts as to the circumstances in which the $50,000 was allegedly sought and paid are irreconcilable. At least one of Mr Jafari, Mr Lanciana or Mr Gangemi is lying. From the evidence as a whole, and taking into account my general view of the demeanour and credibility of the three men as witnesses, I find that it is more probable than not that Mr Jafari is mistaken in his recollection that both Mr Lanciana and Mr Gangemi asked him for the $50,000. It is more likely that it was only Mr Gangemi who asked him for the $50,000, or that Mr Lanciana was present when Mr Gangemi asked Mr Jafari for the $50,000 cash but did not actually ask Mr Jafari to give the money to Mr Gangemi. I reject the evidence of Mr Gangemi. My reasons for these findings are as follows.

169 First, it is not possible that Mr Jafari could be mistaken that he paid Mr Gangemi $50,000 in cash. Not only does Mr Jafari recall doing so, but he recalls the circumstances in which he paid the money in three instalments. Mr Jafari is either telling the truth or he is lying. There is no middle ground. I am not prepared to find that Mr Jafari was lying to me in this regard.

170 Second, it is similarly not possible that Mr Gangemi is mistaken about the receipt by him of $50,000 from Mr Jafari. This is an event which anyone would recall. For the reasons given concerning the general credibility and demeanour of Mr Gangemi as a witness, when compared with that of Mr Jafari, I find that it is more likely that Mr Gangemi is lying on this issue.

171 Third, Mr Lanciana's version is the most plausible of all. At this time, Mr Lanciana and Mr Gangemi were still close friends. They joined together in obtaining moneys from Mr Osborne and Mr Jafari for their private purposes, on the basis that the moneys would later be credited to their investments in the Buckley Street project. I find that it is more likely than not that Mr Lanciana allowed Mr Gangemi to, in effect, "draw" against Mr Jafari's agreed investment amount. This is similar to what was done in respect of the joint purposes of Mr Lanciana and Mr Gangemi in respect of Mr Osborne's first cheque and Mr Jafari's first cheque. Those moneys were utilised by Mr Gangemi and Mr Lanciana in respect of the Hoddle Street development. Similarly, soon after the agreement by Mr Lanciana to permit Mr Gangemi to use part of the funds to be advanced by Mr Jafari for his own purposes, Mr Lanciana used the balance of Mr Jafari's investment as a short term loan to enable him to settle a purchase of a property in the name of his wife. I deal with this matter below under the hearing "Mr Jafari's second cheque: $200,000".

172 Fourth, Mr Jafari's version of events has some support in the evidence of Mr Gangemi's nephew Domenic Americo. Mr Americo was called to give evidence on behalf of Mr Lanciana. His evidence supports the case of Mr Jafari. The purpose of Mr Americo's evidence was to establish that, even taking account of a repayment of $30,000 to Mr Jafari, he nevertheless invested $350,000 in the Buckley Street development. This issue is dealt with below under the heading "Repayment of $30,000 to Mr Jafari".

173 The significance of the evidence of Mr Americo on this issue is that it establishes that Mr Gangemi dealt in large sums of cash at or about the time Mr Jafari alleges that he advanced the $50,000 in cash to Mr Gangemi.

174 In May 2002, Mr Jafari arranged to extend a home loan secured over a property owned by his mother at 8 Thea Grove, Doncaster East by $200,000. He used the proceeds of the extended loan to purchase a bank cheque for $200,000 payable to the Commonwealth Bank. Mr Jafari gave that bank cheque to Mr Lanciana in order to assist Mr Lanciana to settle a property purchased by him in his wife's name in Somerville Road, Yarraville. The transaction came about in the following circumstances.

175 Once again, Mr Gangemi says that he had no involvement whatsoever in the advance of $200,000 by Mr Jafari at the direction of Mr Lanciana.

176 Mr Jafari says that he arranged for the $200,000 loan extension in early May 2002 and that this amount was credited to his account on 16 May 2002. This is confirmed by Mr Jafari's bank statement. Mr Jafari said that, shortly after the loan moneys were credited to his account, he spoke with Mr Gangemi on the telephone and told him that he was in a position to pay the balance of his investment in the Buckley Street project. In response, Mr Gangemi asked if Mr Jafari could lend $200,000 to Mr Lanciana for a forthcoming property settlement. According to Mr Jafari, Mr Gangemi said words to the effect "This is the same as the previous loans. Once Percy has settled his property, he can then refinance and we will use that money towards the settlement of Buckley Street so that they can be purchased unencumbered as agreed".

177 Mr Jafari says that Mr Lanciana then rang him and asked for a loan of $200,000 on a short term basis to avoid him losing his deposit on a forthcoming property settlement. As a result, Mr Jafari purchased a bank cheque for $200,000 and provided it to Mr Lanciana to enable him to complete the settlement of a property at Somerville Road, Yarraville.

178 Mr Lanciana's evidence is generally consistent with that of Mr Jafari. Mr Lanciana said that he spoke with Mr Gangemi about using the balance of the moneys to be invested by Mr Jafari towards settlement of the purchase of the Somerville Road property, that Mr Gangemi said he would speak to Mr Jafari, that he did so and that Mr Jafari agreed to lend Mr Lanciana the sum of $200,000 to settle the Somerville Road property. Mr Lanciana said that he subsequently refinanced the Somerville Road property and repaid approximately $228,000 to the Pre Need Services bank account. 63 Buckley did not have a bank account at any time and all payments made in respect of the Buckley Street project were paid by Pre Need.

179 It is unnecessary to resolve the dispute as to whether Mr Gangemi was involved in dealings with Mr Jafari concerning the advance of $200,000 to enable Mr Lanciana to complete the purchase of the Somerville Road property. This is because there is no dispute that Mr Jafari paid the $200,000 and that this amount was treated by all parties as part of the investment by Mr Jafari in the Buckley Street project. However, although it is unnecessary to do so, I find that Mr Gangemi's denial of any involvement in relation to the $200,000 advanced by Mr Jafari to Mr Lanciana is false. It is highly improbable that in May 2002 Mr Jafari would have advanced $200,000 to Mr Lanciana without involvement by Mr Gangemi. Although Mr Jafari appears to have had some trust in Mr Lanciana at this time, Mr Gangemi was his close friend. He had only had a few meetings with Mr Lanciana. The sum of $200,000 was a large amount for Mr Jafari. He needed to obtain it by finance secured on a home owned by his mother.

180 There is no dispute that on 5 July 2002 Mr Jafari was repaid $30,000 by a cheque drawn on the Pre Need account. The cheque was signed by Mr Gangemi. At this time, Mr Jafari had advanced amounts totalling $370,000: $120,000 to Pre Need by the first Jafari cheque; $50,000 in cash to Mr Gangemi; and $200,000 to Mr Lanciana in connection with the Somerville Road settlement. The $30,000 repayment appears to reduce the total amount paid by Mr Jafari from $370,000 to $340,000. However, Mr Jafari says that only $20,000 of the repayment of $30,000 was in respect of his advances in connection with the Buckley Street project, thus reducing the total amount advanced to the agreed amount of $350,000. According to Mr Jafari, the other $10,000 which was repaid was in respect of a separate advance of $10,000 by Mr Jafari to Mr Gangemi, for purposes not associated with the Buckley Street project.

181 In addition to the $50,000 cash which Mr Jafari says that he advanced to Mr Gangemi, Mr Jafari said that he lent a further $10,000 cash to Mr Gangemi at about this time because Mr Gangemi wished to lend that amount to his nephew Mr Americo. Subsequently, at a social occasion at Mr Gangemi's home at which both Mr Jafari and Mr Americo were present, Mr Jafari told Mr Americo that he had lent the $10,000 to Mr Gangemi to enable him to lend that money to Mr Americo. Mr Americo agrees that this conversation took place.

182 Mr Gangemi denied that Mr Jafari lent him $10,000 for his nephew Mr Americo. When this transaction was put to him in cross-examination, Mr Gangemi said no such transaction occurred and said that the version of events put to him by counsel for Mr Jafari was the first he had heard about such a transaction. Mr Americo was cross-examined by counsel for Mr Gangemi. It was put to Mr Americo that the amount which had been lent to him by Mr Gangemi was not $10,000 in 2002 but was in fact $13,000 lent in late 2001 for the purpose of Mr Americo paying a deposit for the purchase of an apartment at Hoddle Street. It was put to Mr Americo that the $13,000 was advanced in cash by Mr Gangemi. The reason why Mr Gangemi would advance such a sum in cash was not explained in evidence or the subject of puttage to any witness.

183 The position on the evidence and the puttage on behalf of Mr Gangemi to Mr Americo is this. Mr Gangemi and Mr Americo agree that Mr Gangemi lent Mr Americo a large sum of cash by handing the cash across at the "Woodstock" restaurant. Mr Americo says that the amount lent was $10,000, for a purpose which he cannot recall but which "could have been" payment of the deposit on a unit he had contracted to purchase in the Hoddle Street development. Mr Gangemi says that the amount advanced was $13,000 in cash and that it was advanced for that deposit. Mr Americo says that he was subsequently told by Mr Jafari that he had lent Mr Gangemi the cash which had been advanced to Mr Americo. Mr Gangemi denies this, and it was submitted on his behalf that Mr Jafari could not have been involved because Mr Americo paid his deposit on a unit in the Hoddle Street development in late 2001.

184 Mr Americo gave evidence in a hesitant and at times nonsensical fashion. I observed him closely. Apart from a definite recollection that he had been lent $10,000 in cash by Mr Gangemi at the Woodstock restaurant, that he had repaid Mr Gangemi in cash and that Mr Jafari had told him at Mr Gangemi's premises that he had lent Mr Gangemi the $10,000 cash to enable him (Mr Gangemi) to on-lend it to Mr Americo, he appeared unwilling to commit himself to any details.

185 Mr Americo was asked to give evidence by Mr Lanciana and Mr Jafari. They told Mr Americo that Mr Gangemi had denied that Mr Jafari lent him $10,000 for the purposes of lending it to Mr Americo. They asked Mr Americo to give evidence and Mr Americo said "If you get subpoenaed, you get subpoenaed". Mr Americo appeared pursuant to a subpoena.

186 When it became apparent that Mr Americo was going to give evidence, Mr Gangemi telephoned him. In that conversation, Mr Gangemi suggested to Mr Americo that the only cash he had lent him was $13,000 in 2001 to enable Mr Americo to pay a deposit on a unit in the Hoddle Street development. It was this suggestion by Mr Gangemi which caused Mr Americo to say that the cash lent to him by Mr Gangemi, which he remained adamant was $10,000, "could have been" for the deposit. Further, this conversation appears to have caused Mr Americo to acknowledge, at times in his evidence, that he may have repaid $13,000 in cash to Mr Gangemi. However, Mr Americo could not be sure and would not commit to this.

187 It was only when Mr Americo was cross-examined by Mr Jafari that an explanation for his reluctance to commit himself to details emerged. The cross-examination was confused in many respects. Mr Jafari became emotional and argumentative, and Mr Americo became more hesitant, and at times evasive. There was clearly something which Mr Americo did not want to say. Mr Jafari put to Mr Americo what appeared to be the substance of what Mr Americo had said to Mr Jafari during private conversations. It is necessary to set out some of the evidence:

Mr Jafari: Is there any contract in the closet that he warned you not to say much otherwise that contract would come out of the closet, anything that in that regard?---Not in that phone call, no.

His Honour: What did you understand by that question about a contract in the closet because I don't understand it?

Mr Jafari: I am sorry to put you in this situation, Domenic, but please tell His Honour about there is a hidden contract somewhere that you have gone - you have entered with Mr Gangemi about the Anchor Place and he's warned you not to say much, anything in this court, otherwise that would come out and you would get in trouble. Please say to His Honour - nothing is going to happen to you, trust me, you are not looking very good. Okay, he's put you in this position, please say it?---Now, there was a phone call made to my mum.

188 At this stage, Mr Americo was about to give hearsay evidence of the content of the telephone conversation between Mr Gangemi and his mother. An objection was allowed. Mr Jafari then asked another question and got a similar response to that given in response to his first attempt to bring out the relevant circumstances:

Mr Jafari: How about if it's been put to you, Domenic, that not to say anything, that contract is going to be mentioned, anything in that effect?---Not in that conversation.

189 There was then some very confusing evidence about a contract by Mr Americo to purchase a unit in the Anchor Place development, which was apparently a false front for other arrangements, and Mr Jafari put it to Mr Americo that Mr Gangemi was using the existence of the "contract in the closet" to blackmail Mr Americo in an endeavour to prevent him from giving evidence or to alter the evidence which he gave:

Mr Jafari: Has Mr Gangemi been using that to - I don't want to put it this way, I can't find a better word, to in a way, shut your mouth or blackmail you?---yes.

You just said that the existence of that contract has been used by Mr Gangemi against you?---That's correct.

And to your understanding what is it that Mr Gangemi wanted you to do or not to do otherwise he would act in some way to your detriment in respect of that contract?---Well, not to come to court.

190 Counsel for Mr Gangemi was given leave to further cross-examine in respect of this issue. It was put to Mr Americo that Mr Gangemi did not threaten him at all. Mr Americo nodded, and I took this to be an indication that Mr Americo believed he had been threatened. This was made clear by the immediately following questions and answers:

He didn't threaten you at all, did he?---(The witness nodded.)

How was he going to use this contract to get you?---Basically through a phone call to my mum.

He was going to ring your mum?---he rang my mum, he rang my mum.

191 If accepted, the evidence of Mr Americo raises a very serious matter. It indicates that Mr Gangemi endeavoured to persuade Mr Americo that he should not give evidence, or if he did, that he should alter that evidence to accord with Mr Gangemi's position that the only cash which he had lent was $13,000 in 2001 to assist Mr Americo to pay a deposit on a contract to purchase a unit in the Hoddle Street development.

192 It was submitted on behalf of Mr Gangemi that Mr Americo has a history of disagreement with his uncle Mr Gangemi, involving legal disputes and Mr Americo assisting Mr Lanciana to locate Mr Gangemi so that he could be served with legal process on behalf of Mr Lanciana. It was submitted on behalf of Mr Gangemi that Mr Americo's evidence should be rejected, and that the Court should find the only cash advanced by Mr Gangemi to Mr Americo was $13,000 in 2001 in respect of the Hoddle Street contract entered into by Mr Americo.

193 The difficulty with the submissions made on behalf of Mr Gangemi in this regard is that, if accepted, it would be necessary to find that Mr Jafari and Mr Americo are telling lies about the issue. For reasons previously given in connection with the general credibility of Mr Gangemi, I am not prepared to prefer his evidence over that of Mr Jafari or Mr Americo. However, there is a more fundamental reason, based upon the probabilities, for rejecting Mr Gangemi's evidence. Mr Gangemi accepts that it was him who signed the Pre Need cheque for $30,000 and gave it to Mr Jafari. This cheque was provided after Mr Jafari had advanced $370,000. By this time, the parties had agreed that Mr Jafari's investment in the Buckley Street project would be $350,000 in total. Mr Gangemi has not explained why he wrote the cheque for $30,000. Taking the evidence as a whole, and having regard to my findings above, I infer that Mr Gangemi wrote the $30,000 cheque for the purposes Mr Jafari alleges. First, as to $20,000, to balance Mr Jafari's contributions down from $370,000 to the agreed contribution of $350,000. Second, as to the remaining $10,000, to repay the separate advance of $10,000 in cash made by Mr Jafari to enable Mr Gangemi to on-lend that money to Mr Americo.

(5) Purchase of 59 Buckley Street by Mr Jafari.

194 As appears above, in September 2002 Mr Jafari discovered that the Buckley Street properties had not been purchased unencumbered, as he had been led to believe by Mr Gangemi and Mr Lanciana. This caused Mr Jafari to ask Mr Gangemi and Mr Lanciana to pay the mortgage out or to repay his investment of $350,000. They said that they could not do either of these things. From this time, Mr Jafari maintained his desire to withdraw from the Buckley Street project or, in the alternative, to have Mr Gangemi and Mr Lanciana acknowledge that they were responsible for the mortgage over the Buckley Street properties and would indemnify Mr Jafari in respect of that mortgage debt. This led to the deed of acknowledgement prepared by Mr Jafari's solicitor in or about March 2003. However, Mr Gangemi and Mr Lanciana did not sign this deed of acknowledgement. In these circumstances, Mr Jafari continued to insist that his investment be repaid.

195 It is curious therefore, that in April 2003, Mr Jafari entered into a contract to purchase the land at 59 Buckley Street, Footscray for the sum of $377,500. 59 Buckley Street is adjacent to the Buckley Street properties. If developed together with the Buckley Street properties, it has the capacity to increase their development potential, by providing a larger "footprint", thus enabling more apartments to be constructed in the one development. Mr Jafari acquired 59 Buckley Street in the following circumstances.

196 In about late 2002, Mr Gangemi had discussions with the previous owner of 59 Buckley Street, Nick Scapoulos. Mr Gangemi entered into an arrangement with Mr Scapoulos to jointly develop the Buckley Street properties and 59 Buckley Street on certain terms. As a result, Mr Gangemi amended the development plans and the permit application for the Buckley Street project to include 59 Buckley Street. Before this joint venture arrangement could be documented, Mr Scapoulos decided he did not wish to proceed with any joint development and informed Mr Gangemi that he was going to place 59 Buckley Street on the market for sale.

197 In his witness statement, Mr Gangemi said that he had previously introduced Mr Jafari to Mr Scapoulos, that Mr Jafari conducted his own negotiations with Mr Scapoulos and, as a result, purchased 59 Buckley Street. In cross-examination, it was revealed that this account of what transpired was incomplete. Mr Gangemi said in cross-examination that he wished to proceed with a joint development involving 59 Buckley Street but that neither he, 63 Buckley nor Mr Lanciana had the capacity to purchase it. In these circumstances, Mr Gangemi said that he introduced Mr Jafari to Mr Scapoulos and encouraged him to purchase 59 Buckley Street in his own name "Because he (Mr Jafari) wished to have a bigger stake in the project". Mr Gangemi agreed that he was present at a couple of the negotiations between Mr Jafari and Mr Scapoulos which culminated in Mr Jafari agreeing to purchase 59 Buckley Street.

198 Mr Jafari's evidence was that, by this time, he was no longer interested in proceeding with his investment in the Buckley Street project and simply wanted to obtain repayment of his $350,000 investment. Further, by this time, Mr Jafari says that the dispute between Mr Gangemi and Mr Lanciana had commenced. In this context, Mr Jafari said that Mr Gangemi encouraged him to buy 59 Buckley Street because this would increase Mr Jafari's chances of getting his money back. According to Mr Jafari, Mr Gangemi said to him that "If you buy 59 Buckley Street for yourself you will be in a very strong position because without 59 Buckley Street there cannot be a viable permit". As I have said, by this time the permit application by 63 Buckley included 59 Buckley Street in the development plans. In this context, Mr Jafari said that Mr Gangemi was apologetic and embarrassed at Mr Jafari's predicament and offered to build three town houses on 59 Buckley Street at cost price, or alternatively to allow Mr Jafari to use his builder's licence so that he could construct the units himself. Mr Gangemi denied Mr Jafari's account of these events.

199 Mr Jafari said that he told Mr Lanciana that he was going to purchase 59 Buckley Street and that 63 Buckley could, if a settlement was reached involving Mr Jafari being repaid all of his money, be nominated as the purchaser of 59 Buckley Street. Mr Jafari then proceeded to purchase 59 Buckley Street in early April 2003.

200 The probabilities favour Mr Jafari's account. In April 2003, Mr Jafari wanted to withdraw his investment. In these circumstances, something must have caused him to buy 59 Buckley Street. I do not believe that he simply purchased 59 Buckley Street as a separate development project which was, coincidentally, next to the Buckley Street properties. I accept his evidence that he purchased 59 Buckley Street because he believed, based on what he was told by Mr Gangemi, that this would assist to make the Buckley Street project more viable, and thus increase his chances of obtaining repayment of his investment.

201 Obviously enough, Mr Jafari would never have purchased 59 Buckley Street if he had not invested in the Buckley Street project. Accordingly, any loss which Mr Jafari can establish he has suffered by reason of his purchase of 59 Buckley Street is capable of forming part of his damages claims.

(6) What were the respective interests of the parties prior to the Heads of

202 In his statement of claim, Mr Gangemi alleges that the proceeds of the Perpetual mortgage loan, in the sum of $504,000, were used to settle the purchases of the Buckley Street properties.[15] Mr Gangemi then alleges that the balance of the purchase prices and stamp duty payable in respect of the acquisition of the Buckley Street properties was paid by him and Mr Lanciana in equal shares.[16] In addition, Mr Gangemi alleges that he and Mr Lanciana together contributed further sums totalling approximately $90,000 in payment of architects' fees, engineers' fees, other consultants' fees and permit fees in respect of the Buckley Street project.[17] These pleadings by Mr Gangemi assume that the Perpetual loan, and interest thereon, is a liability of all participants in the Buckley Street project and must be taken into account before any profit entitlements arise in favour of any of the participants.

203 As the trial progressed, the unfairness of Mr Gangemi's position as to the liability of all participants for the Perpetual mortgage became apparent. In an endeavour to deal with this unfairness, in final submissions, counsel for Mr Gangemi made what he described as "a genuine offer and a genuine representation" to afford Mr Osborne and Mr Jafari priority for their investments over Mr Gangemi's investment, with the amount of the investments to be determined on the taking of an account. In the course of further discussion concerning this "offer", it became clear that Mr Gangemi maintained his position that the Perpetual mortgage should first be repaid before there was any distribution to participants in the Buckley Street project. In an endeavour to soften this position, counsel asserted that, even taking the Perpetual mortgage into account, there is a likelihood that there will be sufficient equity in the Buckley Street properties to pay back Mr Jafari and Mr Osborne in priority to Mr Gangemi and Mr Lanciana. The evidence on this assertion was incomplete, but it is in my view unlikely to be correct.

204 In his defence, Mr Lanciana pleaded that neither Mr Gangemi nor Bloomingdale had made any financial contribution to the acquisition of the Buckley Street properties or to the Buckley Street project.[18] In his pleadings, Mr Lanciana did not take a position as to the liability of the participants in the Buckley Street project to repay the Perpetual mortgage loan.

205 In oral evidence, Mr Lanciana departed from his pleaded case that Mr Gangemi and Bloomingdale had made no financial contribution to the acquisition of the Buckley Street properties or to the Buckley Street project. In summary, Mr Lanciana gave evidence that the participants in the project, Mr Lanciana, Mr Gangemi, Mr Jafari and Mr Osborne, each invested in return for an agreed percentage of the ultimate profits of the Buckley Street project, in the following manner:

(1) Mr Osborne invested $200,000 for a 12.5% interest in the profits of the Buckley Street project;

(2) Mr Jafari invested $350,000 for a 25% interest in the profits of the Buckley Street project;

(3) Mr Gangemi (Bloomingdale) and Mr Lanciana together invested the amount of the Perpetual loan ($504,000), which was secured by a mortgage over the Buckley Street properties and was guaranteed by them, together with their work and all moneys (including consultants' fees and permit fees) required to obtain a planning permit to allow the Buckley Street project to proceed. They were to receive in return a 62.5% (31.25% each) interest in the profits of the Buckley Street project. In this respect, Mr Lanciana said that he regarded the Perpetual loan and the interest thereon, which was guaranteed by both Mr Lanciana and Mr Gangemi, to be the joint responsibility of him and Mr Gangemi and that neither Mr Osborne nor Mr Jafari was liable in respect of that loan.

(4) Once the planning permit was obtained, the Buckley Street project would proceed by way of project funding from an external financier.

206 Subject to two additional matters, I accept that Mr Lanciana has correctly summarised the terms upon which the participants invested in the Buckley Street project. First, I find that it was intended by the participants that they would each have an interest in the assets of the Buckley Street project, including the Buckley Street properties, in their proportionate shares. The moneys paid by Mr Osborne were paid on this understanding and accepted on that basis. Once Mr Jafari had agreed to invest, it was understood by all participants that his advances would be treated on this basis. Accordingly, if the Buckley Street project did not proceed for any reason, each of the participants was entitled to share in the assets of the project in their respective shares. This result is in accordance with business commonsense and the evidence as a whole. I find that this was the agreement between the parties.

207 Second, until subsequent events altered the position, I find that it was the intention of the parties that their respective interests in the assets and profits of the Buckley Street project would be held by them through unitholdings in a unit trust which was to be established. However, this intention was not carried into effect. Even if it is accepted, as Mr Gangemi contends, that he executed a deed of trust for the Buckley Street unit trust in February 2003, there is no evidence that any other proposed unit holder ever signed that document. In particular, there is no evidence that Mr Osborne or Mr Jafari ever agreed to its terms. Accordingly, 63 Buckley Street held the Buckley Street properties on a constructive trust for the participants in accordance with their agreed percentage interests. Further, after the Heads of Agreement were executed, Mr Lanciana, in reliance upon the efficacy of the Heads of Agreement, determined to abandon the idea of using a unit trust structure for the Buckley Street project because there would be tax and stamp duty consequences, and because it was unnecessary to have such a structure in circumstances were he believed that he was, pursuant to the terms of the Heads of Agreement, the only person interested in the Buckley Street properties.

208 Finally on this issue, it is extremely regrettable that Mr Lanciana's pleadings did not reflect his evidence as to Mr Gangemi's intended interest in the Buckley Street project. Had Mr Lanciana's pleadings and his witness statement been in accordance with the evidence which he ultimately gave, a great deal of Court time, and expense to the parties, could have been saved. Indeed, much of the evidence directed towards establishing that Mr Gangemi had contributed to the Buckley Street properties and project and, but for the Heads of Agreement, would be entitled to an agreed interest in them, would have been irrelevant. I will hear the parties as to the costs consequences of Mr Lanciana's disingenuous pleadings in this regard.

(7) In what circumstances did Mr Gangemi sign the Heads of Agreement?

209 By May 2003, the relationship between Mr Gangemi and Mr Lanciana had broken down irretrievably. The reasons for this are disputed and it is not necessary to resolve them. Mr Lanciana says that the genesis of the dispute was his expression of dissatisfaction at Mr Gangemi's performance as the builder of the Hoddle Street development. Mr Gangemi says that the dispute arose out of his expression of dissatisfaction at the manner in which Mr Lanciana was managing the accounts of the various entities and projects in which they were jointly involved. The evidence concerning these matters was incomplete, and the trial was conducted on the basis that it did not matter whose version as to the catalyst of the dispute was correct. It was common ground that by May 2003, the dispute had led to an irretrievable breakdown of the relationship of trust and confidence which had previously existed between Mr Lanciana and Mr Gangemi.

210 In early May 2003, Mr Lanciana removed Mr Gangemi as a director of both Pre Need and Clapana. Mr Lanciana acted on the basis that he did not need to consult Mr Gangemi, because Mr Gangemi was not a shareholder in either company. Mr Lanciana arranged for his son Daniel Lanciana to be appointed as a director of Pre Need and Clapana in place of Mr Gangemi.

211 In May 2003 there was a meeting at the Mitchell Street offices of Pre Need, attended by all of those interested or potentially interested in the Buckley Street project: Mr Gangemi, Mr Lanciana, Mr Osborne, Mr Jafari, Mr Abate and Mr Battaglia. Mr Lanciana said in his witness statement that this meeting occurred in late May 2003. However, I think that this is likely to be a mistake on his part, probably due to an attempt to reconstruct matters having regard to other activities which occurred in May 2003. For the reasons given above, I find that this meeting occurred prior to the preparation of the handwritten note on the reverse of the Thrifty rental car invoice. That is likely to have occurred on 12 May 2003.

212 It was common ground that, at this meeting, it was clear to all present that the relationship between Mr Lanciana and Mr Gangemi had broken down and they could not continue to work together. As I have said, it was a very heated meeting.

213 In June or July 2003, Mr Lanciana attempted to remove Mr Gangemi as the builder of the Hoddle Street project. As a result, a meeting was held with the financier for the Hoddle Street project, Suncorp Metway. The meeting was attended by Mr Lanciana, Mr Gangemi, Mr Gangemi's solicitor, Mr Alderuccio, Suncorp representatives and the quantity surveyors for the project. It appears that the meeting was called by Suncorp in an endeavour to resolve the disputes between Mr Gangemi and Mr Lanciana. Any such endeavour was unsuccessful. It was common ground that, as a result of this meeting, Suncorp wished Mr Gangemi to continue as the builder at Hoddle Street and this is what happened. There is no doubt that Mr Gangemi was extremely keen to remain as the builder at Hoddle Street, in order to protect his one half interest in that project and to ensure that his guarantee of the project finance was not called upon. Mr Gangemi's desire to remain as the builder at Hoddle Street remained a constant demand by him in the course of subsequent negotiations and dealings with Mr Lanciana. For his part, Mr Lanciana continued to want Mr Gangemi removed as the builder.

214 Mr Gangemi alleges that the attempts by Mr Lanciana to remove him as a builder were part of a wider course of conduct by Mr Lanciana, designed to "disrupt" the orderly progression of the Hoddle Street project. He contends that this conduct placed economic duress upon him at the time he signed the Heads of Agreement and was a material inducement upon him to sign that document.

215 In his witness statement, Mr Gangemi gave the following evidence in support of his economic duress allegations:

1. By September 2003 the Hoddle Street project was about 60 per cent complete. Funds advanced by Suncorp Metway to Clapana were paid at Clapana's direction to Pre Need-Need Services. By September 2003, Suncorp Metway had lent approximately $3,250,000.00 to Clapana. I was liable under the guarantee in the event that the Hoddle Street project did not proceed to completion and if Suncorp Metway was not repaid the whole of the funds which it advanced for the project.
2. In about late May or early June 2003 Lanciana attended the Hoddle Street Project site and called a meeting of the workers on the site. Lanciana informed the workers that they were all being 'laid off' from the site because I had refused to sign some documents. Following this the workers on the site ceased work for one day. Following that meeting and in the period between June and August 2003 Pre-Need Services Australia failed to make due payment to various sub-contractors who had performed work on the Hoddle Street project. There were substantial delays in payment to these sub-contractors and the progress of work on the Hoddle Street project became very slow and almost ceased. Suncorp Metway became concerned about the delay in the progress of the project and threatened to terminate the loan facility that it had provided. By August 2003 and because of my liability to Suncorp Metway as a guarantor of the said loan facility, I believed that I would be liable to Suncorp Metway under the said guarantee unless I was able to complete the Hoddle Street project and the apartments were sold so that the loan to Suncorp Metway could be repaid in full.

1. I did not sign the agreement of my own free will but did so because I was afraid for my personal safety and that of my family. I was also concerned that Lanciana would continue to cause disruption to work on the Hoddle Street project or cause work to cease and thereby further delay the Hoddle Street project with the result that I would be exposed to a claim by Suncorp Metway under the guarantee that I had provided to them. [19]

216 In his oral evidence, Mr Gangemi said that his concern about the delays in paying contractors was another subject discussed at the Suncorp Metway meeting in June or July 2003. He said that, as a result, Suncorp Metway directed that future loan funds which were drawn down under the Suncorp Metway facility should be paid to Mr Gangemi as builder, on condition that both Mr Lanciana and Mr Gangemi sign the draw down notices. Mr Gangemi said that Mr Lanciana was slow in signing these notices, and that this led to some continuing delays in paying contractors. I do not accept Mr Gangemi's evidence concerning delays by Mr Lanciana in signing these notices resulting in continuing delays in paying contractors. It does not accord with the probabilities. Mr Lanciana like Mr Gangemi, was equally interested in ensuring the orderly progression of the Hoddle Street project. Once Suncorp Metway directed that loan draw downs should not be paid to Pre Need, as had previously occurred, but must be paid to Mr Gangemi as builder, there was no reason for Mr Lanciana to delay authorising draw downs if funds were in fact required to pay contractors.

217 Mr Lanciana agreed that, prior to the Suncorp Metway meeting, some contractors had not been paid on time, and that a result of the Suncorp meeting was that Suncorp Metway directed that future draw downs be paid to Mr Gangemi as builder. He denied that he had previously diverted loan funds advanced by Suncorp Metway to other projects, although he frankly acknowledged that he did use deposits received from pre-sales of Hoddle Street apartments to assist him to settle a property at Cecil Street, Williamstown which was purchased in his wife's name.

218 Taking the evidence as a whole on this issue, I find that Mr Lanciana did utilise some of the Suncorp Metway loan funds which were advanced to Pre Need before the meeting in June or July 2003 for purposes other than the Hoddle Street project, and that this diversion caused some contractors at Hoddle Street to be paid late. Of course, the demands of creditors at a particular time may have exceeded available funds from Suncorp Metway, thus causing delays in payment in any event. However, there is otherwise no plausible explanation for Mr Lanciana delaying payment to Hoddle Street contractors once funds were received from Suncorp Metway. Like Mr Gangemi, he was a guarantor of the Hoddle Street financing and was hoping to make substantial profits from the Hoddle Street project. Furthermore, Suncorp Metway had security over the assets of Pre Need, which was Mr Lanciana's principal operating company and "banker" to all of the projects in which he was interested.

219 On the available evidence, the Court cannot determine which projects Mr Lanciana diverted funding intended for the Hoddle Street project to, whether those projects were joint projects with Mr Gangemi or were personal projects of Mr Lanciana or his wife, or whether Mr Lanciana later ensured that the diverted funds were "reimbursed" from Pre Need to the Hoddle Street project.

220 Taking the evidence as a whole, I reject Mr Gangemi's evidence that Mr Lanciana threatened to continue to delay payment to contractors after June or July 2003, when the new draw down procedures were implemented by Suncorp Metway. I find that Mr Lanciana made no such threat, either in an endeavour to place pressure on Mr Gangemi to resolve the overall dispute between them or at all. In circumstances where the new draw down procedures removed the loan funds from Mr Lanciana's control, Mr Lanciana was a co-guarantor, Mr Lanciana had pledged the assets of Pre Need to Suncorp Metway and Mr Lanciana was equally interested with Mr Gangemi to ensure that the Hoddle Street project returned as much profit as possible, it is unlikely that Mr Lanciana would deliberately "disrupt" the Hoddle Street project as Mr Gangemi contends. It is one thing for Mr Lanciana, in his continual search for funds for the various projects in which he was interested, to "borrow" some of the funding from Suncorp Metway to preserve or protect other projects. It is another thing altogether for him to embark on a course of conduct designed to undermine the profitability of the Hoddle Street project and to risk his own personal assets, and those of Pre Need, in that process.

221 Further, I find that Mr Gangemi did not believe that Mr Lanciana would deliberately take steps to delay payment to contractors on the Hoddle Street project, or otherwise "disrupt" the Hoddle Street project, if Mr Gangemi did not settle the disputes between him and Mr Lanciana. As I have said, it makes no sense for Mr Lanciana to engage in such conduct. Nor does it make any sense for Mr Gangemi to believe that he would do so. Their interests in relation to the Hoddle Street project were the same, with the sole exception that Mr Lanciana apparently believed that the Hoddle Street project was more likely to be completed on time and to yield a greater profit if Mr Gangemi was removed as the builder.

222 There was evidence that, after the new draw down procedures were implemented, there were still some delays in paying creditors.[20] However, I infer that these delays were most likely the result of a tight project budget and timing issues, with the demands of creditors exceeding available loan funds from time to time. This is not unusual in large scale building projects, where delays in draw downs being paid are not uncommon whilst quantity surveyors complete inspections prior to completing necessary certificates and authorizations.

223 In June and July 2003, Mr Lanciana and Mr Gangemi each caused a caveat to be lodged over the Buckley Street properties. Mr Lanciana claimed an interest in the Buckley Street properties "as a beneficiary under a constructive trust". Mr Gangemi claimed an interest "pursuant to deed of trust in writing dated 1 February 2003".

224 By early July 2003, the negotiations between Mr Lanciana and Mr Gangemi were floundering. On 9 July 2003, Mr Lanciana sent a facsimile dated 8 July to Mr Gangemi in which he set out two alternative offers to compromise the disputes between them. Mr Lanciana concluded his facsimile in the following manner:

The whole situation is again beginning to be bogged down and I grow impatient.

Either accept the offers or I will take control of the whole situation and run the project.

225 By this time, both Mr Lanciana and Mr Gangemi were clearly frustrated about their inability to resolve their differences and continue upon their separate ways. Something was clearly required to break the impasse. In this context, Mr Gangemi and Mr Lanciana engaged the services of Dominic Gatto to assist them to resolve their disputes. It was following the involvement of Mr Gatto, with assistance from Mario Condello, that the heads of agreement were signed by Mr Gangemi and Mr Lanciana on 9 September 2003. It is necessary to give close consideration to the involvement of Mr Gatto and Mr Condello in achieving this result. This is critical to the allegations of duress made by Mr Gangemi.

226 At the commencement of the trial, I was informed that neither Mr Gangemi nor Mr Lanciana would be calling Mr Gatto as a witness. There was no possibility that Mr Condello would be called as a witness, because he died in February or March 2006. It was clear that each of Mr Gangemi and Mr Lanciana wished to distance themselves from Mr Gatto and Mr Condello, each asserting that the other was responsible for securing their involvement in the attempts to resolve the dispute between them.

227 In his witness statement, Mr Lanciana described the circumstances in which Mr Gatto became involved in the following manner:

At about late 2000 Pre Need Services had agreed to do structural works on a project at the corner of Swanston and Grattan Streets, Carlton, on behalf of two Greek brothers, who were developers.

The project had run into union problems which were delaying the development. The contract under which this project was being developed had a substantial penalty clause for delay, of $1,000 per day ... On one occasion I went to the site and saw Mick Gatto at the site. I knew Mick Gatto.

I asked Mick Gatto what was going in. Mick Gatto said that he was sorting out some union problems on the site. I then spoke to Gangemi and he said to me that he had called in Mick Gatto to sort out union problems on the site.

In about mid July 2003 I received a telephone call from Mick Gatto who said that he was aware that Gangemi and I were in dispute and asked if he could assist in settling the matter. I said that he could assist in mediating between Gangemi and me. He said that he would speak to Gangemi and call me back. A short time later, Gatto said that he had spoken to Gangemi.[21]

228 Certain aspects of Mr Lanciana's witness statement in this regard were struck out due to deficiencies in form and hearsay objections. In oral evidence, Mr Lanciana gave the following evidence-in-chief:

Can I take you to the conversation that you had with Mr Gatto. Mr Gatto telephone you at some stage in July 2003 about a possible resolution?---Yes, somewhere around mid '03 I got a phone call from Mr Gatto.

What did Mr Gatto say to you?---He indicated he knew there was a problem between Gangemi and myself and he asked if he could help mediate the problem.

What was your response to that?---I said look, I wasn't against the idea. It was on a success only basis he indicated to me, and I said look, if Gangemi was willing to be part of the process, so was I, I had nothing to lose.

After that, do you recall who contacted who about a further meeting?---Mr Gatto called me and said to me that he had organised a meeting with Mr Gangemi and he gave me the date, the time and the place.

229 In cross-examination, Mr Lanciana gave the following further evidence concerning the engagement of Mr Gatto:

Just whilst we are on Mr Gatto, what was the amount of the success fee?---I knew that would come up, $100,000, Your Honour.

Through Pre-Need?---Through the companies. I couldn't tell you exactly which but more than likely Pre-Need.

Did Mr Gangemi contribute to that at all?---I believe he did, Your Honour, but I can't say for sure, I was aware that he was being charged the same fee as I was but that communication didn't happen with Gangemi and I at the same time.

We will have to ask Mr Gatto whether he obtained a separate fee from Mr Gangemi?---Again, you would have to ask them, Your Honour. It was my total belief that that was the case, that we were both being charged a fee for the mediation.

230 In his witness statement, Mr Gangemi told a completely different story about the circumstances in which Mr Gatto was retained. This evidence by Mr Gangemi was obviously intended to assert that it was Mr Lanciana who was responsible for involving Mr Gatto:

At about 8.00 pm one evening, in late July 2003, I received a telephone call from Mick Gatto ("Gatto"). Gatto was a prominent person in the building and construction industry with connections to the building and construction unions. I had been introduced to Gatto in 1995 by a friend of mine in a coffee shop in Carlton. I knew Gatto to say hello to but we were not friends. We were merely acquaintances and I had not had any business dealings with him. I do not know how Gatto obtained my phone number because he did not tell me. I was surprised and concerned to receive the telephone call. Gatto told me that he was aware that there was a dispute between Lanciana and myself and that this was affecting the building work at the Hoddle Street property and the concrete panel yard and that various third parties had not been paid. He asked me to have coffee at the La Porcella restaurant in Carlton that evening.

I was concerned, to ensure that no problems arose with the building work at the Hoddle Street site and so I agreed to meet with Gatto for coffee, which I did that night. Gatto told me that he wanted the dispute between Lanciana and me resolved. Gatto told me that he had a mediation practice and that he would like to help me resolve the dispute with Lanciana. I told him that I already had solicitors who were looking after the matter and that I did not think he could help. I thought that was the end of the matter.

The next day Gatto called me again and asked me to attend a meeting with Lanciana. I agreed because I remained concerned to ensure that there were no problems at the Hoddle Street site ...[22]

231 Until Mr Gatto gave evidence, counsel for Mr Gangemi cross-examined on the basis that Mr Gangemi had no involvement in the decision to involve Mr Gatto in attempts to resolve the dispute between Mr Gangemi and Mr Lanciana. However, when Mr Gatto was called as a witness, this position was not put to him.

232 Mr Gatto's evidence was indefinite as to the precise circumstances in which he was first approached to assist Mr Gangemi and Mr Lanciana to resolve their dispute. Initially he said that he was not 100 per cent sure whether Mr Gangemi telephoned him or he "bumped into" Mr Gangemi somewhere. In cross-examination, Mr Gatto thought that it may have been at a building site in Swanston Street, Melbourne where he was approached by Mr Gangemi. This is unlikely to be correct, but it does not matter. What matters is that Mr Gatto was adamant that he spoke with Mr Gangemi first about assisting him to resolve the dispute. He said that he and Mr Condello met with Mr Gangemi about the dispute "before Lanciana ever came onto the scene and before it moved forward at all". None of this evidence was challenged in cross-examination. I accept it. This reflects poorly on Mr Gangemi's credit concerning the circumstances in which he signed the Heads of Agreement.

233 As appears above, Mr Lanciana said that he paid Mr Gatto a "success fee" and that he understood, but did not know, that Mr Gangemi had agreed to pay a fee in the same amount. Mr Gatto gave evidence that each of Mr Gangemi and Mr Lanciana agreed to pay the same fee, which he was sure was at least $50,000 each and could have been $100,000 each. Further, Mr Gatto said that Mr Gangemi had paid "most of" his share of the fee. Mr Gatto was not cross-examined about this evidence. Further, no application was made to recall Mr Gangemi to give evidence denying this evidence, or giving a different version of events. In this regard, I note that application was made to recall Mr Gangemi on other issues, and he was recalled and cross-examined on a number of occasions, including after Mr Gatto had given his evidence. In all the circumstances, I accept Mr Gatto's evidence on this issue.

234 Following the engagement of Mr Gatto, a meeting was arranged. I will call this "the first meeting". Either shortly before or shortly after this meeting, Peter Johnson who was by this time acting for Mr Lanciana, prepared a draft document titled "Terms of Settlement".[23] It matters not whether these Terms of Settlement were drafted before or after the first meeting. The document is relevant because it demonstrates that the purpose of the process involving Mr Gatto was to arrive at a negotiated settlement which would be reduced to writing and signed by Mr Gangemi and Mr Lanciana.

235 The first meeting took place at the offices of George Defteros, solicitor. Apart from providing a boardroom for the purposes of the first meeting, and subsequent meetings, Mr Defteros had no relevant involvement. The first meeting was attended by Mr Gangemi, Mr Lanciana, Paul Fyfield (a friend of Mr Lanciana's), Mr Gatto and Mr Condello.

236 In his witness statement, Mr Gangemi sought to portray this meeting as one resulting from private arrangements made between Mr Lanciana, Mr Gatto and Mr Condello. As I have said, I do not accept that this was so. Mr Gangemi was fully involved in the engagement of Mr Gatto and Mr Condello for the purpose of assisting him to resolve his dispute with Mr Lanciana, and was a willing participant in meetings with them. Mr Gangemi said that he knew of the reputations of Mr Gatto and Mr Condello. However, apart from referring to the fact that he knew Condello had convictions for offences including assaults, he gave no evidence as to his belief concerning the reputations of Mr Gatto and Mr Condello.

237 Mr Gangemi knew of Mr Fifield. He said that Mr Lanciana had previously told him that Mr Fifield had criminal convictions. As it is not alleged that Mr Fifield played any part in the alleged duress, or said anything at any meeting, this evidence is irrelevant and I do not consider it, or the attendance by Mr Fifield, further.

238 Mr Gangemi gave evidence that Mr Lanciana was abusive towards him during the first meeting, calling him a "dog" and a "police informer"; and stated the terms upon which he wanted to finalise their business relationship. Mr Gangemi gave no evidence of any threat being made to him during the course of the first meeting. At the end of the first meeting, it was agreed that further attempts would be made to resolve the dispute.

239 In his oral evidence, Mr Gangemi said that he was given no opportunity to speak at the first meeting. He said that he just sat there and listened to what Mr Lanciana wanted. I do not accept this evidence. It is highly improbable that, at a meeting called for the purposes of resolving a dispute, Mr Gangemi would not put forward the matters which he wanted to achieve in any compromise. I prefer the evidence of Mr Gatto concerning what transpired at the first meeting, which accords with common experience of a negotiating meeting and was not challenged in cross-examination:

Do the best you can, please, Mr Gatto, and tell me what happened at that first meeting?---Well, I mean you are going back a number of years and I do know that Tony was very upset about the way things were conducted there with whatever their dealings were, and equally Percy wasn't too happy about the way things were going either and they were at loggerheads and they couldn't come to any sort of agreement to continue on the way they were and there was lots of issues raised. I mean, I can't really remember what they were now. There was one about Tony running the jobs or whatever, Percy said he wasn't the right bloke to be running the jobs, he was costing him a fortune or whatever. Me and Mario were actually instrumental in keeping him on and in hindsight, it was, you know, probably our fault anyway that he stayed on because Percy didn't want him there.

By that are you saying that was the main topic of the first meeting that you remember?---One of the main topics was, yes, the way he run these jobs and how they were blowing out of proportion as far as their budgets on funding and whatever and yes, there was - he was saying there was a lot of negligence there and Tony was saying there wasn't, you know, and that was the argument.

And no resolution was reached at the first meeting?---The first meeting we had there were many topics raised and there was no resolution, no.

240 Following the first meeting, Mr Gangemi received several telephone calls from Mr Condello and Mr Lanciana seeking to progress the settlement negotiations. As a result, a further meeting was arranged at the offices of Alderuccio solicitors, who were acting for Mr Gangemi (the "second meeting"). Mr Gangemi attended with his legal advisers, John Alderuccio and his junior counsel Stephen Palmer. Mr Lanciana was accompanied by his solicitor, Peter Johnson. Mr Condello was also present. Mr Gatto was not present. In his witness statement, Mr Gangemi said that he did not invite Mr Condello to attend and was surprised when he arrived at the second meeting. I do not accept this evidence. Mr Gangemi had been fully involved in organising the involvement of Mr Gatto and Mr Condello. Mr Condello had been telephoning Mr Gangemi in an endeavour to progress settlement negotiations.

241 The second meeting took place on 1 August 2003. In his witness statement, and in earlier affidavits sworn by him, Mr Gangemi described the content of the second meeting in the following terms:

It was agreed that the meeting would be conducted on a 'without prejudice basis'. Various matters in relation to the possible resolution of the dispute were discussed and a general proposal for settlement agreed. It was agreed that my solicitors would prepare a draft agreement for the purposes of further negotiations.[24]

242 In oral evidence, Mr Gangemi contradicted his previously consistent evidence that "a general proposal for settlement (was) agreed" at the second meeting. He said that he and his solicitor "didn't speak much at all" and that they "just listened to them". Further, he said that when they asked for documents and information they were rebuffed:

We requested many documents, we requested the accounts of the company, the books, all the information we required to actually see where we were at, in the position where we can start negotiating but the conversation went, 'Don't worry about that, we know what we are doing, we have a deal put together. This is what we are proposing', and that's it.

243 I accept the version previously sworn to by Mr Gangemi as being the most probable. It was not challenged by Mr Lanciana. This evidence explains why it is that Mr Gangemi's solicitors, Alderuccios, were asked to prepare the draft Heads of Agreement. It demonstrates that Alderuccios were intended, on behalf of Mr Gangemi and representing his interests, to have a meaningful input into the drafting and content of the proposed agreement.

244 I note that neither Mr Alderuccio nor Mr Palmer were called to give evidence. Of course, Mr Palmer could not have done so without returning his brief as junior counsel for Mr Gangemi in the proceeding.

245 Following the second meeting, Mr Alderuccio wrote to Mr Johnson seeking production of relevant documents to enable him to properly advise Mr Gangemi. This request was not complied with. I infer that it was this non-compliance which caused Mr Alderuccio to delay in preparing a draft settlement agreement in accordance with the proposal tentatively agreed to at the second meeting. In cross-examination, Mr Gangemi said that there was a delay in Mr Alderuccio preparing a draft settlement agreement as agreed at the second meeting because he was "pressed at Hoddle Street", therefore "had no time for this" and "was trying to drag it out". For reasons which will become apparent, I do not accept this evidence.

246 As a result of the delay in Mr Alderuccio preparing a draft settlement agreement, Mr Lanciana's solicitor, Mr Johnson, prepared a further draft of a document titled "Terms of Settlement" and this was provided to Mr Gangemi in early September 2003. Mr Gangemi took this draft Terms of Settlement to Mr Alderuccio and asked him to prepare a draft agreement. On 5 September 2003, Mr Alderuccio forwarded a "preliminary" draft "Heads of Agreement" to Mr Johnson. The facsimile cover sheet stated:

Subject to our client's final approval we enclose preliminary draft Heads of Agreement for your consideration.[25]

247 Once the preliminary draft Heads of Agreement had been prepared, a further meeting was arranged. I will call this "the third meeting".

Circumstances in which the third meeting was arranged

248 In his witness statement, Mr Gangemi said that the third meeting was arranged in the following context:

1. After the meeting Condello telephoned me on several occasions and demanded that I hurry up and reach a concluded agreement with Lanciana. I also continued to receive calls from Lanciana.
2. In early September 2003, I received another telephone call from Gatto and was asked to attend a meeting at offices which I believe were those of George Defteros on 9 September 2003.
3. In response to the demands of Condello and Lanciana, I took another draft Heads of Agreement (CB 1299-1301) which had been faxed to me by Wilckens and Roche on 2 September 2003 to my then solicitors, Alderuccio Solicitors and requested that they prepare a Draft Heads of Agreement to take to the meeting which was held on 9 September 2003 for discussion purposes.[26]

249 This evidence indicated that the draft Heads of Agreement were prepared by Mr Gangemi's solicitor on his instructions in the period between 2 September and 9 September 2003. However, in giving this evidence, Mr Gangemi did not refer to the preliminary draft Heads of Agreement which had been prepared and circulated by 5 September 2003. Nor did Mr Gangemi's witness statement contain any semblance of the remarkably improbable evidence which Mr Gangemi gave orally about the circumstances in which he now says the preliminary draft and final draft Heads of Agreement were prepared.

250 In his oral evidence, Mr Gangemi sought to downplay the significance of him taking draft Heads of Agreement to the third meeting. It was those draft Heads of Agreement which were amended in handwriting, initialled and signed. They are the Heads of Agreement which are in issue in the proceeding.

251 In extraordinary evidence, which was not contained in his witness statement and which is against all of the probabilities, Mr Gangemi sought to explain the circumstances in which Mr Alderuccio prepared the preliminary draft Heads of Agreement sent to Mr Lanciana's solicitors on 5 September 2003 and the final draft of the Heads of Agreement which he took to the third meeting.

252 Mr Gangemi said that he had "no choice" but to go to the third meeting and to take with him a proposed settlement document prepared by Mr Alderuccio. In this context, Mr Gangemi said that the final draft of the Heads of Agreement which he took to the third meeting, did not represent his instructions, but were prepared hastily by Mr Alderuccio on 9 September 2003 pursuant to his instructions to "just draft something up because I've got to go tonight"; to "just get me anything, I've got to go there tonight ... I don't care what"; to "just start drafting up something just to show them that we are doing something"; and like phrases.

253 Further, Mr Gangemi said that he "... didn't care what was on the document. I just wanted to go there that night because the consequences are quite severe if I didn't turn up at that meeting that night". In my view, this evidence is wholly inconsistent with the preparation by Mr Alderuccio of the preliminary draft Heads of Agreement on 5 September 2003 and the provision of that preliminary draft to Mr Lanciana's solicitors subject to Mr Gangemi's "final approval". When Mr Gangemi was confronted with the existence of the preliminary draft Heads of Agreement and the fact that they had been provided to Mr Lanciana's solicitor, he gave further unbelievable evidence. He said that he did not recall the 5 September facsimile or the preliminary draft Heads of Agreement, but accepted that he must have seen them at the time. However, he denied that the preliminary draft, or the final draft which he took to the third meeting, represented his wishes at all. He said that both of these drafts represented "the terms that Lanciana wanted and Condello wanted". He denied that he gave instructions for the preliminary draft to be prepared by his solicitors, and said that his solicitors were instructed by Mr Lanciana and Mr Condello as to what to include in the preliminary draft.

254 There are material differences between the preliminary draft and the final draft which was taken to the third meeting. Some of the changes favoured Mr Lanciana. Others favoured Mr Gangemi. For example, Mr Gangemi was favoured by the additional provisions concerning the release of guarantees given by him (clauses 5(a), 5A and 8 in the final draft) and by the inclusion of a clause providing that Mr Lanciana would be responsible for the repayment of Mr Jafari's investment (called a "loan") of $350,000 (clause 10 in the final draft). Mr Gangemi denied that he gave instructions for any of these changes to be made and said that they were made as a result of instructions from Mr Lanciana's solicitors and Mr Condello. He said "I didn't instruct anything ... it just happened". Mr Gangemi concluded that this remarkable evidence in the following exchange:

So were your instructions then to Mr Alderuccio to prepare a document in accordance with Mr Lanciana's wishes---Lanciana's, Condello's, whatever it was, yes, that's correct, yes.

255 I reject this evidence as incredible. I find that both the preliminary and final drafts of the Heads of Agreement were prepared by Mr Gangemi's solicitor on his instructions, and were intended to reflect the terms upon which Mr Gangemi was prepared to settle his disputes with Mr Lanciana. Of course, it is likely that Mr Alderuccio and Mr Johnson, acting on behalf of their respective clients, negotiated terms acceptable to their clients and that there was give and take in the negotiations.

256 That finding is supported by the fact that Mr Alderuccio was not called to give evidence and no explanation was offered for the failure to call him. I infer that his evidence would not have assisted Mr Gangemi's case.

257 Further, this finding is reinforced by the fact that the draft Heads of Agreement included many terms in favour of Mr Gangemi, including Mr Lanciana's agreement that Mr Gangemi remain as the builder for the Hoddle Street project and, extraordinarily, a provision giving Mr Gangemi the power to sell the Hoddle Street, Buckley Street, Stevedore Street and Mitchell Street properties if Mr Lanciana breached any term of the Heads of Agreement. It is incredible to suggest that such a term was included at the insistence of Mr Lanciana. Moreover, the finding is reinforced by the fact that many changes were made to the draft Heads of Agreement, to the benefit of Mr Lanciana, when they were the subject of negotiation at the third meeting. If the draft Heads of Agreement reflected Mr Lanciana's wishes, as Mr Gangemi contends, these changes are unlikely to have been necessary.

258 The finding is also supported by the fact that the critical financial elements of the Heads of Agreement, which involve Mr Gangemi transferring his interests in the entities which own the properties at Mitchell Street, Stevedore Street, Bute Street and Buckley Street, remained constant in the preliminary draft, the final draft and the executed Heads of Agreement. I infer that these elements were the subject of "the general proposal for settlement" agreed at the second meeting, or were agreed in the course of discussions concerning the drafting of the final draft of the Heads of Agreement.

259 Furthermore, I do not accept the premise underlying this remarkable evidence from Mr Gangemi, to the effect that he had "no choice" but to go to the third meeting and to take with him a document prepared by his solicitors which represented the wishes of Mr Lanciana and Mr Condello. My reasons for rejecting this premise are as follows.

260 First, for the reasons given above I reject Mr Gangemi's evidence that he had no involvement in the decision to engage Mr Gatto, and thus Mr Condello, in the mediation process between him and Mr Lanciana. I find that Mr Gangemi was a willing participant in that mediation process.

261 Second, Mr Gangemi knew Mr Gatto fairly well. He said that he "knew who he was, of course", that he had met him on a couple of occasions through mutual friends, knew of his involvement in the building industry through the newspapers and had also met him on a couple of occasions on another building site in Swanston Street. Mr Gatto gave evidence that he had known Mr Gangemi "for a long time", and that he "really got to know him" a few years prior to the events in issue. This evidence was not challenged in cross-examination or the subject of any application to recall Mr Gangemi to give rebuttal evidence. In any event, the allegations of duress which are made by Mr Gangemi do not depend upon any fear that Mr Gatto might cause him harm.

262 Third, although he gave no details, Mr Gangemi said that he was well aware that Mr Condello had "criminal convictions for offences including assaults". However, Mr Gangemi gave no evidence of any specific threat by Mr Condello to use physical violence against him or his family if Mr Gangemi did not attend the third meeting, or if he did not bring with him a draft settlement agreement reflecting the wishes of Mr Lanciana. In his witness statement, Mr Gangemi said only that Mr Condello telephoned him on numerous occasions and asked him to "hurry up" during the course of the settlement process. In oral evidence, Mr Gangemi made general assertions about feeling pressured by Mr Condello, but gave no particulars of what Mr Condello said to place any pressure upon him.

263 Fourth, for the reasons I have given, I reject Mr Gangemi's evidence that he did not wish to pursue a negotiation with Mr Lanciana at this time because he was "pressed at Hoddle Street" and was "trying to drag it out". I find that Mr Gangemi wished to pursue a settlement with Mr Lanciana and that he willingly instructed his solicitor to draft Heads of Agreement for the purpose of taking them to the third meeting in an endeavour to resolve the disputes. This finding is reinforced by the fact that Mr Gangemi's solicitor forwarded a preliminary draft of the Heads of Agreement to Mr Lanciana's solicitor on 5 September 2003, notwithstanding that the preliminary draft was subject to final instructions, and because the drafts included terms favourable to Mr Gangemi, some of which terms were the subject of handwritten amendment in favour of Mr Lanciana during the course of the third meeting.

264 Fifth, I take into account the significant change in Mr Gangemi's evidence concerning the alleged threats and intimidation relied upon by him in this proceeding. Prior to preparing and subsequently adopting in evidence his witness statement in this proceeding, Mr Gangemi swore two affidavits in which he set out the intimidation and threats upon which he relies in support of his case that his signature on the Heads of Agreement was procured by duress. Initially, in other proceedings concerning the Stevedore Street property, Mr Gangemi swore an affidavit on 6 July 2005. Later, in this proceeding, Mr Gangemi swore an affidavit on 21 February 2007. In each affidavit, Mr Gangemi concluded his recounting of the alleged duress in the following terms:

I did not want to sign the [Heads of Agreement] but felt intimidated by Lanciana. I signed the document because I felt pressured to do so by Lanciana and in order to get out of the meeting as quickly as possible.[27]

265 In his witness statement for the trial of this proceeding, Mr Gangemi added, for the first time, the allegation that he felt intimidated "by Lanciana and Condello".[28]

266 In cross-examination, it was put to Mr Gangemi that he had fabricated his evidence that he had been threatened by Mr Condello. He was asked to explain why he did not state that he felt intimidated by Mr Condello in his earlier affidavits. His explanation for this was that:

While Condello was still alive there was no way I was actually going to include him in the affidavit material ...

... while Mr Condello was alive I received many, many phone calls and one of the conditions of those phone calls was never to go to the police.

267 When it was put to Mr Gangemi that Mr Condello died in or about February 2006, about a year before he swore his affidavit in this proceeding on 21 February 2007 which made no mention of any threats or intimidation by Mr Condello, Mr Gangemi gave inconsistent evidence by way of explanation. Initially, he said that "obviously we forgot ... it's just an oversight, I suppose". Later, he said that he did not name Mr Condello in his 21 February 2007 affidavit as a person who intimidated him, because:

It took a while for me to get encouraged to actually start naming names ...

... with time I think a lot of things have calmed down. I actually have spoken to many officers of the police force and they have assured me that everything's calmed down and I have no reason to feel threatened by any of these people at the moment, so that's why I am at liberty now to actually bring up exactly what happened and how the occurrences actually happened.

268 Later, when cross-examined on behalf of Mr Jafari, Mr Gangemi said that he did not include any reference to intimidation by Mr Condello in his 21 February 2007 affidavit because:

I chose my words very carefully. There are other people that I'm sure are very friendly with Condello and I didn't want to ruffle the wrong feathers. I wasn't going to take a chance, Your Honour. As I said, I'm the one who was put in a position and I took the view that I would rather stay alive, thank you.

269 Then, in apparent contradiction of his earlier evidence that Mr Condello made many telephone calls to him and said that "one of the conditions of those phone calls was never to go to the police", Mr Gangemi said:

No, actually I've reported it to the police many times, I've reported it to the St Kilda CIB, the St Kilda Road CIB. I had meetings with Purana Task Force. I actually enquired to get Condello's phone records. I can prove the allegations - and unfortunately they cannot give me the phone records of Condello. I've made many, many reports to the police about Condello.

270 Once again, there is not a hint of this evidence in Mr Gangemi's witness statement. I do not accept Mr Gangemi's evidence that he felt threatened by Mr Condello. I find that it constitutes recent invention by him in the course of preparation for the trial of this proceeding. Mr Gangemi's duress allegations have always been an important part of his case. He is well represented. If he had told his lawyers about intimidation by Mr Condello, it is highly likely that they would have included evidence of such intimidation in the 21 February 2007 affidavit sworn by Mr Gangemi. I infer that Mr Gangemi has sought to allege intimidation by Mr Condello in reliance upon the fact that he is deceased and cannot give any contrary evidence.

271 Furthermore, Mr Gangemi's evidence that he felt threatened by Mr Lanciana, which he has consistently given, is undermined by his statement in cross-examination that it was Mr Condello who he really felt threatened by and that he "wouldn't give two hoots about" Mr Lanciana. When the inconsistency in this position was put to him, he said that it was "a combination" of intimidation by Mr Condello and Mr Gangemi. This evidence demonstrates that Mr Gangemi was prepared to say whatever he felt was necessary in order to deal with cross-examination on issues adverse to his interests.

272 Sixth, as I have found above, by September 2003, there was no threat by Mr Lanciana to disrupt the progress of the works at Hoddle Street. Although there were some prior difficulties with payment of contractors, arrangements had been made by this time for the loan monies from Suncorp Metway to be channelled through Mr Gangemi and not Pre Need. Mr Lanciana's desire to remove Mr Gangemi as the builder at Hoddle Street was not included in the executed Heads of Agreement. To the contrary, the Heads of Agreement provided that Mr Gangemi would remain as the builder and he in fact did so until completion of the Hoddle Street project.

273 Seventh, following the execution of the Heads of Agreement, Mr Gangemi made no contemporaneous complaint about any alleged intimidation causing him to attend the third meeting and sign the Heads of Agreement. This issue is not addressed in Mr Gangemi's witness statement. In cross-examination, he was asked whether he went and spoke with his solicitor, Mr Alderuccio, after he signed the Heads of Agreement at the third meeting on 9 September 2003. He said that he did not do so, because he was "quite annoyed", he "wanted to keep everybody else out of the situation", he "did not want to put anybody else at risk" and because he felt "very embarrassed".

274 Mr Gangemi then said that later in September he did take the Heads of Agreement to Mr Alderuccio and discuss them with him. This evidence should have been given in answer to the initial questioning as to whether Mr Gangemi went to see Mr Alderuccio after he signed the Heads of Agreement at the third meeting. In any event Mr Gangemi gave evidence to the effect that he later put aside his reasons for not speaking to Mr Alderuccio about the signed Heads of Agreement, that he went and saw Mr Alderuccio, gave him a copy of the Heads of Agreement and gave evidence of a conversation with Mr Alderuccio:

Did you tell Mr Alderuccio, if not the day after, a week later, any other time in September about this document, the heads of agreement?---Yes, I did.

And you got advice from him about the document?---I said don't comment. He did ask me the question whether I had been threatened or had been stood over. At the start - - -

So Mr Alderuccio then knew, on your version, that you had somehow been threatened; when did he know that?---I made it obvious to Alderuccio when I actually gave him the document, I said, 'I had no choice, I just signed it', that's all I said.

That's all you said to him?---I said to him, 'I had no choice, I just signed it.'

Did you ask him then to write to the solicitor for Mr Lanciana and complain about what had happened?---No.

275 I do not accept Mr Gangemi's evidence in this regard. I find that Mr Gangemi did consult Mr Alderuccio soon after he signed the Heads of Agreement. Indeed, although he initially denied it, Mr Gangemi does not dispute this. I reject Mr Gangemi's evidence as to his conversation with Mr Alderuccio when he took the signed Heads of Agreement to him. Mr Alderuccio is an experienced solicitor who represented Mr Gangemi for most of the interlocutory stages of this proceeding. He did so competently. If he had been informed by Mr Gangemi of threats and stand over tactics inducing Mr Gangemi to sign the Heads of Agreement, he would most probably have advised Mr Gangemi to instruct him to write a letter of complaint to Mr Lanciana's solicitors and seek to avoid the Heads of Agreement. Mr Alderuccio made no such complaint. Instead, as appears hereafter, Mr Alderuccio, on behalf of Mr Gangemi, sought to rely upon the Heads of Agreement when it suited Mr Gangemi to do so.

276 Mr Alderuccio was not called as a witness. I infer that his evidence on this issue would not have assisted Mr Gangemi's case.

277 Eighth, I take into account the subsequent conduct of Mr Gangemi and Mr Alderuccio pursuant to and in reliance upon the Heads of Agreement. This subsequent conduct is referred to below. It is inconsistent with the Heads of Agreement being infected with the intimidation which Mr Gangemi alleges.

278 Ninth, I take into account the statements made by Mr Gangemi to Mr Jafari concerning the Heads of Agreement. This evidence is considered below.

279 Tenth, allied to the fact that Mr Gangemi made no complaint about intimidation inducing him to sign the Heads of Agreement, is the fact that Mr Gangemi did nothing as a director of 63 Buckley after he signed the Heads of Agreement, and did nothing towards progressing the Buckley Street project. For example, Mr Gangemi filed no documents with ASIC as required by the Corporations Act 2001 (Cth). More importantly, he ceased to have any involvement in the Buckley Street project. In particular, Mr Gangemi ceased to be involved in the continued prosecution of the planning permit for the Buckley Street project, which was ultimately granted by VCAT in June 2004.

280 The third meeting took place on 9 September 2003 at the offices of Mr Defteros. It was attended by Mr Lanciana, Mr Fifield, Mr Gangemi, Mr Gatto and Mr Condello. There is no dispute that, during this meeting, Mr Gangemi and Mr Lanciana each signed an amended version of the final draft Heads of Agreement ("the Heads of Agreement"). However, there is significant dispute as to the circumstances in which the Heads of Agreement were signed.

281 Mr Lanciana gave evidence to the effect that the draft Heads of Agreement were the subject of discussion and negotiation, consequent handwritten amendment and then signature to reflect a commercial deal reached between him and Mr Gangemi. Mr Lanciana's evidence in his witness statement was as follows:

On the 9th September 2003 a meeting was held at the offices of George Defteros to finalise settlement between Gangemi and me. Present at the meeting were Gangemi, Condello, Gatto, myself and Paul Fyfield.

Gangemi gave to me a copy of a document headed Heads of Agreement, drawn up by his solicitors, setting out proposed terms that Gangemi wanted as part of a settlement. A copy of this document is at CB 875.

The proposed parties to the Heads of Agreement included all of the companies that Gangemi and I were involved in, as well as Sam Abate and others. This document included parties who were not relevant to the settlement and references to interests such as unit trusts that did not exist. However, I was content to proceed with the meeting and try to resolve out disputes.

During the negotiations Gangemi and I discussed the proposed terms of settlement and we agreed upon certain changes to the Heads of Agreement document.

As part of the settlement I said that I wanted to separate Gangemi's and my interests as soon as possible. I wanted Gangemi to resign as director and transfer any shares he held in 87 Stevedore Street and 63 Buckley Street. He did not hold any shares in Pre Need Services and Clapana. Victoria Precast did not trade beyond 2000. I wanted him or his company to transfer any units in any trusts of which these companies were trustees, as soon as possible. I said that I could then turn my attention to dealing with the various financial issues that existed in respect of the various projects that I and these companies were involved in.

In clause 6 of the Heads of Agreement, Gangemi was required to resign as director and transfer any shares, any units and any other documents in respect of Clapana, 87 Stevedore Street, 63 Buckley Street, Pre Need Services and Victoria Precast on the signing of the Heads of Agreement. Bloomingdale was similarly to transfer any shares or any units and any other documents that it may have held in Clapana and the Mitchell Street Unit Trust, the Bute Street Development Unit Trust and the Buckley Street Unit Trust. I said that I wanted the resignation and transfers of interests to take effect upon the signing of the Heads of Agreement.

After extensive negotiations, handwritten changes and amendments to the Heads of Agreement were agreed and all amendments were then initialled by me and Gangemi. Gangemi and I then signed the Heads of Agreement.

A copy of the signed Heads of Agreement was given to Gangemi and I retained a copy of it. Gangemi did not say at the meeting that he did not want to sign the Heads of Agreement or say anything else to indicate that he was not content to go ahead with the settlement that we had reached.[29]

282 In oral evidence, Mr Lanciana estimated that the third meeting took "perhaps an hour, half an hour to an hour." He said that he was unwilling to allow Mr Gangemi to remain as the builder at Hoddle Street, as provided for in the draft Heads of Agreement, and that it was Mr Gatto who persuaded him to agree to Mr Gangemi remaining on as builder.

283 Mr Gangemi gave a different account of the circumstances in which the Heads of Agreement were signed. In his witness statement, he swore:

I attended the meeting on 9 September 2003. I took the draft Heads of Agreement to the meeting for discussion purposes only. Upon arriving at the offices I was shown into a board room where Condello, Gatto, Lanciana and Fifield were present. I was taken from the board room to another room by Condello who told me that he wanted to frisk me for listening devices and he then did so. Condello then showed me back to the board room and the meeting commenced. At the start of the meeting Condello said that it would be conducted on a "without prejudice" basis. I gave Lanciana a copy of the draft Agreement which had been prepared by my then solicitors. Lanciana made a number of substantial alterations to the Agreement and signed it. Lanciana then asked me to sign the Agreement. I felt uncomfortable about signing the Agreement without my solicitor being present and said so. The amendments which Lanciana had made to the draft agreement were unfavourable for Bloomingdale and myself. In the presence of Gatto and Condello and Fifield, Lanciana demanded that I sign the document. I told Gatto and Condello, that even if I signed the document, I did not believe that Lanciana would be able to comply with his obligations under the document, particularly in relation to procuring my release from the various Guarantees which I had provided. Lanciana continued to demand that I sign the document. In order to get out of the situation as quickly as possible, I signed the document (CB 1677-1686). This document was the only document I signed on 9 September 2003. I did not want to sign the document but felt intimidated by Lanciana and Condello. I signed the document because I felt pressured to do so by Lanciana and in order to get out of the meeting as quickly as possible. Condello witnessed the signatures of Lanciana and myself.

I did not sign the agreement of my own free will but did so because I was afraid for my personal safety and that of my family. I was also concerned that Lanciana would continue to cause disruption to work on the Hoddle Street project or cause work to cease and thereby further delay the Hoddle Street project with the result that I would be exposed to a claim by Suncorp Metway under the guarantee that I had provided to them.[30]

284 In oral evidence, Mr Gangemi said that there was no negotiation. He said that he was asked to produce the draft agreement at the commencement of the meeting and then:

The amendments were made by Condello and Lanciana on the other side of the table and I was sitting on the other side of the table ... and then as soon as they finished crossing out everything they wanted to cross out, sign, and that's all.

Later in cross-examination, the following exchange took place:

Are you saying Mr Condello threatened you?---That evening - not threat as in verbal threat, no ...

... I just sat there and just accepted it. I just sat there, I did not even - whatever happened, happened. I didn't particularly - they were crossing things off, they were marking things off, I sat down at the other side of the table. I have got no explanation for that, I just didn't want to - I wasn't prepared to risk my safety or the safety of my family or anybody else's safety for that matter. I just went along - or for that matter having Hoddle Street - I knew the reputations of Condello---

... I just accepted what they wanted to do and that's how I walked out of there in one piece.

285 Mr Gatto gave evidence which was consistent with that of Mr Lanciana. He was asked whether there was discussion at the third meeting before the Heads of Agreement were signed. He responded:

Like I said, there was, there was discussions about Tony staying on as project manager. Percy didn't want anything to do with that. He said that he's costing him a fortune and the job's run right out of budget and there was no profit left, and they were arguing about units, how many they were going to keep and apartments and whatever, and I can't be specific about the amounts or whatever. But there were all these sort of arguments in relation to how they were going to settle it and like I said, me and Mario pushed for Tony to stay on there and Tony was pretty happy then and everybody signed and as far as I was concerned we had done our job and that was the end of it.

286 It was not put to Mr Gatto in cross-examination that this evidence was false. Counsel for Mr Gangemi did not put Mr Gangemi's version of events at the third meeting to Mr Gatto.

287 In all the circumstances, including the reasons given above for rejecting Mr Gangemi's evidence that he had "no choice" in attending the third meeting, I accept the evidence of Mr Lanciana and Mr Gatto as concerning the events at the third meeting as being more probable. That evidence accords with general practice as to ordinary commercial negotiation when parties willingly come together in an endeavour to resolve disputes between them. I find that this is what Mr Gangemi and Mr Lanciana did by attending and participating in the third meeting.

(8) Did Mr Gangemi perform his obligations under the Heads of Agreement? If so, were those acts voluntary?

288 The critical obligations of Mr Gangemi under the Heads of Agreement which are relevant to this proceeding are contained in clause 6, by which Mr Gangemi agreed (amongst other things) to resign as a director of 63 Buckley, to transfer his share in 63 Buckley to Mr Lanciana, to transfer his units (if any) in the Buckley Street Unit Trust and to sign and deliver "other related documents". Clause 6 provides:

Gangemi and Bloomingdale will sign and deliver to Pasquale Lanciana documents prepared by Pasquale Lanciana to cause his resignation of directors, transfer of share, transfer of units and other related documents in respect of Clapana, [the Mitchell Street unit trust], [the Bute Street development unit trust], 87 Stevedore Street Pty Ltd [the company which owns the Stevedore Street property and which is the trustee of the Stevedore Street development unit trust], 63 Buckley, [the Buckley Street unit trust], Pre-Need ... on the signing of this agreement.

289 Further, clause 13(e) of the Heads of Agreement made provision for Mr Gangemi to withdraw his caveats. When understood in the context of the agreement as a whole, the obligation of Mr Gangemi to withdraw his caveats included his caveats over the Buckley Street properties, the Mitchell Street property and the Stevedore Street property.

290 Mr Gangemi signed a handwritten document prepared by Mr Lanciana resigning as a director of 63 Buckley. He also signed a blank share transfer in respect of 63 Buckley, which was later completed in favour of Mr Lanciana. Mr Gangemi says that he signed these two documents under duress, constituted by physical violence and the threat of further physical violence from Mr Lanciana, and continuing concerns that Mr Lanciana would disrupt the orderly completion of the Hoddle Street development and thus expose Mr Gangemi under his guarantee of the finance for that development.

291 Mr Gangemi did not sign any transfer of units in the Buckley Street unit trust. As I have said, the relevant trust deed was not executed by all relevant parties. There is no evidence that any units were ever issued. There was nothing to transfer.

292 A document purporting to be a withdrawal by Mr Gangemi of his caveat over the Buckley Street properties was in evidence. Mr Lanciana gave evidence that this withdrawal of caveat was signed by Mr Gangemi in blank at the same time that Mr Gangemi signed his resignation as a director of 63 Buckley and the share transfer. Mr Gangemi denies this. He contends that the withdrawal of caveat is a forgery. Curiously, Mr Gangemi accepts that he did sign at least one blank form of withdrawal of caveat on this occasion, but said that this is the form which has been completed by Mr Lanciana to record the withdrawal of his caveats over both the Mitchell Street and Stevedore Street properties.

293 The first issue is whether, notwithstanding that he was obliged to do so under the Heads of Agreement, Mr Gangemi signed any of the documents under duress as he alleges. In this regard, Mr Gangemi's evidence in his witness statement was as follows:

In mid September 2003, Lanciana attended the Hoddle Street development site and assaulted me by grabbing me by the throat. He demanded that I sign documents including a blank withdrawal of caveat form and a Resignation of Directorship for both 87 Stevedore Street and Buckley Street Pty Ltd ('Buckley Street'). After he let go of me he said 'we have an agreement with the boys. Just sign'. I signed the documents because they were incomplete and I did not think they were of any effect and could not be used by Lanciana. I was also afraid that Lanciana might cause problems at the Hoddle Street site and I wanted Lanciana to leave the site as quickly as possible. At all times in my dealings with Lanciana after May 2003 I had been concerned to ensure that the development of the Hoddle Street property was completed and I had to keep dealing with Lanciana as his co-operation was necessary for the Hoddle Street development to proceed. Considerable pressure was placed upon me as the builder by Suncorp Metway to ensure that the Hoddle Street Development proceeded on schedule. I was also concerned by the fact that I had significant obligations to sub-contractors to work on the project and had provided a guarantee to Suncorp Metway for the finance advanced by it. Lanciana was a sole director of Clapana and cheques for progress payments were paid by Suncorp Metway to Pre-Need Services at Lanciana's direction. Lanciana had control of the Pre-Need Services cheque books.[31]

294 In oral evidence, Mr Gangemi said that he signed "about three" blank documents on this occasion. However, he said that he did not read any of the documents, and acknowledged that there could have been some writing on them, but that he does not recall. He said "I just signed just to get out of there".

295 Further, in oral evidence, Mr Gangemi sought to add to the account in his witness statement as to the circumstances in which the documents were signed. He gave a most unsatisfactory explanation for not including this further evidence in his witness statement. For the reasons given below, I reject the explanation. The further evidence and explanation is contained in the following exchanges:

So Mr Lanciana came, brought you some documents and asked you to sign them, is that correct?---I refused to sign them, Your Honour, he dragged me by the throat, pushed me against the wall and, 'Fucking sign.' Before he came there, Condello rang me and said, 'Lanciana's coming down, sign documents', so that's the events.

Is that in your witness statement?---There's a lot of things - sorry - - -

Is that in your witness statement that Condello rang and said, 'Sign, Mr Lanciana's coming around with some documents'?---No.

Was that in any of the affidavits previously that you filed in this proceeding?---There's a lot of things I didn't include in my affidavits.

Sorry?---There's a lot of things I haven't included in my affidavits, no, Your Honour, because there's many, many more instances where I was abused, rang, threatened. You could fill a book like this.[32]

What's the explanation for that material not being in your affidavit?---Because it's just - - -

Or your witness statement?---I can't prove it. I can't prove a lot of - - -

You can't prove a lot of what else is in your statement either. Can you explain to me, Mr Gangemi, why it is that other intimidatory conduct beyond that contained in your previous affidavits and your witness statement is not contained in your witness statement in this proceeding; is there a reason for that?---I think we just kept it very - I can only put down, I thought I could only put down exactly what I could prove and there's no - - -

So that's the explanation?---I can only put down what I can prove. I didn't want to put down phone calls that I had received and I don't know whether there's any benefit in it.

296 Although Mr Gangemi did not refer to it in his evidence, a witness was called on his behalf to give evidence that he witnessed the alleged assault. Jason Smith, a contractor on the Hoddle Street project, said that he attended at the Hoddle Street premises in about mid September 2003 ("I remember it was like the footy season was coming to an end") and, upon approaching the site office:

I could hear very loud shouting and arguing going on inside the office. When I looked into the office I saw Percy Lanciana grab Tony by the neck/throat and push him against the wall in an extremely threatening and violent manner.

On seeing this I said 'This has fucking gone far enough, just give me my money'.

297 In his oral evidence, Mr Smith confirmed the evidence given by him in his statutory declaration which was tendered in evidence. In the course of doing so, he demonstrated where Mr Lanciana placed one hand high up on Mr Gangemi's chest but, to my observation, below Mr Gangemi's neck. He said that Mr Lanciana "had a hand up around his chest" and, upon being pressed, said "It's a very fine line between chest and throat".

298 Mr Smith could not say whether Mr Lanciana had documents in his other hand.

299 Although Mr Smith was cross-examined as to his motive to lie on behalf of Mr Gangemi, because Mr Smith is still owed money in respect of the Hoddle Street project and may wish to recover it from Mr Gangemi, I do not accept that Mr Smith was lying in his evidence. He gave straightforward evidence as to a memorable event, which I accept occurred. Whether or not that event is the same event at which Mr Lanciana asked Mr Gangemi to sign the documents at issue is another question.

300 Mr Lanciana gave a completely different version of events. He said that the documents were signed by Mr Gangemi at the Buckley Street properties, not at Hoddle Street. He denied that any assault took place at this time. He said that he asked Mr Gangemi to sign three blank withdrawal of caveat forms and said to him "I'll fill them in later". He later completed the withdrawals of caveat and lodged them at the Titles Office. He also had Mr Gangemi sign the resignation of directorship and a blank share transfer form, which may have had the company name 63 Buckley Street Pty Ltd written on it, but he is not sure. He later completed some details on the blank share transfer form.

301 Mr Lanciana said that he did recall a physical altercation between him and Mr Gangemi, which was at a different time to the occasion on which these documents were signed, when he put his hand on Mr Gangemi's chest and forced him back. He gave the following evidence.

You were in court when evidence was given by a Mr Smith about an incident at Hoddle Street whereby Mr Smith says you had your hand on Mr Gangemi's chest or near his throat, do you recall anything about an incident like that?---I recall an incident like that, I don't recall Mr Smith though.

Mr Gangemi has said you had your hand around his throat at one stage?---Incorrect.

Do you recall whether there was any incident in Hoddle Street at about this sort of time in September 2003 or thereabouts, where things got heated between you and Mr Gangemi?---Yes, I do.

Can you briefly tell His Honour the circumstances in which that incident occurred?---It centred around the fact that I was complaining about his performance still on Hoddle Street. He became quite aggrieved at what I was suggesting. Our tempers rose on both sides. I saw him dangerously going to the next step and I stopped him from going there by putting my hand on his chest and pushing him back.

Mr Lanciana, you are quite proficient in fighting skills, are you not?---Yes, I am.

You have had tournaments in which you have been involved in martial arts or fights?---Not tournaments but fights.

When you said you saw Mr Gangemi trying to go to the next step, what do you mean by that?---My experience with people is they get to a certain stage where they suddenly believe they can do something that they are not really capable of. I saw that in Mr Gangemi and decided I needed to step in before he got hurt.

By you saying they're not capable of taking it to the next step, what do you mean?---In a moment of anger or in the heat of the moment they suddenly believe they are capable of doing something they are not capable of, and Gangemi is not capable of doing anything.

302 Notwithstanding the evidence of Mr Smith, this is an issue of oath against oath which must be resolved by reference to the probabilities arising from the evidence as a whole and the general credibility of Mr Gangemi and Mr Lanciana as witnesses. There is no dispute that an incident of the kind described by Mr Smith occurred. Was it the occasion upon which Mr Gangemi admittedly signed the resignation as a director, the blank share transfer form and at least one blank form of withdrawal of caveat? Having considered the evidence as a whole, I prefer the evidence of Mr Lanciana on this issue. I find that the documents were not signed by Mr Gangemi at the time Mr Lanciana pushed him up against a wall, but were signed by him willingly at the Buckley Street properties as Mr Lanciana contends. My reasons are as follows.

303 First, I have found that Mr Gangemi willingly signed the Heads of Agreement, in the absence of any duress. Accordingly, he was bound to sign the resignation of directorship, transfer of shares and withdrawal of caveat. In these circumstances, it is unlikely that he would have simply refused to comply with his agreement, reached only a few days before.

304 Second, I do not accept Mr Gangemi's assertion that he did not sign the withdrawal of his caveats over the Buckley Street properties. I have examined the copy withdrawal of caveat in evidence, and it does not appear to be an obvious forgery. Indeed, it appears to me to be consistent with many other examples of Mr Gangemi's signature which, as I have said, is characterised by a high degree of inconsistency. The signature is not materially different from that contained on the withdrawal of caveat in respect of the Mitchell Street and Stevedore Street properties, which Mr Gangemi admits that he signed. In my view, Mr Gangemi's false assertion of forgery in respect of the withdrawal of caveat, which I find was signed by him at the same time that he signed the resignation of directorship and share transfer, reflects poorly on his credit concerning these events.

305 Third, Mr Gangemi embellished the evidence in his witness statement with material evidence. The earlier telephone call from Mr Condello and the attribution of the words "Fucking sign" to Mr Lanciana at the time of the alleged assault are important matters which, if Mr Gangemi had informed his lawyers of them, would doubtless have been in his witness statement. I find that they constitute recent invention by Mr Gangemi who was prepared to say whatever he felt was necessary in order to bolster his case on this issue.

306 Fourth, there is the lack of any complaint by Mr Gangemi concerning the alleged assault in connection with the execution by him of the documents in issue - the resignation of directorship, share transfer and withdrawal of caveat form. The significance of Mr Gangemi's lack of complaint has been canvassed above. The comments made above are equally applicable in this context. Mr Gangemi's lack of complaint makes his evidence concerning the circumstances in which the documents were signed difficult to accept. I reject it.

307 Fifth, I take into account my comments concerning the general demeanour and credibility of Mr Lanciana and Mr Gangemi as witnesses. As I have said, where matters are evenly balanced, I will prefer the evidence of Mr Lanciana. I do so on this occasion.

308 As to the assertions by Mr Gangemi that he signed these documents because of a fear that Mr Lanciana would disrupt the Hoddle Street development, I refer to my findings above concerning similar assertions in relation to the background against which there was negotiation and signature of the Heads of Agreement. The conclusions which I reached in that regard are equally applicable to these events.

(9) Conduct of Mr Gangemi and Mr Lanciana subsequent to the Heads of Agreement

309 As appears above, following the execution of the Heads of Agreement, Mr Gangemi signed a document resigning as a director of 63 Buckley, a blank share transfer form in respect of 63 Buckley and three withdrawal of caveat forms. I have found that these documents were signed by Mr Gangemi in performance of his obligations under the Heads of Agreement. Further, I have noted that Mr Gangemi did not, by himself or through his solicitors, make any contemporaneous complaint that his signature on the Heads of Agreement, or on any of these documents, was obtained under duress.

310 Further to these matters, there is other conduct by Mr Gangemi and Mr Lanciana pursuant to or which recognises the existence of the Heads of Agreement. The existence of this conduct is important for four reasons:

(1) it is relevant to the allegations of duress made by Mr Gangemi;

(2) it is relevant to submissions made on behalf of Mr Gangemi that the Heads of Agreement do not constitute a binding agreement because they are incomplete, not signed by all intended parties and were intended to be superseded by a formal agreement after tax advice had been obtained;

(3) it is relevant to allegations made by Mr Gangemi that the Heads of Agreement were later abandoned;

(4) it is relevant to submissions made on behalf of Mr Lanciana that if the Heads of Agreement or the documents signed pursuant to it were procured by duress, Mr Gangemi has nevertheless elected to affirm the Heads of Agreement by his subsequent conduct.

311 The following conduct of the parties following execution of the Heads of Agreement is relevant.

312 First, soon after the Heads of Agreement were signed, either Mr Lanciana or Mr Gangemi forwarded a copy of the Heads of Agreement to Suncorp Metway. Mr Gangemi acknowledged that he was in contact with Suncorp Metway at that point in time and knew that a copy of the Heads of Agreement had been provided to it. The Heads of Agreement provide that Mr Lanciana will procure a release of Mr Gangemi's guarantee of the obligations of Clapana to Suncorp Metway. Suncorp Metway was not prepared to entertain any release of Mr Gangemi. Accordingly, by letter dated 10 October 2003, Suncorp Metway sought to have Mr Gangemi and Mr Lanciana amend their Heads of Agreement to remove any obligation upon Mr Lanciana to obtain a release of Mr Gangemi's obligations under the Suncorp Metway guarantee.

313 In this context, Mr Lanciana approached another financier, the ANZ Bank, in about November 2003 and organised to refinance the Hoddle Street project, in an amount sufficient to pay out Suncorp Metway's finance and to provide some additional funding. This refinance was on the basis that Mr Lanciana would be the sole guarantor, and a guarantee from Mr Gangemi would not be required. The refinance involved Mr Gangemi signing some documents. He refused to do so on the basis that "the documents were wrong". Initially, Mr Gangemi said that he understood that the ANZ refinance "wasn't so much for the guarantee, I think it was purely to increase the amount of borrowings against Hoddle Street". Later, Mr Gangemi said that he could not remember why he thought the documents were "wrong", but thought that they would increase his liability under his existing guarantee. I do not accept this evidence. Although the documents which Mr Gangemi was given to sign were not produced by him, and appear to have been misplaced, it is clear from the ANZ security documents presented to the finance broker acting on behalf of Mr Lanciana and Clapana that ANZ was offering to provide finance to replace the Suncorp Metway facility on the basis of guarantees of Mr Lanciana and Pre Need. There is no evidence that any guarantee was being sought from Mr Gangemi and I find that it was not. Of course, the refinance would have had the effect of releasing Mr Gangemi from his obligations as a guarantor of the Suncorp Metway facility.

314 Second, the Heads of Agreement provided that Mr Lanciana would enter into a contract to sell Mr Gangemi the property at Unit 5, 6 Anchor Place, Prahran for the sum of $735,000. Mr Lanciana arranged for the contract of sale to be prepared, and it was signed by Mr Gangemi on 29 September 2003. At the time Mr Gangemi signed this contract, he insisted upon the insertion of a handwritten special condition to reflect a handwritten amendment made to Clause 8 of the Heads of Agreement. The amended Clause 8 of the Heads of Agreement provided that settlement by Mr Gangemi under the contract of sale would be due "90 days from the signing of contract provided release of all guarantees are obtained". Presumably, this handwritten amendment was made to the Heads of Agreement for Mr Gangemi's protection. Mr Gangemi agreed that he asked Mr Lanciana to amend the contract of sale by adding a special condition in the following terms:

Refer to Heads of Agreement dated 9-Sept-2003 - signed by both parties (item 8).

315 Third, under the Heads of Agreement, Mr Lanciana and Mr Gangemi agreed that Clapana would enter into a contract to sell to Mr Gangemi or his nominee Lot 17 (also known as Lot S2) in the Hoddle Street project for a nominal value. Mr Lanciana caused a contract of sale for Lot S2 to be prepared and this was signed by Mr Gangemi on or about 1 November 2003. However, the purchase price in the contract is stated as $250,000, which is inconsistent with the Heads of Agreement which provide for a sale at a nominal value. Notwithstanding this, Mr Gangemi did not pay $250,000 for Lot S2 or any other sum. The lot was transferred to him for a nominal consideration. This issue is considered below.

316 Lot S2 was not immediately transferred to Mr Gangemi. In October 2004, when Clapana was placed into administration, Lot S2 was yet to be transferred to Mr Gangemi. Until this time, Clapana had been acting as trustee of the Hoddle Street Development Unit Trust. It was agreed at this time that Rala Nominees Pty Ltd ("Rala") would replace Clapana as trustee of the Hoddle Street Development Unit Trust. Rala was a company owned in half shares by Mr Gangemi's son and Mr Gangemi's friend, Mr Wayne Morpeth.

317 A dispute then arose between Mr Gangemi and Mr Lanciana as to whether Rala was an appropriate entity to act as trustee of the Hoddle Street Development Unit Trust. Mr Lanciana purported to remove Rala as the trustee of the trust by a "deed of appointment and removal of trustee" dated 27 December 2004, addressed to Mr Morpeth who was a director of Rala.

318 This dispute was ventilated at a heated meeting that was held at Mr Blott's offices on 9 February 2005, attended by Mr Gangemi, Mr Lanciana, Mr Morphett and Mr Blott. The meeting resulted in a joint "letter of instruction" addressed to Mr Blott, and signed by Mr Lanciana, Mr Gangemi and Mr Morpeth. Amongst other things, the letter of instruction contains an agreement by Mr Lanciana and Mr Gangemi that, pending the registration of Rala Nominees as the legal owner of the Hoddle Street property:

that the parties will pursue the completion of the Contracts of all units sold (with the exception of LS2 which is being transferred to A.Gangemi by way of distribution without consideration from the Trust) expeditiously so that settlements will occur within 14 days of registration of the Instrument of Transfer aforesaid.[34]

319 Mr Gangemi did not pay the purchase price of $250,000 stated in the contract for the sale of Lot S2 that was signed on or about 1 November 2003, or any other sum for the property. Lot S2 was later transferred to Mr Gangemi and he became the registered proprietor of it in September 2006.

320 Mr Lanciana contends that the transfer of Lot S2 to Mr Gangemi for nil consideration was provided for in the letter of instruction in furtherance of the Heads of Agreement. However, counsel for Mr Gangemi put to Mr Lanciana that Lot S2 was transferred to Mr Gangemi by way of a distribution from the trust without consideration because Mr Gangemi 'was owed a lot of money on the project'. Mr Lanciana denied that this was the case.

321 In this regard, counsel for Mr Gangemi tendered a loan agreement dated 8 December 2004 entered into between Mr Gangemi and Rala. Mr Gangemi gave evidence that the loan agreement dealt with funds advanced by him for the purposes of the Hoddle Street development. The loan agreement creates an obligation upon Rala to repay Mr Gangemi $255,450 in respect of advances made by Mr Gangemi for the purposes of the Hoddle Street development, in connection with payment of wages and sub-contractors. The agreement provides that these amounts will be repaid by Rala upon settlement of Lots 1 to 16 in the Hoddle Street development. As security for the loan, Rala charges its interest in Lot 17 (or S2) in the Hoddle Street development in favour of Mr Gangemi.

322 Mr Lanciana said that he was not shown a copy of the loan agreement at the time it was entered into, although he does recall discussion prior to him and Mr Gangemi signing the letter of instruction to Mr Blott in February 2005 to the effect that Mr Gangemi was complaining that he had provided funds for the Hoddle Street development.

323 The letter of instruction makes no reference to the loan agreement as the source of any obligation by Rala to transfer Lot S2 to Mr Gangemi without consideration. For example, the letter of instruction makes no reference to a set-off between Mr Gangemi's obligations to pay $250,000 under the contract of sale between him and Clapana and Rala's obligations under the loan agreement. In these circumstances, the letter of instruction is consistent with the parties reaffirming the entitlement of Mr Gangemi under the Heads of Agreement to receive Lot S2 for nominal consideration.

324 I infer that, by this time, Mr Gangemi knew that the Hoddle Street project was not sufficiently profitable to enable Suncorp Metway to be repaid in full and for him to receive Lot 16 for a nominal consideration. Clapana had been placed in administration in October 2004 and went into liquidation thereafter. Although there was sufficient funds to repay Suncorp Metway, there were other unsecured creditors of the Hoddle Street development. In these circumstances, I find that Mr Gangemi did whatever he could to protect his position. Mr Lanciana said that he specifically recalls Mr Gangemi saying that "he wasn't going to walk away from this with nothing" and, although his answers on the issue contained much evasion, Mr Gangemi frankly acknowledged that the purpose of the loan agreement and related charge over Lot S2 was to protect his position in all the circumstances. In my view, this is not inconsistent with Mr Gangemi's entitlement under the Heads of Agreement to receive Lot S2 for a nominal consideration.

325 The question remains as to why a price of $250,000 was specified in the contract of sale from Clapana to Mr Gangemi for the sale of Lot S2. This was not explored in the evidence. However, the Heads of Agreement did cast an obligation upon Mr Gangemi to pay the stamp duty in respect of the transfer of Lot S2. Against this background, I infer that the sum of $250,000 was stated in the contract in an endeavour to provide a basis for the assessment of stamp duty. The evidence does not enable any finding to be made as to whether this was a genuine estimate of the value of Lot S2.

326 Fourth , the Heads of Agreement provided that Clapana would enter into a contract to sell Lot 16 in the Hoddle Street project to Mr Gangemi "for the consideration equivalent to a nominal value". Further, the Heads of Agreement provided that Clapana was obliged to enter into a contract to sell Lot 15 in the Hoddle Street project to Mr Gangemi's mother-in-law, Giuseppina Carbone, or her nominee for the price of $450,000. Each of Lot 16 and Lot 15 was described in the Heads of Agreement as a "penthouse shell", meaning a penthouse apartment without fittings, fixtures and finishes.

327 Mr Lanciana said that he arranged for these contracts to be prepared and that they were signed by Mr Gangemi at the same time that he signed the contract of sale in respect of Lot 17 (or Lot S2) on or about 1 November 2003. This raises another factual dispute. The two contracts are dated 15 January 2001. Mr Gangemi says that they were signed at this time, and had nothing to do with performance of the obligations of Clapana under the Heads of Agreement. At first blush, Mr Gangemi's case appears to be supported by the facts that, under the Heads of Agreement, it was "Giuseppina Carbone" (Mr Gangemi's mother-in-law) who was to be the intended purchaser and the Lot 15 contract instead names the purchaser as "Rose Carbone and/or nominee", with Mr Gangemi being named as the nominee. However, in this regard, Mr Gangemi himself gave evidence that this was an error in the Heads of Agreement, because it was intended to be his wife, not his mother-in-law who was the purchaser.

328 Mr Gangemi's case on this issue also finds some support in the fact that the stated sale price in the contract for Lot 16, which was to be for a "nominal value" is $450,000.

329 Mr Lanciana's case is that these contracts were back-dated, at the request of Mr Gangemi, in order to avoid stamp duty by representing that they were contracts entered into prior to commencement of construction of the Hoddle Street project. Further, and most importantly, Mr Lanciana relies upon the fact that the bound versions of the two contracts each include a copy of the Plan of Subdivision as at 28 August 2003. If the contracts of sale were signed in their bound form, then they could not have been signed before that time. In order to answer this inconsistency in his position, Mr Gangemi said that the contracts were not bound at the time that he signed them, and that they have been subsequently bound by or at the direction of Mr Lanciana.

330 I do not accept Mr Gangemi's evidence in this respect. I find that the two contracts were bound at the time that he signed them, and that they were backdated for stamp duty purposes. These were not mere sale notes but formal contracts drawn by a solicitor, which make reference to the attached bound materials, in particular to the Plan of Subdivision. Special Condition 17 of each contract specifically states that it relates to the sale of the apartment at a "shell stage". This language is consistent with the obligation in the Heads of Agreement to procure Clapana to sell a "penthouse shell" to Mr Gangemi and to his mother-in-law or nominee. Moreover, I have examined the originals and can see no sign that they have been tampered with at a later time. Having regard to Mr Gangemi's credibility as a whole, and the time which he had to think of an explanation for the inconsistency between the date on the contracts and the date of the Plan of Subdivision which is attached to the contract of sale, I infer that Mr Gangemi has endeavoured to reconstruct a situation which is consistent with his case. I do not accept that he has a positive recollection of signing unbound contracts of sale in 2001 without any annexures.

331 As with the contract of sale for Lot S2, the question remains as to why the sale price in the Lot 16 contract is stated as $450,000 and is not a nominal consideration, as provided for in the Heads of Agreement. Once again, I infer that the answer lies in the desire of the parties to fix a sale price to enable the assessment of stamp duty payable by Mr Gangemi on any transfer. In this context, it is consistent with Mr Gangemi and Mr Lanciana intending to honour the Heads of Agreement, and to transfer Lot S2 and Lot 16 to Mr Gangemi for nominal consideration if the finances of the Hoddle Street development permitted. I note that the stated price of $450,000 for Lot 16 is the same as that stated in the contract of sale for Lot 15, which also relates to a "penthouse shell" to be sold for that amount under the Heads of Agreement. I infer that the parties have simply endeavoured to link the Lot 15 sale price to that of Lot 16, and thus create evidence of value in respect of Mr Gangemi's obligation to pay stamp duty on the intended sale of Lot 16 for nominal consideration. Given that Clapana was unable to convey Lot 15 for $450,000 and repay Suncorp Metway in full, thus necessitating an arms-length sale to another purchaser, I infer that $450,000 was not a genuine estimate of the value of the penthouse shells.

332 Fifth, the Heads of Agreement provide that Mr Gangemi will assume responsibility for the payment to Mr Osborne of the $200,000 invested by him. From in or about October 2003 until in or about April 2004, Mr Gangemi paid to Mr Osborne monthly amounts equivalent to the interest due by Mr Osborne to his bank in respect of the $200,000 borrowed by Mr Osborne and advanced to Mr Lanciana and Mr Gangemi in respect of the Buckley Street project.

333 Mr Gangemi said that he made these payments to help Mr Osborne out when Mr Lanciana ceased causing Pre Need to make the payments. Mr Gangemi said that he made the payments on the condition that Mr Osborne placed caveats over the Buckley Street and Mitchell Street properties and commenced proceedings against Mr Lanciana. When that did not eventuate, he said that he ceased making the payments because Mr Osborne had not done what he asked. In my view, the coincidence of timing makes it improbable that this evidence is correct. Prior to the Heads of Agreement, Mr Lanciana had consistently ensured that Mr Osborne's interest was paid by Pre Need. The most probable reason why he ceased doing this is the execution of the Heads of Agreement. Likewise, the most probable reason why Mr Gangemi commenced making these payments is because he accepted the obligation to do so under the Heads of Agreement. Accordingly, I do not accept Mr Gangemi's explanation that he did not make these payments because he accepted responsibility for Mr Osborne's advances under the Heads of Agreement.

334 Sixth, by letter dated 14 April 2004 from Mr Gangemi's solicitors, Alderuccio, to Mr Lanciana's solicitors, Mr Gangemi's solicitors relied upon and sought to enforce one of the terms of the Heads of Agreement. This was the term which Mr Gangemi insisted be added to the contract of sale by Mr Lanciana to him of Unit 5, 3-9 Anchor Place, Prahran.

335 Seventh, the Heads of Agreement provided that Mr Lanciana would secure the release of Mr Gangemi as a guarantor of 63 Buckley Street. Mr Lanciana contacted Perpetual Nominees, the financier, and arranged for this to occur. This left Mr Lanciana as the sole guarantor of the finance for the acquisition of the Buckley Street property. As a result, Mr Lanciana lost any right to contribution from Mr Gangemi as a co-guarantor. There is no reason to think that Mr Lanciana would act to bring this result about unless he was bound to do so under the Heads of Agreement.

336 Mr Gangemi said that he arranged for his guarantee to be released because, at that time, he was "attempting to get rid of all of my guarantees, any guarantees that I had any involvement with Lanciana ...". Although I accept that Mr Gangemi was keen to be released from his guarantees at this time, I find that this was because of the Heads of Agreement, under which he had secured the agreement of Mr Lanciana to obtain these releases and had ceased to have any involvement in any of the projects with the exception of the Hoddle Street project.

337 The form of the deed of release of Mr Gangemi as guarantor is also consistent with the parties treating the Heads of Agreement as being efficacious. Mr Gangemi signed on his own behalf. Immediately above his signature, Mr Lanciana signed on behalf of 63 Buckley. Mr Lanciana's signature was affixed above the words "signature of sole Director and sole Secretary, Percy Lanciana".

338 Eighth, by letter dated 24 May 2004 from Mr Gangemi's solicitors to Mr Lanciana's solicitor, Mr Gangemi's solicitor (Mr Alderuccio) stated:

We confirm we act for Antonio Gangemi and you act for Percy Lanciana and Clapana Pty Ltd ...

1. In broad terms the parties' rights and obligations are set out in the following documents:

- development finance facility and mortgage of Suncorp Metway with Clapana Pty Ltd as borrower and mortgagor, Antonio Gangemi, Percy Lanciana and Pre-Need Services Australia Pty Ltd as guarantors.

1. The Heads of Agreement signed by the parties sets (sic) out the terms of settlement between the parties and their related entities. However as there are still a number of unresolved disputes we suggest that the parties attempt to resolve these disputes informally and failing resolution agree to appoint an arbitrator ...[35]

This letter from Mr Alderuccio is wholly inconsistent with Mr Gangemi having instructed Mr Alderuccio that the Heads of Agreement were procured by duress or maintaining any right to rescind the Heads of Agreement for duress.

339 Ninth, in February 2004 Mr Gangemi was served with a penalty notice in relation to unpaid tax due by Clapana in respect of a time when he was a director of Clapana. Mr Gangemi telephoned Mr Lanciana and complained about the receipt of this notice. Mr Gangemi said that Mr Lanciana was required to pay all of the Clapana liabilities to third parties under the terms of the Heads of Agreement. Mr Lanciana agreed and paid the tax.

340 Tenth, by letter dated 3 December 2004 from Mr Gangemi's solicitors to Mr Lanciana's solicitors, Mr Gangemi's solicitor (Mr Alderuccio) again sought to rely upon Clause 8 of the Heads of Agreement in relation to the proposed settlement of Mr Gangemi's purchase from Mr Lanciana of Unit 6 in the Anchor Place development. Mr Alderuccio threatened rescission of the contract of sale in the absence of Clause 8 of the Heads of Agreement being complied with within seven days.

341 Eleventh, by letter dated 17 January 2005 from Mr Gangemi to Mr Lanciana's solicitors in connection with the contract of sale for Unit 6 in the Anchor Place development, Mr Gangemi repeated his solicitors reliance upon Clause 8 of the Heads of Agreement and objected to Mr Lanciana's solicitors arranging for settlement of the contract of sale on the following day. Mr Gangemi wrote:

I am completely shocked by this information given that my solicitors had advised you in writing that your client has failed to comply with Condition 8 of the Heads of Agreement dated 9 September 2003.

As you are well aware the Contract of Sale of the above premises has been rescinded on the basis that your client has not been able to meet the terms of Condition 8 of the abovementioned agreement.

I had not and would not[36] at any time waived the benefit as mention (sic) in Special Condition 7 of the Contract of Sale dated 29 September 2003 in reference to Condition 8 of the Heads of Agreement.

I am informed that my solicitor Mr Alderuccio is on annual leave until 21 January 2005 and I shall provide him with further instructions upon his return as to the enforcement of the entirety of the Heads of Agreement.[37]

342 Once again, this letter from Mr Gangemi is wholly inconsistent with any suggestion that he retains a right to question the efficacy of the Heads of Agreement.

343 Twelfth, on 2 June 2004 Mr Osborne's solicitors wrote to Mr Lanciana and demanded repayment of his investment of $200,000. Mr Lanciana immediately faxed a copy of this letter to Mr Gangemi. In his facsimile, Mr Lanciana stated to Mr Gangemi:

I have received a letter from Richard's lawyer concerning the funds outstanding. This is totally your responsibility and any costs/actions needed to attend to this will be sought from you personally ...[38]

344 Mr Gangemi did not respond to Mr Lanciana's facsimile, either to deny any responsibility for Mr Osborne's loan or at all. Of course, the Heads of Agreement provided in clear terms that repayment of Mr Osborne's investment was the responsibility of Mr Gangemi.

345 Thirteenth, there is the conduct of Mr Gangemi in his dealings with Mr Jafari, which is referred to below. In summary, Mr Gangemi told Mr Jafari that he had settled his differences with Mr Lanciana and that he was "out of Buckley Street".

346 In evidence and submissions, Mr Gangemi sought to downplay the significance of the above conduct subsequent to the Heads of Agreement. The evidence relied upon by Mr Gangemi in this regard is relevant to his contentions that Mr Lanciana ought be estopped from relying on the efficacy of the Heads of Agreement, that Mr Lanciana repudiated the Heads of Agreement and that Mr Gangemi accepted that repudiation or that Mr Lanciana and Mr Gangemi abandoned the Heads of Agreement in any event.

347 First, Mr Gangemi relied heavily upon a conversation which he says that he had with Mr Lanciana in December 2003 to the following effect:

In December 2003 I had a meeting with Mr Lanciana at the Hoddle Street site. Lanciana demanded that I settle the purchase of Unit 5, Anchor Place, Prahran. I reminded Lanciana that he had not procured the release of the guarantee. He said that he couldn't do so. I said that the contract of sale incorporated the provisions of the Heads of Agreement that required him to procure my release from the guarantees that I had provided. Referring to the Heads of Agreement Lanciana said 'What agreement? We haven't got any fucking agreements'.[39]

348 The first thing to note about this conversation is that it involves Mr Gangemi acknowledging the existence of the Heads of Agreement as binding and seeking to rely upon them. Further, having regard to the evidence as a whole, I do not accept that Mr Lanciana made the statement attributed to him. Mr Lanciana's conduct following the execution of the Heads of Agreement was consistent with their efficacy. The fact that he may have continued to argue with Mr Gangemi about a whole host of matters, including the Buckley Street project, does not detract from this. In any event, even if Mr Lanciana made the statement, Mr Gangemi did not accept it as a repudiation of the Heads of Agreement. To the contrary, he continued to engage in the confirmatory conduct which is referred to above.

349 Second, Mr Gangemi relied heavily upon the evidence of dealings between him and Mr Lanciana with Coadys solicitors to obtain advice as to the revenue implications of the Heads of Agreement. They consulted Coadys as a result of clause 11 of the Heads of Agreement, which provides:

The parties agree to engage an independent accountant or consultant to advise Gangemi and the Lanciana parties on appropriate tax issues in relation to the matters set out in these Heads of Agreement and agree to bear the cost of such advisor equally.

350 On the day following the execution of the Heads of Agreement, Mr Gangemi and Mr Lanciana attended at the offices of Coadys and conferred with a solicitor, Mr Jorgensen. Mr Jorgensen said that Mr Lanciana and Mr Gangemi told him that they were partners and that through various company and trust structures they had undertaken a series of property developments. They told him that they were in the process of terminating their business relationship and they were seeking his advice about the most tax effective means of doing so. Mr Jorgensen gained the general impression that no agreement had been reached. However, he gave no evidence of being told that this was the fact, and following the initial meeting a copy of the Heads of Agreement was faxed to him. Although the execution clauses of the Heads of Agreement were not part of this fax, the initialled changes to the Heads of Agreement indicated that they had been the subject of negotiation and agreement between the parties.

351 Mr Lanciana gave evidence that neither he nor Mr Gangemi gave Mr Jorgensen firm instructions as to whether an agreement had been reached, and presented the issues to him on a hypothetical basis. I accept this evidence, which is consistent with Mr Lanciana's conduct thereafter.

352 As part of his instructions, Mr Jorgensen was told that Mr Gangemi was to transfer his interest in the Buckley Street unit trust to Mr Lanciana. In this connection, he was told that the Buckley Street unit trust had been established after 63 Buckley had purchased the Buckley Street properties. This caused Mr Jorgensen to advise that there were potential stamp duty consequences arising from the later establishment of the Buckley Street unit trust, and that Mr Gangemi might be liable for capital gains tax on the transfer of his units to Mr Lanciana. As a result of concerns expressed by Mr Gangemi about the possibility that he may be liable for capital gains tax as a result of the transfer of units by Bloomingdale to Mr Lanciana, Mr Gangemi asked Mr Jorgensen to prepare a deed of indemnity for Mr Lanciana to sign, under which Mr Lanciana would undertake to indemnify Mr Gangemi or Bloomingdale in respect of any capital gains tax liability. Although this draft deed was prepared, it was never executed.

353 The fact that Mr Gangemi requested Coadys to draft the deed of indemnity supports the finding that he and Mr Lanciana were treating the Heads of Agreement as binding on them. In the absence of the Heads of Agreement being binding, there is no reason for Mr Gangemi to have sought that such a deed of indemnity be prepared and executed. If the parties were simply working towards an agreement, and one aspect of that agreement was the giving of a tax indemnity by Mr Lanciana to Mr Gangemi and Bloomingdale in respect of the contemplated transactions, the parties would probably have sought to instruct lawyers to include that indemnity in a form of agreement incorporating all of the terms of their agreement.

354 Mr Jorgensen also advised of adverse tax consequences in respect of the proposed transfer by Mr Gangemi of Bloomingdale's units in the Mitchell Street unit trust.

355 In these circumstances, Mr Lanciana considered how to avoid the adverse tax consequences adverted to by Mr Jorgensen. It is clear that Mr Lanciana was of the view that, under the Heads of Agreement, he was liable for these tax consequences if they eventuated.

356 In order to avoid any possible capital gains tax liability for Bloomingdale on a transfer of units in the Buckley Street unit trust, Mr Lanciana adopted the position that, notwithstanding the clear intention to establish that trust, the fact that the trust deed had not been executed by all parties meant that he could simply ignore the existing intention to create the Buckley Street unit trust. By adopting this course, Mr Lanciana sought to avoid stamp duty on any transfer of the Buckley Street properties to a trust and the possibility of Mr Gangemi being faced with capital gains tax on a transfer of units in such a trust. Insofar as Mr Gangemi's transfer of his share in 63 Buckley was concerned, Mr Lanciana simply ignored the possibility of any stamp duty or capital gains tax consequences.

357 In respect of the Mitchell Street property, Mr Lanciana adopted more active methods of seeking to avoid any adverse revenue implications. Initially, Mr Lanciana had intended that the Mitchell Street property would be owned by a company controlled by him, Michie Investments Pty Ltd, as trustee of the "Mitchell Street Development Unit Trust".[40] A trust deed was prepared, with Mr Lanciana and his wife as unitholders. Subsequently, Mr Lanciana put aside this intention and arranged for Clapana to purchase the Mitchell Street property as trustee of the "Mitchell Street Unit Trust". Mr Lanciana and Mr Gangemi were equal unitholders in that trust.

358 Following the execution of the Heads of Agreement, and in order to avoid stamp duty being payable on the transfer by Mr Gangemi to him of his units in the Mitchell Street Unit Trust, and to avoid any capital gains tax payable by Mr Gangemi on that transfer, Mr Lanciana decided to ignore the existence of the Mitchell Street Unit Trust and to create a document designed to mislead the revenue authorities. The document is a "Deed of Appointment". Under it the fiction was created that Clapana was at all times the trustee of the "Mitchell Street Development Unit Trust".[41] The existence of the Mitchell Street Unit Trust was simply ignored. Michie Investments was purportedly "appointed" as the new trustee of the Mitchell Street Development Unit Trust in place of Clapana, and the document was relied upon by Mr Lanciana to avoid any stamp duty on the transfer of legal ownership of the Mitchell Street property from Clapana to Michie Investments. Neither the State Revenue Office nor the Australian Taxation Office was informed that Mr Gangemi had previously been a beneficial owner of one half of the units in the Mitchell Street Unit Trust and had transferred those units to Mr Lanciana.

359 The Court will refer the conduct of Mr Lanciana in connection with his endeavours to avoid revenue obligations to the Attorney-General to investigate and, if appropriate, to draw it to the attention of the relevant statutory authorities.

360 However, notwithstanding the opprobrium with which the Court views Mr Lanciana's conduct in this regard, that conduct is consistent with the efficacy of the Heads of Agreement; not inconsistent with it.

361 Taken as a whole, I find that the evidence of the dealings with Coadys is not inconsistent with Mr Gangemi and Mr Lanciana treating the heads of agreement as binding upon them. I accept that they may have given Mr Jorgensen the impression that the arrangements between them under the heads of agreement might be the subject of further agreement to take account of revenue implications. However, no such further agreement was reached. Instead, Mr Lanciana simply took Coadys advice on board and took unilateral steps to ensure that any revenue obligations were avoided. Of particular relevance is Mr Lanciana's exploitation of the fact that the intended Buckley Street Unit Trust deed had not been executed and Mr Lanciana's rewriting of past events regarding the Mitchell Street Unit Trust, thus ensuring that he, Mr Gangemi and Bloomingdale did not have to pay any stamp duty or capital gains tax.

362 Furthermore, the evidence establishes that Mr Lanciana was of the view that, under the Heads of Agreement, he was obliged to assume all liability to pay stamp duty and taxes arising from the transactions contemplated by the Heads of Agreement, with the exception of any stamp duty payable in respect of any transfer of Lots 15, 16 or 17 (S2) in the Hoddle Street development (where the Heads of Agreement provided that the purchaser was to pay such stamp duty). Mr Lanciana was correct in that assumption. Clause 4(c) of the Heads of Agreement contains a broad indemnity which so provides. Based on this understanding, Mr Lanciana assumed all liability to pay any taxes owing, acted on the basis that there was no need for him to execute the deed of indemnity and in fact paid any unpaid taxes when Mr Gangemi brought them to his attention. As a result, Mr Gangemi has not been exposed to any tax liability at the present time. If, following investigation by the relevant authorities, Mr Gangemi or Bloomingdale are liable in respect of any unpaid taxes resulting from the transactions effected pursuant to the Heads of Agreement, other than stamp duty in respect of the transfer of Lot 17 (S2), Mr Lanciana must indemnify Mr Gangemi for that liability pursuant to his obligations under the Heads of Agreement.

363 Third, Mr Gangemi relies upon the continuation of disputation between him and Mr Lanciana after the Heads of Agreement were signed as evidence that they were in any event superseded by further negotiations between the parties and abandoned. I do not accept that this is so. Although there are some confusing aspects of the later disputes and negotiations between Mr Gangemi, Mr Lanciana and their lawyers, there is no evidence of any concluded agreement being reached to put aside the Heads of Agreement and to replace them with any other agreement. I reject Mr Gangemi's reliance upon statements or acknowledgements made in draft proposals for settlement, which appear to have been based upon the parties putting the Heads of Agreement to one side and restating a different agreement. As I have said, none of these proposals were accepted and no agreement was reached.

364 Fourth, reliance was placed by Mr Gangemi upon the fact that Mr Lanciana was unable to bring about the completion of the contracts of sale for Units 15 and 16 in the Hoddle Street development. These contracts of sale were executed pursuant to obligations upon Clapana under the Heads of Agreement. However, the Hoddle Street project did not yield a sufficient profit to enable these sales to be completed and to repay the finance to Suncorp Metway. Accordingly, Clapana sold Units 15 and 16 to other purchasers for arms-length sale prices, in order to ensure that Suncorp Metway was paid out and that there was no recourse to Mr Gangemi, Mr Lanciana or Pre Need under their guarantees of that finance. No claim is made in this proceeding that Mr Lanciana breached the Heads of Agreement because Clapana was unable to complete the contracts of sale for Units 15 and 16. However, in my view, no breach was involved. Mr Lanciana's obligation under the Heads of Agreement was to procure that Clapana entered into the contracts of sale. No obligation was cast upon him to ensure that those contracts were completed.

365 Fifth, reliance was placed on behalf of Mr Gangemi upon a statement by Mr Lanciana's solicitor (Mr Blott) in a letter dated 13 December 2004 in connection with the proposed settlement of Mr Gangemi's purchase of Unit 5 in the Anchor Place development. In response to Mr Gangemi's solicitor seeking to rely upon Clause 8 of the Heads of Agreement, as incorporated into the contract of sale, Mr Blott stated:

I would note your view that the contract herein is conditional upon the release of your client from guarantees under an Agreement of the 9 September 2003. I would also note that the Agreement has become so convoluted by both the subsequent actions and agreements of the parties since that time as to be of questionable interpretation. Notwithstanding I would advise that on my instructions your client has waived the benefit of that special condition in the Contract of Sale by his very conduct in relation to the guarantees that are in place.[42]

366 It was submitted that this statement by Mr Blott demonstrated that Mr Lanciana did not regard himself as bound by the Heads of Agreement. I do not accept this submission. Mr Blott's statement is ambiguous and only his opinion. It was written in the context of a dispute and contains an assertion of waiver of the special condition under discussion in the correspondence.

367 Sixth, in this regard, reliance was placed on behalf of Mr Gangemi on conduct of Mr Lanciana in connection with the issuing of further units in the unit trust for the Hoddle Street development. In December 2004, Mr Lanciana arranged for Clapana to issue further units in the Hoddle Street unit trust to him, so as to ensure that he had a majority unitholding. This conduct by Mr Lanciana is inconsistent with the Heads of Agreement, in the sense that the Heads of Agreement did not provide that Mr Gangemi or Bloomingdale were to transfer their interests in the Hoddle Street development to Mr Lanciana. No doubt the parties believed that they would continue to be equal joint venturers in the Hoddle Street development. That was the effect of the commercial arrangement reached and recorded in the Heads of Agreement. In these circumstances, Mr Lanciana's conduct in seeking to obtain control of the Hoddle Street unit trust was, probably, a breach of an implied term of the Heads of Agreement. However, nothing turns on this. Control of the Hoddle Street unit trust was by this time with Mr Gangemi and there was no evidence that this position changed as a result of Mr Lanciana's issuing of further units. Further, in the events which transpired, although the Hoddle Street project yielded sufficient income from sales of apartments to repay the loans provided by Suncorp Metway, there were no profits arising from the Hoddle Street project available for distribution to unit holders. In its capacity as trustee of the Hoddle Street unit trust, Clapana remained indebted to various creditors at the time that it was placed in administration, liquidation and was deregistered.

(10) Transfer by Mr Lanciana of ownership and control of 63 Buckley to Mr Jafari

368 As appears above, by early 2003, Mr Jafari had told Mr Lanciana and Mr Gangemi that he wanted to withdraw from participation in the Buckley Street project, and that he wanted to be repaid his investment of $350,000. In this context, with a view to assisting his bargaining position, he purchased 59 Buckley Street in April 2003.

369 From about mid 2003, there were negotiations between Mr Jafari on the one hand and Mr Gangemi and Mr Lanciana on the other hand with a view to reaching agreement in respect of Mr Jafari's claim to be repaid his investment in the Buckley Street project.

370 In the course of the conversations between Mr Gangemi and Mr Jafari, Mr Gangemi informed Mr Jafari that he and Mr Lanciana were conducting negotiations to resolve their overall dispute. In this context, Mr Jafari gave evidence that Mr Gangemi showed him an unsigned and unaltered version of the final draft Heads of Agreement which Mr Gangemi took to the third meeting on 9 September 2003. Mr Jafari said in his witness statement that, at this time:

1. Gangemi told me that his solicitors had prepared the document. He told me that he and Lanciana had now been to a number of mediations and that he now believed that his disputes with Lanciana were close to resolution. He said that he was having a further mediation where he believed everything will be finalized.
2. Gangemi showed me my name on the document. He said 'You see we acknowledge our debt to you.'
3. I looked over the document quickly. I saw my name on the document. I saw that Lanciana was responsible to pay my money.
4. Gangemi asked me if I wanted to take part in their mediation.
5. I said 'No. I don't want to be involved in your mediation. I just want my money. I don't care who pays me as long as I get it.'[43]

371 Shortly after this conversation, Mr Jafari said that he met Mr Gangemi and the following conversation occurred:

1. In or about early September 2003 I saw Gangemi again. He told me that he and Lanciana had signed the document. Gangemi told me 'I've transferred the Buckley Street company to Percy.'
2. I was angry. I said 'How could you do that without talking to me about it. I am a director and shareholder of that company. Don't I have a say in it?'
3. Gangemi said. 'I'm sorry. I've got nothing more to do with that company. You will have to deal with Percy.'[44]

372 Mr Jafari then spoke with Mr Lanciana. In his witness statement, he described this conversation in the following terms:

1. I spoke to Lanciana. I was angry. I said 'You've done a deal with Tony behind my back.'
2. Lanciana said 'Don't worry about that. You are interested in the apartment. Let's deal with that.'
3. By this stage as Lanciana knew through my discussions with him, I was very interested in apartment 5/129 Hoddle Street.[45]

373 Following this conversation, an agreement was reached that Mr Jafari would purchase an apartment in the Hoddle Street development at a discounted price in full settlement of his claims over the Buckley Street properties and the Buckley Street project. Mr Gangemi said that Mr Lanciana agreed to pay Clapana for this apartment. This agreement by Mr Lanciana is consistent with Mr Lanciana assuming responsibility under the Heads of Agreement for Mr Jafari's investment in the Buckley Street project.

374 An extract of the contract of sale from Clapana to Mr Jafari was in evidence. It is undated. Mr Jafari said that it was entered into in or about September 2003 and that the special conditions provided that the nominated purchase price would be satisfied by him releasing all of his claims against the Buckley Street properties and project.

375 As matters transpired, there was insufficient equity in the Hoddle Street development to enable Clapana to complete the contract of sale to Mr Jafari. As a result, in early 2005 Mr Jafari agreed to rescind the contract of sale and to remove his caveat which had been lodged to protect his interests as purchaser.

376 In the meantime, Mr Jafari remained interested in the continuation of the Buckley Street project, because he took the view that his claims over the Buckley Street project would not be satisfied unless and until the Hoddle Street apartment was in fact transferred to him by Clapana as agreed. Further, in this context, Mr Jafari was interested in the successful completion of the Hoddle Street project, so that the contract of sale by Clapana to him could be completed. In this context, Mr Jafari remained in fairly regular contact with both Mr Gangemi and Mr Lanciana. Although Mr Jafari was annoyed at Mr Gangemi for his involvement in mortgaging the Buckley Street properties, Mr Jafari remained on friendly terms with Mr Gangemi.

377 In about January 2004, Pre Need ceased paying the interest on the loans which Mr Jafari had taken out in order to fund his investment in the Buckley Street project. This was because Mr Lanciana took the position that Mr Jafari's rights had merged in the contract of sale. Mr Jafari became most concerned about his position and had repeated contact with Mr Gangemi and Mr Lanciana. In his witness statement, Mr Jafari said that, during these conversations, Mr Gangemi refused to accept any responsibility for Mr Jafari's claims in respect of his investment in the Buckley Street project. He said that Mr Gangemi conveyed this position by stating "I am completely out of Buckley Street. You deal with him (Lanciana)";[46] "I am completely out of the Buckley Street project and its between Jafari and Lanciana";[47] "Good luck with the permit but I am glad I am out of Buckley Street";[48] and, after Mr Jafari told Mr Gangemi that he had reached agreement with Mr Lanciana to assume control of 63 Buckley, that Mr Gangemi responded "Well good luck. I am happy that you have it (a reference to Buckley Street)".[49]

378 Further to the contract of sale under which Mr Jafari was to acquire an apartment in the Hoddle Street development, Mr Jafari and Mr Lanciana conducted negotiations with a view to Mr Lanciana acquiring 59 Buckley Street from Mr Jafari. However, no agreement was reached. In the meantime, the permit application for the Buckley Street project, which by this time included 59 Buckley Street, was proceeding. Mr Gangemi had ceased to have any involvement in the prosecution of the permit. Mr Jafari and Mr Lanciana discussed the permit application and agreed to continue with it. In July 2004, Mr Jafari was present at the Victorian Civil and Administrative Tribunal when its decision to grant the planning permit was published. Mr Gangemi did not attend on this occasion and, according to Mr Jafari's witness statement, when he informed Mr Gangemi that the permit had been granted, Mr Gangemi responded "Good luck with the permit but I'm glad I am out of Buckley Street".[50]

379 In late 2004 Mr Jafari completed a separate purchase by him, of the properties situate at 69-79 Buckley Street. He nominated one of his companies, FAARS Pty Ltd as the purchaser. Mr Jafari had separate plans to develop these properties as student accommodation and those plans have been put into effect.

380 Shortly following Mr Jafari's purchase of 69-79 Buckley Street, he agreed to the rescission of the Clapana contract of sale to him of an apartment in the Hoddle Street development and withdrew his caveat. He then recommenced negotiations with Mr Lanciana in respect of his claim to the Buckley Street properties.

381 Initially, the negotiations between Mr Jafari and Mr Lanciana concerned a proposal that Mr Lanciana would buy Mr Jafari's interest in the Buckley Street project and would also purchase 59 Buckley Street from Mr Jafari. However, during the course of these negotiations, Mr Jafari came to believe that Mr Lanciana did not have the financial capacity to repay his investment in the Buckley Street properties ($350,000) and to purchase 59 Buckley Street from him. In these circumstances, the negotiations changed and became focussed upon Mr Jafari buying Mr Lanciana out of his interest in the Buckley Street project. These negotiations were conducted on the basis that Mr Lanciana was the person who was solely entitled to the Buckley Street properties, following the execution of the Heads of Agreement.

382 There was much negotiation between Mr Lanciana and Mr Jafari. Mr Lanciana drove a very hard bargain and commenced by demanding $250,000 for a transfer of all of the issued shares in 63 Buckley. This offer was on the basis that Mr Jafari would assume liability for the mortgage debt of $504,000. Understandably, Mr Jafari did not agree to Mr Lanciana's offer. In his witness statement, Mr Jafari said that he discussed Mr Lanciana's offer with Mr Gangemi, who expressed sympathy for Mr Jafari's position and said words to the effect "I'm sorry but I can't do anything about it"[51] and "If you ask me, I think you should take over the company without paying anything".[52]

383 Following extensive negotiations, on 4 February 2005 Mr Jafari agreed to pay Mr Lanciana $165,000 for control of 63 Buckley. According to Mr Jafari's witness statement, he told Mr Gangemi of this and Mr Gangemi replied "Well good luck. I am happy that you have it".[53]

384 Mr Gangemi denied all of Mr Jafari's evidence of dealings with him in this regard. I reject Mr Gangemi's denials as false, for the following reasons.

385 First, Mr Gangemi's conduct in ceasing to have any involvement in the Buckley Street project was conduct objectively consistent with Mr Jafari's evidence. If Mr Gangemi was not "out of the Buckley Street project", why did he not continue to be involved with endeavours to progress it?

386 Second, Mr Gangemi's conduct subsequent to the Heads of Agreement is consistent with Mr Gangemi making the statements which Mr Jafari has sworn to.

387 Third, Mr Gangemi's credibility as a witness when compared to that of Mr Jafari is, for the reasons I have given throughout these reasons, weak. Taking the demeanour of the two men as witnesses, and the evidence as a whole, I am not prepared to find that Mr Jafari told a series of elaborate lies on this issue as Mr Gangemi would have me believe.

388 After a delay in completion, the agreement between Mr Jafari and Mr Lanciana was further negotiated and the price increased to $175,000. An amended agreement was signed on 23 June 2005. It provided that Mr Lanciana would transfer the ten issued shares in 63 Buckley to Mr Jafari on 31 July 2005 or earlier by mutual agreement. From a "Change to company details" form filed with ASIC on 3 August 2005 and signed by both Mr Lanciana and Mr Jafari, it is apparent that they agreed to transfer full control of 63 Buckley to Mr Jafari on 1 July 2005. The form records that Mr Jafari has become the sole shareholder in, and the sole director of, 63 Buckley in place of Mr Lanciana from 1 July 2005. The documents effecting these transactions were not in evidence. From this time, Mr Jafari assumed complete control of 63 Buckley and of the Buckley Street project.

389 Once he had assumed control of 63 Buckley, Mr Jafari refinanced the existing mortgage loan over the Buckley Street properties, increased that loan from $504,000 to $840,000 and provided security to the financier over both 59 Buckley Street and the Buckley Street properties. For a time, Mr Jafari obtained further finance on a second mortgage over 59 Buckley Street and the Buckley Street properties. However, that second mortgage finance has been repaid. Mr Jafari is the sole guarantor of the loans which are secured over 59 Buckley Street and the Buckley Street properties. He and 63 Buckley Street are incurring substantial interest costs.

390 Mr Jafari then proceeded with plans to develop 59 Buckley Street and the Buckley Street properties. Those plans were different to the existing permit which had been obtained in mid 2004. In March 2007, on behalf of 63 Buckley, Mr Jafari obtained an alternative planning permit for the development of 59 Buckley Street and the Buckley Street properties as student accommodation, dwellings and retail shops. Mr Jafari wished to proceed with this revised development proposal in conjunction with the development by him of the properties at 69-79 Buckley Street, thus attracting very substantial cost savings from proceeding with two projects at the one time. However, due to caveats lodged by Mr Gangemi, Mr Jafari was unable to proceed with a development of 59 Buckley Street and the Buckley Street properties at this time. Mr Jafari claims damages from Mr Gangemi in respect of the delays and extra costs incurred by him, and the loss of opportunity, arising from Mr Gangemi's caveats.

391 The question of whether the Heads of Agreement are binding and enforceable raises a number of issues. In summary:

(1) Mr Gangemi alleges that the Heads of Agreement were incomplete in material respects and did not constitute a concluded agreement.

(2) Mr Gangemi alleges that, if the Heads of Agreement did constitute a concluded agreement, they are nevertheless unenforceable because they were procured by duress.

(3) Mr Gangemi alleges that, in any event, his conduct in performance of the Heads of Agreement was procured by duress and accordingly did not give rise to any enforceable transaction or dealing.

(4) If any material duress is established, Mr Lanciana alleges that Mr Gangemi nevertheless acted so as to affirm the Heads of Agreement by his conduct.

(5) Mr Lanciana alleges in the alternative that Mr Gangemi is estopped from denying that the Heads of Agreement are enforceable.

(6) Mr Gangemi also raises an estoppel claim. He alleges that Mr Lanciana is estopped from relying upon the Heads of Agreement.

(7) Finally, Mr Gangemi alleges that Mr Lanciana repudiated the Heads of Agreement and that he accepted that repudiation, or alternatively that he and Mr Lanciana agreed to abandon the Heads of Agreement.

393 Mr Gangemi contends that no concluded agreement was reached when he and Mr Lanciana signed the Heads of Agreement. This contention was principally[54] based upon the preamble to the Heads of Agreement, which provides:

The following are the terms upon which various matters in dispute between the stated parties are to be settled. The terms of settlement will take effect upon the signing of these Heads of Agreement by the parties.[55]

394 As appears above, the final draft of the Heads of Agreement was prepared by Mr Alderuccio, the solicitor acting for Mr Gangemi. In preparing the final draft, Mr Alderuccio had consultations and negotiations with Mr Johnson, the solicitor acting for Mr Lanciana, after Mr Alderuccio forwarded the preliminary draft of the Heads of Agreement to Mr Johnson.

395 In these circumstances, the third meeting was arranged. The only parties to the proposed Heads of Agreement who attended the third meeting were Mr Gangemi and Mr Lanciana.

396 The final draft of the Heads of Agreement provided that the parties would be Clapana (in its own right and in its capacity as trustee of the Mitchell Street, Hoddle Street and Bute Street unit trusts), 87 Stevedore Street (in its own right and in its capacity as trustee of the Stevedore Street unit trust), 63 Buckley (in its own capacity and in its capacity as trustee of the Buckley Street unit trust), Pre Need, Mr Lanciana, Mr Gangemi, Bloomingdale, Mr Lanciana's son Daniel (presumably on the basis that he had been appointed the director of Clapana and Pre Need in place of Mr Gangemi), Mr Abate, "Victoria Pre Cast Pty Ltd"[56] and Mr Jafari. Mr Gangemi and Bloomingdale were collectively referred to as "the Gangemi parties". Mr Lanciana, Pre Need, Daniel Lanciana, Mr Abate, Victoria Pre Cast and Mr Jafari were collectively referred to as "the Lanciana parties". At the time the Heads of Agreement were signed, Victoria Pre Cast and Mr Jafari were deleted as parties and these amendments were initialled by Mr Gangemi and Mr Lanciana.

397 The Heads of Agreement were signed by Mr Gangemi and Mr Lanciana only. Mr Gangemi signed on his own behalf and on behalf of Bloomingdale. Mr Lanciana signed once only, on his own behalf. He did not sign for the companies he effectively controlled: Pre Need and Clapana. The question remains: notwithstanding the terms of the preamble to the Heads of Agreement which is quoted above, did Mr Lanciana and Mr Gangemi nevertheless conclude an agreement between them when they signed the Heads of Agreement?

398 The relevant principles to be applied are not in doubt. In order to resolve this question, it is necessary to determine whether, objectively considered, Mr Gangemi and Mr Lanciana intended to conclude an enforceable agreement between them alone. In determining this question, the Court may consider and take into account the terms of the Heads of Agreement, the surrounding circumstances in which the Heads of Agreement were signed[57] and the subsequent conduct of the parties.[58]

399 It is necessary to construe the relevant provisions of the Heads of Agreement in accordance with general principles of contractual interpretation. This requires the Court to consider what reasonable persons in the position of the parties would have understood the words to mean by reference to the text of the agreement, the surrounding circumstances known to the parties and the purpose or object of the transaction.[59] In interpreting the words and resolving any ambiguity, the Court should proceed in a common sense and non-technical way and give a commercially sensible construction.[60]

400 The final draft of the Heads of Agreement provided, in summary, as follows.

401 First, the final draft provided that, in consideration of the promises made by Mr Lanciana (and the other "Lanciana parties"), Mr Gangemi agreed that he would do the following things:

(1) Mr Gangemi agreed that he would transfer to Mr Lanciana any interest which he had in Clapana, Pre Need, Victoria Pre Cast, the Mitchell Street property, the Stevedore Street property, the Buckley Street properties and the profits of the Bute Street development.[61]

(2) In order to effectuate the transfers, Mr Gangemi agreed that he would resign his position as a director of any of the specified companies, would transfer his shares (if any) in those companies, would transfer his units (if any) in the relevant unit trusts established for the purposes of owning or developing the specified properties and would withdraw any caveats over those properties.[62]

(3) Mr Gangemi agreed that he would "be responsible for the loan moneys owed to Richard Osborne" of $200,000.[63]

402 These obligations of Mr Gangemi under the final draft were the subject of some handwritten amendments prior to Mr Gangemi and Mr Lanciana signing the Heads of Agreement. The final draft provided that Mr Gangemi would transfer his shares and units, resign any directorships and withdraw his caveats "on the Settlement Date on condition the Lanciana parties have satisfied the terms and conditions set out in this Heads of Agreement". By handwritten amendment initialled by Mr Gangemi and Mr Lanciana at the time of signing the Heads of Agreement, the time for performance by Mr Gangemi of these obligations has been amended to read "on the signing of this agreement". Otherwise, the commercial provisions remained the same.

403 The "Settlement Date" was defined in the Heads of Agreement as the date "120 days from the date of these Heads of Agreement provided that either party has the right to request an extension of the Settlement Date but no later than the date of issue of the Certificate of Practical Completion (in respect of the Hoddle Street development)".[64]

404 Second, the final draft provided that, in consideration of the promises made by Mr Gangemi and Bloomingdale, Mr Lanciana (and the other "Lanciana parties") agreed that they would do the following things:

(1) Mr Lanciana agreed that he would take steps to ensure that Clapana (which is not one of the defined "Lanciana parties") would enter into a contract to sell to Mr Gangemi or his nominee Lots 16 and 17 in the Hoddle Street development for a "consideration equivalent to a nominal value for each lot and Gangemi shall be responsible for any stamp duty or other charges in respect of the transfer".[65] This provision remained unaltered in the signed Heads of Agreement.

(2) Mr Lanciana agreed that he would take steps to ensure that Clapana would enter into a contract to sell Mr Gangemi's mother-in-law or her nominee Lot 15 in the Hoddle Street development for a purchase price of $450,000 inclusive of GST with the purchaser being "responsible for any stamp duty or other charges in respect of the transfer".[66] This provision remained unaltered in the signed Heads of Agreement.

(3) Mr Lanciana agreed that he would procure the release of Mr Gangemi as a guarantor "for all loans or mortgages in respect of" Clapana, Pre Need, Victoria Pre Cast, 87 Stevedore and 63 Buckley, including guarantees given by Mr Gangemi for loans in respect of the unit trusts relating to the Mitchell Street property, the Bute Street development and the Buckley Street properties. Suncorp Metway was the financier of the Hoddle Street project. This obligation of Mr Lanciana was the subject of handwritten amendment at the time the Heads of Agreement were signed. The final draft provided that Mr Lanciana would procure the release of Mr Gangemi's guarantees "on the Settlement Date". By handwritten amendment, the signed Heads of Agreement impose an obligation upon Mr Lanciana "upon signing of this agreement" to "proceed to procure the release of Mr Gangemi as guarantor ..." (emphasis added). A promise to procure the release of the guarantees by the Settlement Date (120 days from the date of the Heads of Agreement) has been replaced by an immediate obligation to "proceed to procure" the release of Mr Gangemi's guarantee. In my view, the substituted obligation had the effect of casting upon Mr Lanciana an obligation to procure the releases of Mr Gangemi's guarantees within a reasonable time.[67] Furthermore, Clause 5A of the final draft Heads of Agreement, which was deleted at the time of execution, provided that the release of Mr Gangemi's guarantee in respect of the Suncorp Metway loan for the Hoddle Street project was to occur upon the discharge of that loan. As appears above, the deletion of this clause caused Suncorp Metway to seek an amendment to the Heads of Agreement. However, no such amendment was made and the agreement by Mr Lanciana to procure a release of Mr Gangemi's guarantee of the Suncorp Metway finance to Clapana remained.

(4) Mr Lanciana agreed that Mr Gangemi would remain as the builder for the Hoddle Street project until the issue of the certificate of practical completion.[68] As appears above, this was a major issue in the dispute between the parties. It involved them in a continuing relationship. This provision was unaltered in the signed Heads of Agreement.

(5) Mr Lanciana agreed to indemnify Mr Gangemi and Bloomingdale "from any claims by third parties including trade creditors, financiers, contractors or sub-contractors in respect of" Clapana, Pre Need, Victoria Pre Cast, 87 Stevedore, 63 Buckley and the Mitchell Street, Buckley Street and Bute Street unit trusts.[69] This demonstrated that the risk of losses by any of these companies, or in respect of any of the projects undertaken by them as trustee, would be assumed by Mr Lanciana only. This indemnity was not the subject of any alteration in the signed Heads of Agreement.

(6) Mr Lanciana agreed to sell to Mr Gangemi the property at Unit 5 in the Anchor Place development for the sum of $735,000.[70] This was not a discounted amount. However, Mr Gangemi wished to purchase this property because it was already occupied by his wife in connection with her business and was adjacent to his own home. This provision remained unaltered in the signed Heads of Agreement.

(7) Mr Lanciana agreed that he would "be responsible for the loan moneys owed to Jafari" of $350,000.[71] As appears above, Mr Gangemi agreed to be responsible for Mr Osborne's investment of $200,000. As I have found above, Mr Gangemi and Mr Lanciana were jointly responsible to Mr Osborne ($200,000) and Mr Jafari ($350,000) for the monies invested by them. Accordingly, the effect of these cross-obligations was that Mr Lanciana was paying $75,000 more than his half share of these joint liabilities. These cross-obligations were not the subject of amendment when the Heads of Agreement were signed.

(8) Mr Lanciana was to agree that he would provide broad releases to Mr Gangemi and Bloomingdale, together with broad indemnities in respect of "any claims by third parties ... arising out of the discharge by him (Mr Gangemi) of his duties as a director or secretary of Clapana, Pre Need, 87 Stevedore, 63 Buckley or Victoria Pre Need Cast".[72] These provisions were deleted from the signed Heads of Agreement. However, as appears above, the broad indemnity by Mr Lanciana to Mr Gangemi in respect of "any claims by third parties" remained in the signed Heads of Agreement.

(9) Mr Lanciana agreed that he would give certain warranties to Mr Gangemi and Bloomingdale.[73] These warranties were the subject of some amendment in the signed Heads of Agreement.

(10) Mr Lanciana was to agree that, if he or any of the other "Lanciana parties" defaulted in any obligation under the Heads of Agreement, Mr Gangemi would have the right to sell, by public auction, the Hoddle Street, Buckley Street, Stevedore Street and Mitchell Street properties; and Mr Lanciana was to appoint Mr Gangemi as his irrevocable power of attorney in this regard.[74] Unsurprisingly, this provision was deleted from the signed Heads of Agreement.

405 Third, the final draft of the Heads of Agreement contained mutual releases in respect of all matters in dispute between the parties.[75] This clause was deleted in the signed Heads of Agreement. Had it been agreed to, this clause would have been far reaching. For example, it would have included a release by Mr Lanciana of his claims that Mr Gangemi had failed in his duties as a builder in respect of the Hoddle Street project. Further, it would have included a release by Mr Gangemi of his claims against Mr Lanciana for misappropriation of the funds of Clapana, Pre Need and the projects undertaken by Mr Gangemi and Mr Lanciana jointly. The effect of the deletion of these mutual releases is that these matters remain unresolved between Mr Gangemi and Mr Lanciana. They are the subject of other litigation between them and do not fall to be considered in this proceeding.

406 Fourth, the final draft Heads of Agreement provided that the parties would engage an independent accountant or consultant to advise them on "appropriate tax issues in relation to the matters set out in these Heads of Agreement and agree to bear the costs of such advisor equally".[76] This clause remained the same in the signed Heads of Agreement.

407 Fifth, the final draft Heads of Agreement contained miscellaneous provisions listing matters to be attended to at settlement,[77] providing that time was of the essence[78] and providing that the parties would bear their own costs of the Heads of Agreement.[79] Those were unaltered in the signed Heads of Agreement.

408 Finally, the final draft Heads of Agreement provided:

Each of the parties hereto shall join in executing a formal terms of settlement which effect, embody and give effect to the substance of these Heads of Agreement such terms to be executed by [blank] September 2003.[80]

The date 9 September 2003 was inserted and initialled. This was the day the Heads of Agreement were signed.

409 From the above summary, it can be seen that none of Clapana, 87 Stevedore or 63 Buckley undertook any obligation, or received the benefit of any promise, under either the final draft or the signed Heads of Agreement.

410 Taking the evidence of surrounding circumstances and subsequent conduct of the parties as a whole, and taking account of the terms of the signed Heads of Agreement, I find that Mr Gangemi and Mr Lanciana, by signing the Heads of Agreement at the conclusion of the third meeting, intended to be bound by the commercial terms recorded in the signed Heads of Agreement, notwithstanding that they were the only persons who signed the Heads of Agreement. My reasons are as follows.

411 First, by the time of the third meeting it was abundantly clear that none of Mr Osborne, Mr Jafari or Mr Abate wished to continue as an investor in the Buckley Street project. Mr Abate had made a small investment which had been repaid or was the subject of an agreement with Mr Lanciana that he be repaid. He was not making any claim against 63 Buckley, Mr Lanciana, Mr Gangemi, Mr Osborne or Mr Jafari. Mr Osborne and Mr Jafari had each made their position plain. They wished to have their investments in the Buckley Street project repaid. They did not care who repaid them. A material factor in their mutual desires to be repaid their investments was the knowledge of the heated dispute between Mr Gangemi and Mr Lanciana. By this time, there appears to have been no issue that Mr Osborne and Mr Jafari would be repaid their investments. Indeed, the Heads of Agreement describe their investments as "loan monies". The issue was how this would be achieved. That depended upon the resolution of the wider dispute between Mr Gangemi and Mr Lanciana.

412 Second, the wider dispute involved only Mr Gangemi and Mr Lanciana. Although it is true that there were a number of companies and unit trusts which held the assets of the joint endeavours of Mr Gangemi and Mr Lanciana, each of those companies and unit trusts was under the effective control of either Mr Gangemi or Mr Lanciana. Viewed objectively, there was a dispute between two businessmen, Mr Gangemi and Mr Lanciana, which needed to be resolved. There is no doubt that they intended to resolve it if they could.

413 Third, in an endeavour to resolve their dispute, Mr Gangemi and Mr Lanciana engaged the services of Mr Gatto, assisted by Mr Condello. None of Mr Osborne, Mr Jafari, Mr Abate or Daniel Lanciana was involved in this process in any way.

414 Fourth, each of Mr Gangemi and Mr Lanciana engaged solicitors to assist them in connection with their attempts to resolve their dispute. Those solicitors dealt with each other, their clients, Mr Gatto and Mr Condello in an endeavour to put together the framework of an overall settlement of the dispute. The result of this was the final draft of the Heads of Agreement, which was taken by Mr Gangemi to the third meeting.

415 Fifth, Mr Gangemi and Mr Lanciana each attended the third meeting willingly. I have rejected Mr Gangemi's evidence to the contrary. Objectively considered, their purpose in attending the third meeting was to endeavour to resolve the overall dispute between them. In this regard, although he attempted to withdraw it in his oral evidence, I have accepted Mr Gangemi's written evidence in his witness statement and in earlier affidavits sworn by him that, at the second meeting:

Various matters in relation to the possible resolution of the dispute were discussed and a general proposal for settlement agreed. It was agreed that my solicitors would prepare a draft agreement for the purposes of further negotiations.[81]

416 Sixth, I have found that the final draft of the Heads of Agreement did represent the terms upon which Mr Gangemi was prepared to settle his dispute with Mr Lanciana. The document was prepared by his solicitors and upon his instructions. I have rejected his evidence that he would not have signed an agreement in the form of the final draft if Mr Lanciana was prepared to sign it in an unamended form.

417 Seventh, the only natural persons who were to be parties to the proposed Heads of Agreement who attended the third meeting were Mr Gangemi and Mr Lanciana. None of Daniel Lanciana, Mr Abate or Mr Jafari attended.

418 Eighth, I have found that there was commercial negotiation at the third meeting and that, as a result, agreement was reached, amendments were made to the final draft Heads of Agreement and Mr Gangemi and Mr Lanciana then signed and initialled the Heads of Agreement. As appears above, I have accepted the evidence of Mr Gatto and Mr Lanciana in that regard. I find that Mr Gangemi and Mr Lanciana signed the Heads of Agreement with the intention that they would be bound by them, without the necessity for the other proposed parties to sign the document embodying their agreement.

419 Ninth, there is no evidence of any subsequent request by Mr Gangemi, Mr Lanciana or any other person that the Heads of Agreement be signed by any other proposed party.

420 Tenth, the subsequent conduct of the parties, which is canvassed in detail above, reinforces the finding that Mr Gangemi and Mr Lanciana objectively intended to conclude an agreement between them on the commercial terms set out in the Heads of Agreement which they signed.

421 Eleventh, there is no commercial reason as to why execution of the Heads of Agreement by Daniel Lanciana, Mr Abate, Clapana, 87 Stevedore or 63 Buckley was necessary in order to resolve a dispute between Mr Gangemi and Mr Lanciana. I am of this view for the following reasons.

(1) Daniel Lanciana was not a necessary party to the Heads of Agreement. He was a mere "puppet" director for his father. The companies of which he was a director, Clapana and Pre Need, were at all relevant times under the effective control of Mr Lanciana. Mr Gangemi well knew this. I have no doubt that Mr Lanciana had full authority from his son to bind Clapana and Pre Need to any obligation which Mr Lanciana thought fit.

(2) As noted above, none of Clapana, 87 Stevedore or 63 Buckley undertook any obligation, or received the benefit of any promise, under either the final draft or the signed Heads of Agreement. This is because none of these companies is included within the definitions of "the Gangemi parties" or "the Lanciana parties". Clause 2 of the Heads of Agreement contains acknowledgements and agreements on the part of the Gangemi parties and the Lanciana parties. These obligations include obligations upon them to procure that contracts of sale will be executed by Clapana as vendor and Mr Gangemi, his mother-in-law or their nominees as purchasers.[82] Further, the Gangemi parties and the Lanciana parties agreed that Mr Gangemi would remain the builder at the Hoddle Street project. Again, this is not a promise made by Clapana, as owner of the Hoddle Street properties, but is a promise made by Mr Lanciana, who controlled Clapana, to Mr Gangemi.[83]

(3) Mr Abate was not a necessary party. As noted above, there is no evidence that he was making any claim. To the extent that he may have made a small investment in the Buckley Street project, that had either been repaid or was the subject of agreement between him and Mr Lanciana.

(4) I infer that Mr Alderuccio adopted a cautious approach and endeavoured, on a "belts and braces" basis, to protect his client by including all possible parties. However, notwithstanding this, I find that it was the objective intention of Mr Gangemi and Mr Lanciana to proceed on the commercial terms stated in the Heads of Agreement by way of a concluded agreement between them alone.

422 Twelfth, it is clear that either Mr Gangemi or Mr Lanciana was the person who was in effective control of each of Clapana, Pre Need, 87 Stevedore and 63 Buckley. To the extent necessary, they were authorised to bind those companies to the Heads of Agreement.

423 Thirteenth, no case was made on the pleadings, or in submissions, that the Heads of Agreement did not constitute a concluded agreement because their operation was subject to the preparation and execution of a more formal document.[84] Such a case could have no merit, given that Mr Gangemi and Mr Lanciana inserted the date they signed the Heads of Agreement in Clause 16 of that document. Objectively considered, they intended the Heads of Agreement to be the formal terms of settlement between them. It is nonsense to suggest that they intended a more formal document would be prepared and executed later that day. No such contention was advanced.

(2) Was Mr Gangemi's signature on the Heads of Agreement, or the documents signed by him pursuant thereto, procured by duress?

424 Mr Gangemi's duress case has two principal elements. First, Mr Gangemi contends that the Heads of Agreement should be set aside because his signature was procured by duress. In this regard, he relies upon alleged threats of physical harm to him or his family; and upon alleged threats by Mr Lanciana to "disrupt" the Hoddle Street project if he did not sign the Heads of Agreement. Second, Mr Gangemi contends that, in any event, his signature on the documents upon which Mr Lanciana relies to establish that Mr Gangemi transferred ownership and control of 63 Buckley and the Buckley Street properties to him (the resignation of directorship, share transfer form and blank withdrawal of caveat) were, if valid for this purpose, procured by duress. Again, alleged threats of physical and economic harm are relied upon.

425 The factual allegations upon which Mr Gangemi relies for his duress claims have been considered in detail above. In summary, the following relevant factual findings have been made:

(1) By May 2003 there was an irretrievable breakdown of the relationship between Mr Gangemi and Mr Lanciana. The resulting dispute was wide-ranging and involved claim and counterclaim in respect of projects and dealings other than the Buckley Street project. It is unnecessary to determine these claims. They are the subject of other proceedings between Mr Gangemi, Mr Lanciana and related entities.

(2) The Hoddle Street project was a joint development between Mr Gangemi and Mr Lanciana. They each held one unit in the relevant unit trust of which Clapana was the trustee. The Hoddle Street project was the only relevant development project which was in progress. Building works had commenced. Mr Gangemi was the builder pursuant to a building contract with Clapana. Other relevant projects had been completed, involved holding property for investment only or, in the case of Buckley Street, were awaiting permit approval prior to obtaining development finance and commencing building works.

(3) One central aspect of the dispute was Mr Lanciana's desire to remove Mr Gangemi as the builder for the Hoddle Street project. Following a meeting in May or June 2003 with representatives of Suncorp Metway, the financier for the Hoddle Street project, Mr Gangemi remained as the builder. However, Mr Lanciana remained unhappy about this.

(4) Prior to the meeting with Suncorp Metway representatives in May or June 2003, the Suncorp Metway loan funds had been progressively advanced to Pre Need. Mr Lanciana then attended to paying the Hoddle Street contractors. There were delays in making payments. At least some of these delays were the result of Mr Lanciana using Suncorp Metway loan funds intended for the Hoddle Street project for paying expenses in respect of other projects. The evidence does not show if these projects were joint projects of Mr Gangemi and Mr Lanciana, or were personal projects of Mr Lanciana or his wife.

(5) Following the meeting with Suncorp Metway representatives, loan funds were advanced to Mr Gangemi as the Hoddle Street builder. Any subsequent delays were not caused by Mr Lanciana delaying in the signing of draw-down notices. Nor did he threaten to delay signing drawn-down notices. Mr Gangemi had no reasonable basis for any belief that Mr Lanciana would take steps to deliberately delay payment to Hoddle Street contractors. I have found that he had no such belief.

(6) When the attempts by Mr Gangemi and Mr Lanciana to negotiate a settlement stalled, Mr Gatto was engaged by both Mr Gangemi and Mr Lanciana to assist them to reach a settlement. Mr Gangemi participated willingly in all aspects of the ensuing settlement process, which culminated in the signing of the Heads of Agreement at the third meeting. Until the third meeting, Mr Gangemi was assisted by his solicitor Mr Alderuccio, who prepared the final draft of the Heads of Agreement on Mr Gangemi's instructions. That draft did not contain only what Mr Lanciana wanted. It was prepared as a result of a general proposal for settlement which was agreed at the second meeting, negotiations following the preliminary draft Heads of Agreement and otherwise contained provisions that Mr Gangemi wanted; including an extraordinary demand for a provision giving Mr Gangemi the power to sell the Hoddle Street, Buckley Street, Stevedore Street and Mitchell Street properties if Mr Lanciana breached any term of the Heads of Agreement. Some, but not all, of Mr Gangemi's demands contained in the final draft Heads of Agreement were amended or deleted during the course of the negotiations at the third meeting. The negotiations at the third meeting involved give and take on both sides and genuine commercial negotiations.

(7) Mr Gangemi did not sign the Heads of Agreement because he feared the consequences of threats or intimidation by Mr Lanciana or Mr Condello. There is no evidence capable of supporting such a finding. The mere reference to Mr Gatto and Mr Condello and their reputations, and the fact that Mr Gangemi believed Mr Condello had "criminal convictions for offences including assaults", is not enough. Nor does the fact that Mr Gangemi was apparently "frisked" by Mr Condello before the third meeting constitute a threat to Mr Gangemi. Mr Gangemi gave no evidence of any threats or intimidation, other than a general reference to telephone calls from Mr Condello asking him to "hurry up" during the course of the settlement process. No evidence was given of any threat by Mr Gatto.

(8) Mr Gangemi made no contemporaneous complaint about duress in connection with the signing by him of the Heads of Agreement or the subsequent documents.

(9) Mr Gangemi's subsequent conduct, and that of his solicitors, is inconsistent with his signature on the Heads of Agreement and subsequent documents being procured by duress. He relied upon the Heads of Agreement when it suited him to do so. Further, his dealings with Mr Jafari following the execution of the Heads of Agreement were wholly inconsistent with any belief on his part that the Heads of Agreement did not reflect his commercial arrangements reached with Mr Lanciana.

(10) I have rejected Mr Gangemi's evidence that the subsequent documents (resignation of directorship, share transfer form and blank withdrawal of caveat which was subsequently completed by Mr Lanciana in respect of Mr Gangemi's caveat over the Buckley Street properties) were procured as a result of an assault by Mr Lanciana. Further, I have rejected Mr Gangemi's evidence that his signature on these documents was procured in circumstances where he feared Mr Lanciana would otherwise disrupt the Hoddle Street project if he did not sign. Moreover, I have rejected Mr Gangemi's evidence that the blank withdrawal of caveat which Mr Lanciana later completed in respect of Mr Gangemi's caveat over the Buckley Street properties is a forgery. The withdrawal of caveat was signed by Mr Gangemi.

426 In these circumstances, the duress claims raised by Mr Gangemi have no merit.

427 The legal principles to be applied are not in doubt. It is for the party alleging duress to prove it. Proof of duress involves proof of two essential elements. First, that one of the reasons for the affected party entering into the transaction was pressure. Second, that the pressure was of an illegitimate kind, so as to vitiate the consent of the affected party. Mere commercial pressure to act is not enough. [85]

428 In determining whether there has been illegitimate pressure exerted upon the plaintiff, so that there is no true consent given by the plaintiff, the Court considers a number of matters, including:

(1) whether or not the plaintiff protested at the time of the transaction;

(2) whether there was an alternative course open to the plaintiff instead of entering into the transaction;

(3) whether the plaintiff was independently advised; and

(4) whether, after entering into the transaction, the plaintiff took steps to avoid it.[86]

429 As the above summary of the evidence discloses, Mr Gangemi has not proved either of the elements necessary to establish his duress case. There may well have been some commercial pressure for Mr Gangemi to resolve his protracted dispute with Mr Lanciana. However, I am not satisfied that Mr Gangemi entered into the Heads of Agreement or signed the subsequent documents because of illegitimate pressure. He did not protest at the time he signed the documents; it was open to him to refuse to sign; he was independently advised in connection with the preparation of the final draft Heads of Agreement; and, after he entered into the Heads of Agreement and signed the subsequent documents, and consulted his solicitor, he made no complaint and took no steps to avoid the consequences of him signing the Heads of Agreement or the subsequent documents.

430 I reject the submission made on behalf of Mr Gangemi that I should infer that illegitimate pressure was placed upon him during the course of the third meeting, because all of the changes which were made to the final draft Heads of Agreement favoured the interests of Mr Lanciana. Such an inference is not open. It must be remembered that the final draft was prepared by Mr Gangemi's solicitors and included provisions that Mr Gangemi wanted, including the extraordinary Clause 12 in the final draft, which would have given Mr Gangemi the right to sell the Hoddle Street, Buckley Street, Stevedore Street and Mitchell Street properties without recourse to Mr Lanciana in the event that Mr Lanciana was in breach of the Heads of Agreement in any respect.

431 The amendments to Clause 8 of the final draft favoured Mr Gangemi. The amount of the deposit on the Anchor Place contract was reduced and a provision protecting Mr Gangemi's interests was inserted, requiring Mr Lanciana to procure the release of all guarantees prior to Mr Gangemi being required to settle the purchase.

432 The deletion of the mutual releases did not favour either party. It meant simply that, with the exception of the indemnities given by Mr Lanciana to Mr Gangemi, the parties reserved all of their rights against each other to the extent that they were not dealt with in the Heads of Agreement.

433 The alteration of the time upon which certain obligations were to arise, from the Settlement Date to "the signing of this agreement",[87] although generally favouring Mr Lanciana, is the kind of matter which is likely to be the subject of robust negotiations between businessmen. Mr Lanciana obviously wanted certainty and was able to negotiate it. This is similar to Mr Gangemi wanting to remain the builder at Hoddle Street against Mr Lanciana's wishes. As a result of the negotiations, Mr Lanciana gave in on that matter and agreed that Mr Gangemi could remain as the builder.

434 The amendments to the final draft Heads of Agreement are insufficient to found an inference that Mr Gangemi signed the Heads of Agreement by reason of illegitimate pressure placed upon him.

(4) If the Heads of Agreement were procured by duress, did Mr Gangemi nevertheless affirm the Heads of Agreement by his conduct?

435 If, contrary to the above findings and conclusions, the signatures of Mr Gangemi on the Heads of Agreement or the subsequent documents signed by him in performance of that agreement had been procured by duress, I find that Mr Gangemi nevertheless elected to affirm the Heads of Agreement and the transactions pursuant to it by his conduct.

436 The relevant legal principles are not in doubt. If a party's signature to a contract is procured by duress, the resulting contract is voidable not void.[88] Where there is duress, the contracting party who has been affected by the duress is put to an election. The affected party can either elect to rescind the contract for duress, or can elect to affirm the contract. The affected party cannot blow hot and cold. If the contract is affirmed, then it is affirmed once and for all. Whether or not the affected party has elected to rescind the contract, or to affirm it, is to be determined objectively by the Court in light of all of the evidence.[89]

437 The objective evidence establishes that Mr Gangemi, by his conduct subsequent to him signing the Heads of Agreement, elected to affirm the Heads of Agreement and the documents signed by him pursuant to it. The relevant factual findings appear above. In summary:

(1) Pursuant to the Heads of Agreement, Mr Gangemi resigned as a director of 63 Buckley, transferred his share in 63 Buckley to Mr Lanciana and signed a blank form of withdrawal of caveat in the knowledge that Mr Lanciana would complete it as a withdrawal of Bloomingdale's caveats over the Buckley Street properties.

(2) Mr Gangemi either forwarded, or did not object to Mr Lanciana forwarding, a copy of the Heads of Agreement to Suncorp Metway. The purpose of this was probably to support a request that Suncorp Metway release Mr Gangemi from his guarantee of the Hoddle Street finance facility, as provided for in the Heads of Agreement.

(3) Pursuant to the Heads of Agreement, Mr Gangemi entered into a contract to purchase the property at Unit 5, 6 Anchor Place, Prahran from Mr Lanciana for the sum of $735,000. At the time that this contract of sale was signed, Mr Gangemi insisted that Mr Lanciana include a handwritten special condition linking Mr Gangemi's obligation to complete the purchase to the obligations of Mr Lanciana under Clause 8 of the Heads of Agreement. Subsequently, Mr Gangemi and his solicitors repeatedly relied upon this special condition and Clause 8 of the Heads of Agreement in connection with demands that Mr Gangemi complete the purchase of the Anchor Place apartment.

(4) Pursuant to the Heads of Agreement, Mr Gangemi entered into contracts to purchase from Clapana Lots 15, 16 and 17 (S2) in the Hoddle Street development.

(5) The Heads of Agreement provided that Mr Gangemi would be "responsible" for Mr Osborne's "loan" of $200,000. From in or about October 2003 Mr Gangemi commenced paying Mr Osborne monthly amounts equivalent to the interest due by him to his bank in respect of the $200,000 borrowed by Mr Osborne and advanced to Mr Lanciana and Mr Gangemi. Prior to the Heads of Agreement, this interest had been paid by Pre Need.

(6) Mr Gangemi signed the deed of release of his obligations as a guarantor of the mortgage loan over the Buckley Street properties. He signed immediately below Mr Lanciana's signature on behalf of 63 Buckley as its sole director and sole secretary.

(7) By letter dated 24 May 2004, Mr Gangemi's solicitors asserted to Mr Lanciana's solicitors that the rights and obligations of Mr Gangemi and Mr Lanciana were contained in documents including the Heads of Agreement, which "set out the terms of settlement between the parties and their related entities".

(8) When he received a tax penalty notice in connection with his position as a director of Clapana, Mr Gangemi complained to Mr Lanciana that it was his obligation to pay this tax. I infer that this complaint was based on Mr Lanciana's obligations under the Heads of Agreement. Mr Lanciana accepted that this was so and arranged for the tax to be paid.

(9) By letter dated 17 January 2005 from Mr Gangemi to Mr Lanciana's solicitors, Mr Gangemi relied upon Clause 8 of the Heads of Agreement. Further, Mr Gangemi warned Mr Lanciana's solicitors that he intended to give instructions to his solicitor, Mr Alderuccio, "as to the enforcement of the entirety of the Heads of Agreement".

(10) Mr Gangemi did not contest the assertion by Mr Lanciana by facsimile in June 2004 that Mr Gangemi was "totally" responsible for the repayment of Mr Osborne's investment. Of course, under the Heads of Agreement, that was the case.

438 I find that Mr Gangemi affirmed the Heads of Agreement and the documents signed by him pursuant to them by this conduct. Accordingly, any right which Mr Gangemi may have had to set aside the Heads of Agreement or the subsequent documents signed by him pursuant to it, on grounds of duress, ceased to exist. All of Mr Gangemi's defences based upon duress fail.

(5) Is Mr Gangemi estopped from denying that the Heads of Agreement are enforceable?

439 Having regard to the above findings, it is unnecessary to consider whether, if the Heads of Agreement and subsequent documents signed by Mr Gangemi pursuant to them were procured by duress, Mr Gangemi has by his conduct acted in such a way that it would be unconscionable for him to now contend that the Heads of Agreement and subsequent documents should be set aside for duress. However, the same facts which have led me to the conclusion that Mr Gangemi affirmed the Heads of Agreement and the subsequent documents signed by him pursuant to it, would appear to be sufficient to found the estoppel relied upon by Mr Lanciana.

440 Furthermore, the conduct of Mr Gangemi towards Mr Jafari in the period leading up to the signing of the Heads of Agreement and thereafter provides a solid factual foundation for the conclusion that, as against Mr Jafari, Mr Gangemi should in any event be estopped from denying that Mr Jafari has acquired full ownership and control of 63 Buckley, to the exclusion of any interest of Mr Gangemi.

441 The relevant facts are the subject of detailed findings above. In summary, Mr Gangemi informed Mr Jafari of his negotiations with Mr Lanciana to resolve their overall dispute. In this context, Mr Gangemi showed Mr Jafari a copy of the final draft of the Heads of Agreement and said that he was having a further mediation (a reference to the third meeting) in an endeavour to resolve the dispute on the basis of the final draft. After the third meeting, Mr Gangemi told Mr Jafari that he and Mr Lanciana had resolved their dispute and that Mr Gangemi had transferred 63 Buckley to Mr Lanciana. Following this conversation, Mr Jafari confirmed the fact with Mr Lanciana and, in subsequent conversations with Mr Gangemi, was repeatedly told by Mr Gangemi that he was "out of the Buckley Street project" and words to like effect. In addition, Mr Gangemi ceased to have any involvement with the Buckley Street project, for example in connection with the further prosecution of the permit application, and by this conduct confirmed his statements that he was "out of Buckley Street".

442 In these circumstances, Mr Jafari dealt with Mr Lanciana in an endeavour to recover his own investment in the Buckley Street project. Mr Jafari told Mr Gangemi of his efforts in this regard and Mr Gangemi responded in terms which further confirmed his earlier statements that he was "out of Buckley Street". As I have found above, I accept Mr Jafari's evidence in this regard.

443 Although it is unnecessary to decide it, I find that, in these circumstances, it would be wholly unconscionable for Mr Gangemi to now assert against Mr Jafari that Mr Lanciana had no capacity to transfer ownership and control of 63 Buckley to Mr Jafari because ownership and control of 63 Buckley remained with Mr Gangemi.

(6) Is Mr Lanciana estopped from relying upon the Heads of Agreement?

444 Mr Gangemi's estoppel case against Mr Lanciana assumes that all of his other challenges to the efficacy of the Heads of Agreement and the documents which he signed pursuant to them are unsuccessful. Mr Gangemi alleges that Mr Lanciana represented to him that he did not regard the Heads of Agreement as a concluded or binding agreement and that he did not intend to proceed with the Heads of Agreement. The pleaded basis for this representation is:

(1) The failure of Mr Lanciana to "raise the issue of the Heads of Agreement" with Mr Gangemi after the receipt of tax advice from Coady's that the Heads of Agreement gave rise to substantial revenue obligations;[90]

(2) The fact that the proposed deed of indemnity by Mr Lanciana in favour of Bloomingdale in respect of any adverse tax implications for Bloomingdale arising out of the Heads of Agreement was not executed;[91]

(3) The fact that Mr Lanciana did not procure all of the parties named in the Heads of Agreement to sign them;[92]

(4) The alleged statement by Mr Lanciana in December 2003 that he could not procure the release of Mr Gangemi's guarantees, as required by the Heads of Agreement, and, in that regard that Mr Lanciana said to Mr Gangemi "I have never agreed to anything and there aren't any fucking agreements" (which statement, for the reasons I have discussed above,[93] I have found that Mr Lanciana did not make);[94]

(5) The conduct of Mr Lanciana from early 2004 in advising Mr Gangemi that he wished to recommence negotiations to resolve all of the disputes between them;[95] and

(6) A statement made by Mr Lanciana's solicitor, Mr Blott, in December 2004, that the Heads of Agreement were "so convoluted by both the subsequent actions and agreements of the parties ... to be of questionable interpretation".[96]

445 Mr Gangemi alleges that, in reliance upon the representation by Mr Lanciana, he was induced to act to his detriment by engaging in further negotiations with Mr Lanciana in an endeavour to resolve the disputes between them and incurring substantial legal costs in that regard.

446 I reject Mr Gangemi's estoppel case. The evidence upon which he relies, even if accepted in isolation, is not capable of constituting a representation to the effect alleged. Furthermore, when the evidence is considered as a whole, the representation alleged is inconsistent with the facts. It is inconsistent with the conduct of Mr Gangemi subsequent to the Heads of Agreement which I have found constituted an affirmation of the Heads of Agreement; and is also inconsistent with Mr Lanciana's conduct subsequent to the Heads of Agreement in seeking to implement and rely upon them.

(7) Were the Heads of Agreement terminated or abandoned?

447 Mr Gangemi raised two final answers to the defences of Mr Lanciana and Mr Jafari based upon the Heads of Agreement. First, Mr Gangemi alleges that Mr Lanciana repudiated the Heads of Agreement and that he accepted that repudiation and thereby terminated the Heads of Agreement. Second, Mr Gangemi alleges that it should be inferred from that evidence that he and Mr Lanciana abandoned the Heads of Agreement. For the reasons given below, neither of these allegations has any merit.

448 The evidence does not establish that Mr Lanciana repudiated the Heads of Agreement. I do not accept the evidence of Mr Gangemi that Mr Lanciana expressly did so by saying to Mr Gangemi that there were "no fucking agreements" between them. Nor do I accept that Mr Lanciana has, by his conduct, evinced an intention to no longer be bound by the terms of the Heads of Agreement. To the contrary, Mr Lanciana's conduct, when viewed as a whole, has been to rely upon the efficacy of the Heads of Agreement. Moreover, in the face of any arguable breaches of the Heads of Agreement by Mr Lanciana, Mr Gangemi continued to rely upon the Heads of Agreement and elected to affirm them as a result. This affirmatory conduct is wholly inconsistent with any acceptance by Mr Gangemi of a repudiation of the Heads of Agreement by Mr Lanciana.

449 The conduct of Mr Lanciana and Mr Gangemi pursuant to, and in recognition of, the Heads of Agreement, militates against any finding that the parties mutually abandoned the Heads of Agreement. The Court will only find abandonment of an agreement where the parties have so conducted themselves as to lead to the inference that they have mutually abandoned their contract.[97] Further, abandonment will not usually be inferred in circumstances where there has been substantial performance of the contract and the parties have not agreed to restore themselves to their respective positions prior to the entry into the contract.[98]

450 The conduct constituting performance of the Heads of Agreement includes entry into the contracts of sale for Lots 15, 16 and 17 (S2) in the Hoddle Street development, the completion of the contract of sale in respect of Lot 17, Mr Gangemi remaining as the builder for the Hoddle Street development until completion of that development, Mr Lanciana indemnifying Mr Gangemi in respect of tax liabilities, Mr Lanciana procuring the release of Mr Gangemi's guarantee of the finance for the Buckley Street development, Mr Lanciana arranging for the release of Mr Gangemi's guarantee of the finance provided by Suncorp Metway for the Hoddle Street development, Mr Gangemi's resignation as a director of 63 Buckley, Mr Gangemi's transfer of his share in 63 Buckley to Mr Lanciana, Mr Gangemi signing withdrawal of caveat forms for the purpose of removing his caveats over the Buckley Street, Mitchell Street and Stevedore Street properties, Mr Gangemi and Mr Lanciana entering into the contract of sale for Unit 5, 6 Anchor Place on the terms stated in the Heads of Agreement, Mr Gangemi assuming (for a time) responsibility for the $200,000 advanced by Mr Osborne by paying interest on Mr Osborne's extended home loan for this amount, Mr Lanciana taking responsibility for the $350,000 advanced by Mr Jafari, and Mr Lanciana and Mr Gangemi consulting Coadys to obtain advice on tax issues.

451 Moreover, the rights of a third party intervened when Mr Lanciana, acting on the faith of the transfer by Mr Gangemi to him of full ownership and control of 63 Buckley, dealt with Mr Jafari and, as a result, agreed to transfer full ownership and control of 63 Buckley to Mr Jafari.

452 For the reasons give above, I reject the submissions made on behalf of Mr Gangemi that the unsuccessful endeavours by Mr Gangemi and Mr Lanciana to renegotiate the Heads of Agreement, and to negotiate a compromise of other differences between them, constituted abandonment of the Heads of Agreement. Parties do not abandon an agreement by conducting unconcluded negotiations to amend or replace it.

1. WAS THE TRANSFER BY MR LANCIANA TO MR JAFARI OF OWNERSHIP AND CONTROL OF 63 BUCKLEY VALID?

453 It was submitted on behalf of Mr Gangemi that the acts of Mr Lanciana in purporting to transfer all of the issued shares in 63 Buckley to Mr Jafari, and to resign as a director of 63 Buckley and appoint Mr Jafari in his place, were invalid because of a chain of non-compliance with the constitution of 63 Buckley. It was submitted that this chain of non-compliance commenced with the invalid resignation of Mr Gangemi as a director, the invalid transfer of Mr Gangemi's share in 63 Buckley to Mr Lanciana and the consequent invalid assumption by Mr Lanciana of the position of sole director and shareholder of 63 Buckley. None of Mr Gangemi's submissions in this regard has any merit. My reasons for this conclusion are set out below. I will consider each allegation of invalidity separately.

454 As appears above, soon after the Heads of Agreement were signed, Mr Gangemi signed a handwritten note resigning as a director of 63 Buckley effective on 9 September 2003. The handwritten resignation is in the following form:

455 It was submitted on behalf of Mr Gangemi that his resignation as a director was defective because it did not comply with rule 90(d) of the constitution of 63 Buckley, which provides that the office of a director becomes vacant if the director "resigns his office by notice in writing to the Company".

456 There was no invalidity involved in Mr Gangemi's resignation. In circumstances where he was the sole director and shareholder in 63 Buckley, had agreed in the Heads of Agreement to resign as a director and transfer his share to Mr Lanciana and signed the handwritten resignation, that conduct constituted his resignation by notice in writing to the company. There was nothing further that he needed to do.

457 If there was some technical invalidity in this process of resignation, it does not affect the validity of Mr Gangemi's resignation. There are two reasons for this. First, even an oral agreement to resign will be valid if tendered to the company and accepted. This is so even where the company's constitution contains a requirement, like here, that a resignation must be by notice in writing to the company.[99] Second, the Court has power to declare that Mr Gangemi's resignation as a director is not invalid by reason of any failure to comply with rule 90(d) of the constitution of 63 Buckley.[100] If it were necessary to resort to this power, I would have no hesitation in doing so.

(2) Transfer by Mr Gangemi of his share in 63 Buckley to Mr Lanciana

458 Soon after the Heads of Agreement was signed, Mr Gangemi signed a standard form of share transfer. With the exception of the name of 63 Buckley being completed in handwriting, none of the other details were completed at the time Mr Gangemi signed. Subsequently, Mr Lanciana completed parts of the form. He wrote in Mr Gangemi's name as the seller and his name and address as the buyer. However, the form remained blank as to the quantity of shares and the consideration for their transfer.

459 It was submitted on behalf of Mr Gangemi that the share transfer was invalid and ineffective because it did not comply with the procedures specified in rules 42 to 48 in 63 Buckley's constitution. It was submitted that the constitution was not complied with because the share transfer was incomplete, and thus not "in the usual form",[101] had not been duly stamped,[102] had not been submitted to him as the sole director of 63 Buckley for registration[103] and was not registered.[104]

460 There is no doubt that the share transfer does not comply with the constitution of 63 Buckley and was not registered in accordance with its requirements. However, the share transfer must be viewed in its context. Notwithstanding the procedural irregularities attendant upon it, the fact remains that it was signed by Mr Gangemi in performance of his obligations under the Heads of Agreement to resign as the sole director of 63 Buckley and to transfer the sole issued share in 63 Buckley to Mr Lanciana. In other words, the share transfer formed part of an agreement to transfer complete ownership and control of 63 Buckley from Mr Gangemi to Mr Lanciana. The clear intention was to enable Mr Lanciana to then become the sole director and shareholder in 63 Buckley, in place of Mr Gangemi. In these circumstances, it is appropriate that the Court exercise its undoubted power to validate the share transfer. That power is contained in s 1322(4)(a) of the Corporations Act 2001, which provides that the Court may:

(a) [make] an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken ... in relation to a corporation is not invalid by reason of any contravention of ... a provision of the constitution of a corporation;

461 The power to make an order under s 1322(4)(a) is, constrained by s 1322(6) of the Corporations Act. Relevantly, that sub-section provides that no order shall be made under s 1322(4)(a) unless it relates to a matter which is essentially procedural in nature, the person or persons concerned in the contravention or failure acted honestly or it is just and equitable that the order be made.[105] It is enough if any one of these three requirements is satisfied, provided that the Court is also satisfied that no substantial injustice has been or is likely to be caused to any person by reason of the order.[106]

462 Section 1322(4) of the Corporations Act gives the Court a broad discretionary power. It is "a remedial provision to be applied with liberality".[107] Apart from the mandatory matters about which the Court must be satisfied, the discretion is unfettered and exists to prevent injustice.[108]

463 The share transfer form was signed by Mr Gangemi in performance of his obligations under the Heads of Agreement to transfer full ownership and control of 63 Buckley to Mr Lanciana. Subsequently, Mr Lanciana dealt with Mr Jafari and agreed to transfer full ownership and control of 63 Buckley to him. These circumstances call for the beneficial exercise of the Court's discretion to validate the transfer. The irregularities are essentially procedural in nature, my findings as to the lack of duress mean that Mr Lanciana should be taken to have acted honestly in this regard and, especially have regard to the intervention of Mr Jafari's rights, it is just and equitable that a validating order be made.

464 Further, the making of a validating order will not, on the view I take of the facts of the case, occasion injustice to Mr Gangemi. This is because he was contractually bound under the Heads of Agreement to bring about the result that Mr Lanciana obtained full ownership and control of 63 Buckley.

(3) Appointment of Mr Lanciana as a director of 63 Buckley

465 It was submitted on behalf of Mr Gangemi that Mr Lanciana's appointment as a director of 63 Buckley was defective because rule 84 of 63 Buckley's constitution was not complied with. That rule relevantly provides:

If the Company has a single member who is also the sole director, the director may appoint another director by recording his or her decision and signing the record.

466 At the time Mr Gangemi signed the Heads of Agreement, signed his resignation as a director of 63 Buckley and signed the share transfer form, he was the single member and sole director of 63 Buckley. By signing these documents, he effectively appointed Mr Lanciana as a director of 63 Buckley. However, the formalities for the appointment of Mr Lanciana were not observed. For the same reasons as I have given concerning validation of the share transfer from Mr Gangemi to Mr Lanciana, I will exercise my discretion to make validating orders in respect of the appointment of Mr Lanciana as a director of 63 Buckley.

(4) Were Mr Lanciana's acts as a director of 63 Buckley valid?

467 In my view, the acts of Mr Lanciana as a director of 63 Buckley, in particular his acts in issuing further shares to himself and subsequently selling those shares to Mr Jafari and arranging for Mr Jafari to take over full ownership and control of the company, are effective acts even though there were deficiencies in the appointment of Mr Lanciana as a director. This result is dictated by s 201M(1) of the Corporations Act, which provides:

An act done by a director is effective even if their appointment, or the continuance of their appointment, is invalid because the company or director did not comply with the company's constitution (if any) or any provision of this Act.

468 Furthermore, for the reasons stated, if s 201M(1) of the Corporations Act does not have the effect of validating Mr Lanciana's acts as a director of 63 Buckley, I would nevertheless make validating orders under s 1322(4), for the reasons stated above.

469 Notwithstanding this result, it appears that no stamp duty and capital gains tax may have been paid in respect of the transfer by Mr Lanciana to Mr Jafari of all of the issued shares in 63 Buckley. The Court cannot allow this situation to go unnoticed. The Court will refer this matter to the Attorney-General to take any necessary action and refer any appropriate matters to the relevant statutory authorities.

470 In conformity with his case that he is entitled to full ownership and control of 63 Buckley, Mr Jafari has caused pleadings to be filed both on his own behalf and on behalf of 63 Buckley. Mr Jafari and 63 Buckley counter-claim for damages from Mr Gangemi and Bloomingdale on a number of grounds.

471 First, Mr Jafari alleges that he was induced to invest in the Buckley Street project by representations made to him by Mr Gangemi to the effect that the Buckley Street properties would be purchased unencumbered, from the moneys advanced by Mr Jafari and Mr Osborne and from further contributions to be made by Mr Lanciana and Mr Gangemi.

472 As appears above, I am satisfied that Mr Gangemi made this representation to Mr Jafari, and that Mr Jafari relied upon it in deciding to invest in the Buckley Street project. I am also satisfied that Mr Lanciana by hearing Mr Gangemi make the representation and saying nothing to correct it, adopted the representation by his silence and thereby engaged in misleading or deceptive conduct.[109] The conduct of Mr Gangemi and Mr Lanciana was misleading or deceptive because they both said that they intended, at all times, that the Buckley Street properties would be purchased subject to mortgage finance. But even if they did not have this intention, there were no reasonable grounds for them to have made the representation. This is because they were constantly short of funds for their projects and it was likely that they would need to cause 63 Buckley to borrow in order to complete the purchases of the Buckley Street properties.[110]

473 Accordingly, Mr Jafari has established that both Mr Gangemi and Mr Lanciana engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 9(1) of the Fair Trading Act 1999 (Vic). I will make a declaration accordingly. Although Mr Jafari makes no claim against Mr Lanciana, Mr Gangemi has claimed contribution or indemnity from Mr Lanciana. It is therefore appropriate to make a similar declaration against Mr Lanciana.

474 Further, there will be judgment for Mr Jafari against Mr Gangemi for damages to be assessed. In this regard, it is relevant to note that, since he invested, Mr Jafari has purchased 59 Buckley Street and has acquired full ownership and control of 63 Buckley, and thus the Buckley Street properties, from Mr Lanciana for the sum of $175,000. Complex questions of causation and assessment of damage are raised. These questions can only be determined by a further trial as to these issues. It is only once these issues are resolved that the Court can determine the amount of any damages to which Mr Jafari is entitled and the extent to which Mr Gangemi is entitled to contribution or indemnity from Mr Lanciana in respect of any losses which Mr Jafari can establish. In conformity with usual Commercial List practice, the trial was not concerned with these issues.

475 Second, 63 Buckley makes a claim against Mr Gangemi for an alleged contravention by him of s 182(1) of the Corporations Act 2001 (Cth), which relevantly provides that a director of a corporation "must not improperly use their position to gain an advantage for themselves or someone else or to cause detriment to the corporation". Further, it is alleged that Mr Gangemi "failed to act in good faith and in the best interests of", or "for the proper purposes of" 63 Buckley. Although it is not expressly mentioned in the counterclaim, this allegation uses the words of s 181(1) of the Corporations Act 2001 (Cth), and it should be understood as an allegation that Mr Gangemi contravened that sub-section also.

476 In his final written submissions, Mr Jafari made the general contention that Mr Gangemi breached his director's duties because he did not establish a separate bank account for 63 Buckley, trusted the whole of the administration and finance of 63 Buckley to Mr Lanciana and failed to ensure that 63 Buckley kept proper accounts so that the money advanced by him could be "traced". Mr Jafari made no attempt to link these contentions to the pleadings made by 63 Buckley against Mr Gangemi for contravention of ss 181 or 182 of the Corporations Act 2001 (Cth). Mr Jafari's submissions appear to be directed towards a breach by Mr Gangemi of s 180 of the Corporations Act 2001 (Cth). However, no contravention of that section was alleged in Mr Jafari's counterclaim.

477 In my view, Mr Jafari has not established that Mr Gangemi is liable to 63 Buckley for the contraventions alleged. When the evidence is viewed as a whole, Mr Jafari knew when he made his advances that they were, in the first instance, to be made to, and applied towards purposes associated with, Mr Gangemi and Mr Lanciana or persons or entities associated with them or one of them. He accepted their word that they would repay these advances by paying like amounts to 63 Buckley to constitute Mr Jafari's investment in the Buckley Street project. These arrangements constituted private dealings between Mr Jafari, Mr Gangemi and Mr Lanciana. They did not involve Mr Gangemi acting in his capacity as a director of 63 Buckley.

478 Third, Mr Jafari and 63 Buckley claim damages against Bloomingdale for lodging caveats over the Buckley Street properties without reasonable cause. Their claims are based upon s 118 of the Transfer of Land Act 1958 (Vic) which provides:

Any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make any person who sustains damage thereby such compensation as the Court deems just and orders.

479 It follows from my findings on the principal issues in the proceedings that Bloomingdale had no entitlement, and thus no reasonable cause, to lodge its caveats. At the time it did so, Bloomingdale had transferred any interest which it had in the Buckley Street properties to Mr Lanciana, who subsequently transferred full ownership and control of 63 Buckley (and thus the Buckley Street properties) to Mr Jafari. In these circumstances, each of Mr Jafari and 63 Buckley has established an entitlement to compensation from Bloomingdale under s 118 of the Transfer of Land Act 1958 (Vic). The amount of such compensation must be determined at a separate trial. At present, Mr Jafari is entitled to a declaration that Bloomingdale lodged the caveats without reasonable cause and an order for compensation to be assessed.

1. IS MR OSBORNE ENTITLED TO SUCCEED IN HIS DEBT CLAIM AGAINST MR GANGEMI? IF SO, IS MR GANGEMI ENTITLED TO CONTRIBUTION FROM MR LANCIANA?

480 In section IV(3) above, I have given detailed consideration to the facts relevant to the debt claims made by Mr Osborne against Mr Gangemi. I have concluded that the Thrifty Note was prepared by Mr Gangemi and Mr Osborne as a written record of the agreement previously reached between them prior to Mr Osborne providing the second Osborne cheque. Accordingly, I accept Mr Osborne's evidence as to the terms upon which he agreed with Mr Gangemi to invest in the Buckley Street project.

481 It is common ground that the relevant planning permit for the Buckley Street project was not obtained within 18 months of the final advance of funds by Mr Osborne. It follows that Mr Osborne has made out his case for recovery of the $200,000 advanced by him and the agreed interest of $50,000, a total of $250,000.

482 The debt of $250,000 was due for repayment 18 months after Mr Osborne's final advance of funds on 4 March 2002. Accordingly, the debt was due for payment on 4 September 2003. I will hear the parties as to interest accruing from that time.

483 Were it not for the Heads of Agreement, Mr Lanciana would, although not sued by Mr Osborne, be a person also liable to Mr Osborne for the debt, and Mr Gangemi would be entitled to equal contribution from Mr Lanciana in respect of Mr Gangemi's liability to Mr Osborne. It is clear that, in his dealings with Mr Osborne, Mr Gangemi was representing both himself and Mr Lanciana. Indeed, in his evidence, Mr Lanciana frankly acknowledged that, but for the Heads of Agreement, he was jointly responsible with Mr Gangemi for the advances made by Mr Osborne and Mr Jafari. However, the Heads of Agreement are clear on this matter. Mr Gangemi specifically agreed with Mr Lanciana that he would be "responsible" for Mr Osborne's advances, and Mr Lanciana would be "responsible" for Mr Jafari's advances. In these circumstances, Mr Gangemi is not entitled to recover contribution from Mr Lanciana in respect of his liability to Mr Osborne.

484 By his third party notice in the Osborne proceeding, Mr Gangemi also raised separate claims against Mr Lanciana for the amount of the two cheques advanced by Mr Osborne, for $86,040 and $112,960 respectively. In my view, these claims are also not maintainable because they are dealt with expressly by the Heads of Agreement. Although Mr Gangemi and Mr Lanciana agreed to delete the general mutual releases which were contained in clause 7A of the final draft of the Heads of Agreement, thus preserving any claims against each other which were not specifically dealt with in the Heads of Agreement, they made specific provision to account for their joint obligations to repay the investments made by Mr Osborne and Mr Jafari. They agreed that Mr Gangemi would be "responsible" for Mr Osborne's advances, and Mr Lanciana would be "responsible" for Mr Jafari's advances. The use of the word "responsible" is significant. In the context of the mutual obligations undertaken by Mr Lanciana and Mr Gangemi in respect of the advances of Mr Osborne and Mr Jafari, the word "responsible" connotes something more than a mere obligation to repay the advances to Mr Osborne and Mr Jafari respectively. It involves Mr Gangemi and Mr Lanciana agreeing that, as between themselves, they would deal with all issues between them concerning the advances made by Mr Osborne and Mr Jafari by allocating responsibility between them. In my view, this is what reasonable persons in the positions of Mr Lanciana and Mr Gangemi would have understood by the mutual obligations which were undertaken.

485 In summary, I have reached the following principal findings and conclusions.

486 First, Mr Lanciana, Mr Gangemi, Mr Jafari and Mr Osborne each invested in the Buckley Street properties and the Buckley Street project in return for an agreed percentage ownership of the Buckley Street properties and an agreed percentage of the ultimate profits of the Buckley Street project. The investments were made in the following manner:

(1) Subject to conditions, Mr Osborne invested $200,000 for a 12.5% interest;

(2) Mr Jafari invested $350,000 for a 25% interest;

(3) Mr Gangemi and Mr Lanciana together invested the amount of the Perpetual loan ($504,000), which was secured by a mortgage over the Buckley Street properties and was guaranteed by them, together with their work and all moneys (including consultants' fees and permit fees) required to obtain a planning permit to allow the Buckley Street project to proceed. They were to receive in return a 62.% (31.25% each) interest. The Perpetual loan of $504,000 was the joint responsibility of Mr Gangemi and Mr Lanciana to repay from their own moneys or share of the profits of the project;

(4) Once the planning permit was obtained, the Buckley Street project would proceed by way of project funding from an external financier.

487 Second, it was intended that the investments by Mr Lanciana, Mr Gangemi, Mr Jafari and Mr Osborne would be held through unit holdings in a unit trust to be established and called "The Buckley Street Unit Trust". However, no such unit trust was ever established.

488 Third, Mr Osborne invested $200,000 in the Buckley Street project on the condition that Mr Gangemi and Mr Lanciana would repay his investment, together with $50,000 interest, if the necessary planning permit for the project was not obtained within 18 months of him investing. The planning permit was not obtained within that time, which expired on 4 September 2003, and Mr Osborne is accordingly entitled to judgment against Mr Gangemi for $250,000 together with interest on that amount from 4 September 2003.

489 Fourth, Mr Lanciana undertook joint responsibility with Mr Gangemi for Mr Osborne's debt. However, by reason of the Heads of Agreement, Mr Gangemi is not entitled to recover contribution from Mr Lanciana.

490 Fifth, I reject Mr Gangemi's claims that his signatures to the Heads of Agreement and the documents signed by him pursuant to the Heads of Agreement were procured by duress. If that is not so, Mr Gangemi has nevertheless affirmed the Heads of Agreement by his conduct or should be estopped from alleging that the Heads of Agreement are not binding by reason of any duress.

491 Sixth, the Heads of Agreement constitute a binding agreement between Mr Lanciana and Mr Gangemi.

492 Seventh, the Heads of Agreement were not terminated or abandoned as contended for by Mr Gangemi.

493 Eighth, pursuant to the Heads of Agreement Mr Gangemi transferred full ownership and control of 63 Buckley to Mr Lanciana. Subsequently, Mr Lanciana transferred full ownership and control of 63 Buckley to Mr Jafari. Although these steps were attended by gross informality and procedural error, they were nevertheless valid or else will be the subject of declarations of validity under s 1322(4)(c) of the Corporations Act 2001 (Cth).

494 Ninth, each of Mr Gangemi and Mr Lanciana represented to Mr Jafari, in trade or commerce, that the Buckley Street properties would be purchased unencumbered, and thereby engaged in conduct which was misleading or deceptive or likely to be mislead or deceive in contravention of s 11 of the Fair Trading Act 1999 (Vic). Although Mr Jafari makes no claim against Mr Lanciana in this regard, Mr Gangemi has sought contribution or indemnity from Mr Lanciana. In these circumstances, it is appropriate that declarations be made that each of Mr Gangemi and Mr Lanciana has engaged in false and misleading conduct in contravention of s 11 of the Fair Trading Act 1999 (Vic). However, all questions of causation and quantification of any loss or damage suffered by Mr Jafari by reason of this contravention, and all issues concerning contribution or indemnity between Mr Gangemi and Mr Lanciana, should be determined in a separate trial.

495 Tenth, Bloomingdale had no reasonable cause to lodge its caveats over the Buckley Street properties. These caveats have had the effect of preventing Mr Jafari and 63 Buckley from dealing with the Buckley Street properties in any way. I am satisfied that this has caused each of them some damage. Accordingly, they are entitled to a declaration that Bloomingdale had no reasonable cause to lodge the caveats, and for an order for compensation to be assessed under s 118 of the Transfer of Land Act 1958 (Vic).

496 Eleventh, there are a number of revenue matters which I will refer to the Attorney-General for investigation and possible referral to revenue authorities. If it transpires that, as a result, Mr Gangemi or Bloomingdale is liable for any duties or taxes arising out of the Heads of Agreement or their implementation, Mr Lanciana must indemnify them in respect of that liability. The only exception to this indemnity is in respect of any stamp duty payable by Mr Gangemi in respect of the acquisition by him of Lot 17 in the Hoddle Street development.

497 Based on these findings and conclusions, I propose to make the following declarations and orders.

498 In the Osborne proceeding there will be judgment for Mr Osborne against Mr Gangemi for $250,000 together with interest thereon from 4 September 2003. The third party proceeding by Mr Gangemi against Mr Lanciana seeking contribution for indemnity will be dismissed. I will hear the parties as to the amount of interest and as to costs.

499 In the principal proceeding, the Court will make the following declarations:

(1) In September 2003 Antonio Gangemi transferred the only issued share in 63 Buckley Street Pty Ltd to Pasquale Lanciana. That share transfer is not invalid by reason of any contravention of the provisions of the constitution of 63 Buckley.

(2) In September 2003, Antonio Gangemi resigned as the sole director of 63 Buckley Street Pty Ltd and appointed Pasquale Lanciana to act as a director in his place. The appointment of Pasquale Lanciana as a director of 63 Buckley Street Pty Ltd is not invalid by reason of any contravention of the constitution of 63 Buckley Street Pty Ltd.

(3) On 1 July 2005, Pasquale Lanciana transferred all of the issued shares in 63 Buckley Street Pty Ltd to Kourosh Jafari and appointed him as the sole director of 63 Buckley Street Pty Ltd. The transfer and appointment are not invalid by reason of any contravention of the constitution of 63 Buckley Street Pty Ltd.

(4) By representing to Kourosh Jafari that 63 Buckley Street Pty Ltd would acquire the properties at 61 and 63-67 Buckley Street, Footscray free of any encumbrances, each of Antonio Gangemi and Pasquale Lanciana engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 9 of the Fair Trading Act 1999 (Vic).

(5) Bloomingdale Holdings Pty Ltd lodged caveats numbered AD824331J and AE12488F with the Registrar of Titles without reasonable cause.

500 Further, in the principal proceeding there will be judgment:

(1) for the first defendant 63 Buckley Street Pty Ltd and the second defendant Kourosh Jafari for compensation to be assessed under s 118 of the Transfer of Land Act 1958 (Vic);

(2) for the second defendant Kourosh Jafari against the second plaintiff Antonio Gangemi for damages to be assessed in respect of the contravention by Antonio Gangemi of s 9 of the Fair Trading Act 1999 (Vic);

(3) discharging paragraphs 2, 3 and 4 of the orders made by the Honourable Justice Hargrave in the proceeding on 2 April 2007; and

(4) that all claims and counterclaims in the proceeding are otherwise dismissed.

501 I will hear the parties as to costs of the principal proceeding and to the precise form of the judgment to be entered.

63 BUCKLEY STREET PTY LTD (ACN 099 836 361) (IN ITS OWN CAPACITY AS TRUSTEE OF THE BUCKLEY STREET UNIT TRUST)

63 BUCKLEY STREET PTY LTD (ACN 099 836 361) (IN ITS OWN CAPACITY AS TRUSTEE OF THE BUCKLEY STREET UNIT TRUST)

[1] There is a dispute about which amount.

[2] At this time, Mr Gangemi had not lodged a caveat over 61 Buckley Street.

[3] In fact, some of these documents were separately marked as exhibits and are not included in the folder, but are referred to in the index to it.

[5] Gangemi witness statement [59] (emphasis added).

[7] Osborne witness statement, [15]-[16].

[8] This meeting was also attended by two other potential investors in the Buckley Street project, Sam Abate and Salvatore Battaglia. Neither man proceeded with his proposed investment.

[11] Gangemi witness statement, [210].

[12] Jafari witness statement, [40-42].

[13] Lanciana witness statement, [142].

[14] Jafari witness statement, [76]-[84].

[19] Mr Gangemi's witness statement, [94]-[95] and [109] (emphasis added).

[20] See the evidence of Mr Smith referred to below. He attended at the Hoddle Street site in September 2003 seeking payment of an overdue account.

[21] Lanciana witness statement, [202-206].

[22] Gangemi witness statement, [98-100] (emphasis added).

[23] It appears that Mr Johnson may have had a separate legal firm or practice acting in association with Wilckens and Roche. Nothing turns on this.

[24] Gangemi witness statement, [104] (emphasis added).

[26] Gangemi witness statement, [105]-[107].

[29] Lanciana witness statement, [213]-[220].

[30] Gangemi witness statement, [108]-[109].

[31] Gangemi witness statement, [111].

[32] Mr Gangemi made hand gestures indicating a large volume of paper.

[33] Statutory Declaration sworn by Mr Smith in August 2006. A redated version of this statutory declaration was treated as Mr Smith's witness statement.

[39] Gangemi witness statement [122].

[43] Jafari witness statement, [153]-[157].

[44] Jafari witness statement, [158]-[160].

[45] Jafari witness statement, [161]-[163].

[46] Jafari witness statement, [177].

[54] In his pleadings, Mr Gangemi also alleged that the Heads of Agreement did not constitute a concluded agreement because there was no provision as to the price to be paid by Mr Lanciana to acquire the shares and units which were to be transferred to him under the provisions of the Heads of Agreement. No submissions were directed towards this issue and I take it to have been abandoned. In any event, this allegation clearly has no merit. The obligation of Mr Gangemi and Bloomingdale to transfer shares and units is contained in Clause 6 of the Heads of Agreement. It makes no mention of price, with the consideration for the transfer being dealt with in other provisions of the Heads of Agreement which contain mutual promises.

[56] This was an error. There was no such company. Victoria Pre Cast was, or had been, a business operated by Pre Need.

[57] Ermogenous v Greek Orthodox Community (2002) 209 CLR 95, [25]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, [38].

[58] Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68, 78; Barrier Wharfs Limited v W. Scott Fell & Co Ltd [1908] HCA 88; (1908) 5 CLR 647; Vroon BV v Fosters Brewing [1994] VicRp 53; [1994] 2 VR 32, 82-3; Toyota Motor Corporation v Ken Morgan Motors [1994] VicRp 55; [1994] 2 VR 106, 176-8, 201; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, 550.

[59] Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, [40].

[60] Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; [1932] All ER 494, 499, 503-4; Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429, 437; Di Dio Nominees Pty Ltd, v Brian Mark Real Estate Pty Ltd [1992] VicRp 99; [1992] 2 VR 732, 740; MLW Technology Pty Ltd v May [2005] VSCA 29, [76]-[81]; Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19; [1997] AC 749, 770-1.

[67] For example, Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537, 543, 547, 552, 556-60 and 565.

[81] Gangemi witness statement, [104] (emphasis added).

[84] Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353, 360.

[85] Barton v Armstrong [1976] AC 104, 121; Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40, 45-46; Pao On v Lau Yiu Long [1979] UKPC 2; [1980] AC 614, 635.

[86] Pao On v Lau Yiu Long [1979] UKPC 2; [1980] AC 614, 635.

[88] Pao On v Lau Yiu Long [1979] UKPC 2; [1980] AC 614, 634; Universe Tank Ships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366, 400; North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] 1 QB 705, 720.

[89] North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] 1 QB 705, 721.

[97] Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144, 151-2; DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 434.

[98] Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420, 432-3.

[99] Knight & Ors v Bulich & Ors [1984] 13 ACSR 553, 561.

[100] Corporations Act 2001 (Cth) s 1322(4).

[105] Section 1322(6)(a).

[106] Section 1322(6)(c).

[107] Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd [2001] NSWCA 427, [74].

[108] Re Vanfox Pty Ltd (1994) 13 ACSR 209, 216.

[109] Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31, 32; Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84, 88.

[110] Fair Trading Act 1999 (Vic) s 4(1).