Ferizis v Nash

George Ferizis (plaintiff) PARTIES: Christine Nash (first defendant) Graham Vaughan (second defendant)

Mr R Parsons (plaintiff) COUNSEL: Mr M Maxwell (first defendant) Second defendant in person

SOLICITORS: Merewether & Co Solicitors (plaintiff)

1 These proceedings concern two units which were to be built on a property at 140-148 Beattie Street Balmain ("the units"), as part of a building development ("the Balmain Project"). The plaintiff, Mr George Ferizis ("Ferizis"), an accountant, as trustee of the Kallithea Trust ("the Trust"), negotiated with Projects & Equity Pty Ltd ("P&E") and LNG Holdings Pty Ltd ("LNG") an option to purchase unit 7 and unit 8 (at the price of $675,000 and $700,000 respectively) for $250,000 each unit. He paid the agreed amount of $500,000, and having decided not to exercise the options he sought the refund of his money, as he was entitled to do, but he has never received that money back. He brings these proceedings against those who, he claims, guaranteed the obligations of P&E and LNG, namely Ms Christine Nash ("Nash") (the first defendant), and Mr Graham Vaughan ("Vaughan") (the second defendant), Mr Peter Dixon ("Dixon") (the third defendant) and Mr Matthew Kelly ("Kelly") (the fourth defendant). Dixon and Kelly having entered no appearance in the proceedings had judgment entered against them prior to the hearing.

2 Mr R Parsons of counsel appears for Ferizis and Mr M Maxwell appears for Nash. In the first four days of the hearing in October 2006, Mr Maxwell also appeared for Vaughan, but Vaughan, since Monday 12 March, has appeared for himself. Nash and Vaughan at all relevant times have been living in a de facto relationship. Mr Maxwell made it quite clear that he could see no reason for separate representation: T57.31-35. I received detailed written and oral submissions from Mr Parsons, Mr Maxwell and Mr Vaughan.

3 The property on which the units were to be constructed was at all relevant times owned by P&E and LNG.

4 Both P&E and LNG have been placed in liquidation.

5 As at June 2003, Dixon and Kelly were listed directors of P&E.

6 As at June 2003 Mr Lyell Gorman ("Gorman") was listed as sole director of LNG. The shareholders were Gorman and Vaughan. Vaughan had resigned as a director of LNG on 23 August 2002: see Exhibit "5" Tab 21.

7 On 20 June 2003 Ferizis handed a cheque for $500,000 to his solicitor, Mr James Lahood ("Lahood"), made out to Hughes & Taylor, the solicitors for P&E and LNG, to be handed over on execution of the Option Deeds, and on Ferizis' case on execution of guarantees by Nash, Vaughan, Kelly and Dixon. There is no dispute that Kelly and Dixon were directors of P&E. There is in fact no dispute that Nash and Vaughan were not in fact directors of LNG, but it is Ferizis' case that Nash and Vaughan had represented themselves to him to be directors of LNG.

8 On 20 June 2003 two documents described as deeds ("the Option Deeds") were executed by Vaughan purporting to execute on behalf of LNG (Vaughan), and by Kelly and Dixon executing them on behalf of P&E: see Exhibit "A" p 252 (Unit 7) and p 324 (Unit 8). Each document also had a page signed by Vaughan, Kelly, Nash and Dixon: see pp 250 and 322 Exhibit "A". Although the page bearing these names and signatures describe each of these persons as "the said", their names do not appear anywhere in the document prior to or after that, save for that of Vaughan, whose name has been handwritten beneath his signature as "director" of LNG. I shall refer to the page with the four names and signatures (the page for Unit 7 is identical to that for Unit 8) as the "four signature page" - as its status and whether it was actually part of the Option Deeds is very much in issue between the parties. The schedule to each of the Option Deeds which has provision for the name of the guarantors is in each case left blank. The Option Deeds, in addition to permitting Ferizis to call for return of the Option Fee (clause 20), contain relevantly the following clauses: " 5. Caveat

5.1 The Grantor acknowledges and agrees that the Grantee will be entitled to lodge a caveat on the title to the Property to give notice of its rights under this Deed provided that the Grantee must withdraw such caveat forthwith after the expiry of the Call Option and repayment of the Option Fee as hereinafter provided.

5.2 Grantee covenants that notwithstanding the right to Lodge a Caveat on the title of the Property to secure its interest under this Deed Grantee shall not lodge any Caveat which has the effect of preventing or delaying the registration of the Strata Plan or any other of the Registration Documents, any mortgage, any discharge of mortgage, any change of name, any variation of mortgage, any release or cancellation of any easement or covenant, any draft document attached to or contemplated by the Contract, any transfer of any lot shown on the Strata Plan other than this property or any easement or right referred to in or contemplated by the Contract.

5.3 Grantee irrevocably appoints Grantor its attorney for the purposes of executing a withdrawal of any caveat which breaches Clause 5.2 and Grantee shall be liable for all legal costs and disbursements should Grantor withdraw any such Caveat.

12.1 This instrument embodies the entire agreement and understanding between the parties regard [sic] the subject matter hereof. This instrument supersedes all previous discussion, correspondence and writings between them and/or between their respective legal and other advisers.

19.2 The Vendor agrees to pay the Purchaser interest on the Option Fee ("interest") calculated at the rate of twenty per centum per annum (20% p.a.) from the date of this Deed until the date on which the Purchaser exercises the Call Option. Upon the exercise of the Option the interest accrued shall be credited towards the purchase price.

The Directors of the Grantor hereby agree to personally guarantee the performance by the Guarantor of the terms of this Agreement.

9 The proceeds of the cheque for $500,000 were deposited to the trust account of Hughes & Taylor, the solicitors for LNG and P&E on 20 June 2003. Vaughan directed Ms Lyn Hughes, the solicitor who was handling the matter on behalf of LNG and PED, that the $500,000 be paid into the account of a company called Taffia Pty Ltd ("Taffia"). As at June 2003, Vaughan was the sole director of, and controlled, Taffia.

10 Under the terms of each Option Deed, Ferizis could not call for return of the $250,000 until the expiry of 11 months. At the expiry of the 11 months, Ferizis in the manner required by the deeds, advised that he did not wish to exercise the options and called for the return of the money. He received no payment, then or at any time since, in respect of either unit.

11 Having not received back the money due to him, Ferizis instructed his solicitors to take such action as would protect his money. His solicitor filed a caveat on the title of the Balmain property.

12 I have earlier referred to clause 5.2 of the Deed of Option. Apparently purporting to act in reliance on that clause a withdrawal of caveat was lodged: see Exhibit "A" p 388. The withdrawal was executed by Vaughan as "sole director" of LNG (a few days earlier he had again become a director) and Kelly and Dixon as directors of PED. Nash was a witness to all signatures.

13 In these proceedings a cross claim was filed by Nash and Vaughan asserting that the lodgement of the caveat by Ferizis was wrongful and adversely affected the continuation of the development, and that as unit holders in the trust connected with the Balmain Project they had standing to claim for that loss, but on the second day of the hearing the cross claim was abandoned: T5-13 (25/10/06). The case was estimated as a three day case. On the fourth day I asked counsel for their revised estimate of the case and was told a further five days was estimated. There was no five day period to the end of the year following my return from circuit on 13 November in which both Mr Parsons and Mr Maxwell were available. I fixed the balance of the case for 12-16 March 2007. The inadequacy of the original estimate is made even more dramatic given the fact that it supposedly took into account the cross claim.

14 The parties agreed that on the pleadings the following issues arise:

(1) Was the first defendant a party to the Option Deeds dated 20 June 2003 ("Option Deeds")?

(2) Did the first defendant enter into an oral or partly oral agreement with the plaintiff to guarantee the obligations of PED and/or LNG under the Option Deeds?

(3) Was the second defendant a party to the Option Deeds?

(4) Did the second defendant enter into an oral or partly oral agreement with the plaintiff to guarantee the obligations of PED and/or LNG under the Option Deeds?

(5) Did the second defendant by his execution of the Option Deeds as "DIRECTOR" of LNG agree to guarantee the obligations of LNG under the Option Deeds?

(6) Are the first and/or second defendants precluded and estopped from denying that they are directors of LNG by a convention or agreement between them and the plaintiff?

(7) Did the first and second defendants sign a piece of paper on or about 20 June 2003 acknowledging receipt of a cheque in the sum of $250,000 in relation to "Draft Lot 7" in the "Balmain Land"?

(8) Did the first and second defendants sign a piece of paper on or about 20 June 2003 acknowledging receipt of a cheque in the sum of $250,000 in relation to "Draft Lot 8" in the "Balmain Land"?

(9) Whether clause 12.1 of the Option Deeds precludes the plaintiff from relying on an oral or partly oral agreement by the defendants to guarantee the obligations of PED and/or LNG under the Option Deeds.

(10) Whether the Option Deeds contained the provisions pleaded in paragraph 3 of the Amended Statement of Claim.

(11) Whether the plaintiff on or about 2 December 2004 gave notice to LNG and PED requiring payment of the option fees totalling $500,000 plus interest pursuant to the provisions contained in the Option Deeds.

(12) Whether LNG or PED have repaid the sum of $500,000 plus interest or any part thereof.

(13) Whether the first and second defendants were induced to sign the guarantees contained in clause 21 of each of the Option Deeds by a representation ("the representation") that the first and second defendants were not signing an execution page bearing their names as guarantors but merely for the purpose of acknowledging receipt of two cheques.

(15) Was Lahood expressly or impliedly authorised to make the representation?

(16) Is either the first or second defendant entitled to avoid the contract of guarantee contained in clause 21, if so held?

(17) Is the plaintiff estopped from relying upon the first and second defendants' execution of the execution page?

(18) Does this Court have jurisdiction to determine the defendants' estoppel point?

15 It was agreed that Ferizis did give notice in appropriate form on 7 December 2004 for return of the option fees of $500,000 and that no part of those fees were ever repaid, thus removing issues (11) and (12). There is no issue that PED and LNG were liable to repay those monies. Issue (18) ceased to be an issue as well, it being conceded that the Court did have jurisdiction: see s 134(1)(h) of the District Court Act 1973 and Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; [2001] NSWCA 440. Wykes v Samilk Pty Ltd [1998] NSWSC 192 differentiated between estoppel by representation and equitable estoppel but was decided before the introduction of s 134(1)(h).

16 The issues in (1)-(8) can be better understood this way:

(1) Did Nash on behalf of herself and Vaughan agree to guarantee the obligations of LNG and PED under the Option Deeds to be granted to Ferizis?

(2) Was the four signature page a part of the respective Option Deeds?

(3) Did Nash and Vaughan sign the four signature page as guarantors or as acknowledgment of receipt of a cheque in the sum of $250,000, as Nash and Vaughan assert, or as guarantors, as Ferizis asserts?

(4) Did Vaughan by signing the Option Deed as director of LNG agree to guarantee the obligations of LNG under the Option Deeds?

(5) Are Nash and Vaughan precluded and estopped from denying that they are directors of LNG by convention or agreement between them and Ferizis?

(1) Did Nash and Vaughan inform Ferizis that they were directors of LNG?

(2) What did Nash say to Ferizis on the question of the giving of guarantees?

(4) Did Lahood tell Nash and Vaughan that they need sign the four signature page only as an acknowledgment of receipt of the monies paid over by Ferizis?

and involve stark contrasts in the evidence of the witnesses. Considerable attention was given in the cross examination to surrounding circumstances that might impact on the truthfulness of the assertions of the various witnesses.

(1) Nash told him that she and Vaughan were directors of the company that was joint venturer with LED on the Balmain Project. The Option Deeds presented for execution did indicate that LNG was a joint owner of the Balmain Property and this was consistent with p 19 Exhibit "A" which was handed by Nash and Vaughan to Ferizis at their first meeting and made reference to the developer, a "Property & Equity Development ACN 095 570 728 (LNG Holdings Pty Ltd ACN 099 795 678)".

(2) He indicated to Nash that he would invest $500,000 for options on two units in the Balmain Project.

(3) He stated to Nash that he would not do so without personal guarantees from the two directors of LNG (who he understood incorrectly to be Nash and Vaughan) and the two directors of PED (who he understood correctly to be Kelly and Dixon).

(4) Nash, although she initially indicated that guarantees would not be given by the directors, told him shortly thereafter that guarantees would be given.

(5) Documents were prepared by LNG's solicitors (Hughes & Taylor) with amendments sought by Lahood and agreed to by LNG.

(6) Each of the Option Deeds included a clause (clause 21) dealing with a guarantee and the documents provided for execution by Nash, Vaughan, Dixon and Kelly as guarantors although not specifically naming them in the schedule.

(7) He instructed Lahood not to hand over the cheque for $500,000 (made out to Hughes & Taylor) without obtaining all the guarantors' signatures.

(8) Nash, Vaughan, Kelly and Dixon did each sign the two Option Deeds as guarantors in addition to Vaughan, Kelly and Dixon executing the documents on behalf of LNG and PED respectively.

(9) The word "guarantor" in the second line of clause 21 is obviously an error for "grantor", and when the document is looked at as a whole this is clear.

(1) She never had any significant role on behalf of the Balmain Project in seeking investment by Ferizis in the project.

(2) Whatever she did for the Balmain Project was really only as in effect secretary or assistant to Vaughan.

(3) She never agreed that guarantees would be given nor was she ever asked directly or indirectly by Ferizis as to whether the directors would give guarantees.

(4) When asked to sign the four signature page she told Lahood that she was not a director of LNG (which was true) and Lahood said he only wanted her to sign the four signature page as an acknowledgment of receipt of the cheques.

(5) She signed the four signature page in that capacity.

(6) In any event, the alleged guarantee document ought not be construed as making her liable because it should be construed strictly and the word "guarantor" in the second line of clause 21 does have meaning and no guarantors were actually named. So there is nothing for the guarantee by directors to operate upon. Further, no oral agreement to give guarantees can be relied on because of clause 12. Alternatively, if clause 21 is ambiguous, then since contracts of surety are to be construed favourably to the surety, the ambiguity should be resolved in her favour, and further Nash was not a director of LNG and therefore does not meet the description used in clause 21.

20 Vaughan's case is similar to Nash's except that he does not say that Nash said to Lahood that Vaughan was not a director. He says he told Lahood that "Christine" has nothing to do with "Balmain": paragraph 203 of Vaughan's main affidavit.

21 Nash and Vaughan rely on Lahood's evidence which supports their assertion that Lahood told Nash that placement of her signature (and on one view of the evidence Vaughan's signature) on the four signature page was only required as an acknowledgment of receipt of the cheques. Vaughan supports Nash's evidence that her role on behalf of the Balmain Project was minor. Vaughan says that he was directing all matters to do with the Balmain Project. He admits that he was from November 2002 onwards not a director of LNG. He signed the final page of each Option Deed with the word "Director" placed under his signature: see pp 252 and 324 Exhibit "A". He asserts that he was authorised to execute the documents on behalf of LNG by Gorman.

22 Ferizis came across as an honest and reliable witness who was not shaken in cross examination. There was only one minor matter in which Ferizis was demonstrated to be in error - he had said in his affidavit that he had left Lahood with a blank cheque, but he conceded that whilst he had taken a blank cheque to Lahood's office he had completed the cheque at Lahood's office after signing the Option Deeds. The defendants' submissions point to the fact that Ferizis admitted that he had not told Ms Hughes that he had appointed Lahood as his solicitor when she asked him on 18 June. His explanation for that was that he did not want Nash contacting his solicitor as she had offered to do. I see nothing sinister in this concern. The defendants' written submissions did seek to assert negligence on the part of Ferizis and to assert that his negligence rendered his evidence questionable (see C5 Mr Maxwell's submissions 5/04/07 and Mr Vaughan similarly), but I do not accept that Ferizis was negligent or that if he was that that diminishes the veracity of his evidence. Mr Maxwell in his final submissions did not seek to impugn Ferizis' credit and there was in my view no proper basis on which he could do so.

23 Nash is a barrister and an officer of the Supreme Court, and I recognise that a finding adverse to her credit has significant ramifications, but the contest of credit is so stark that I am required to form a view and I do so. The fact that Nash is a barrister is not relevant in assessing her veracity: see Evans v Page (1996) 24 MVR 197. The contrary was not submitted. I will detail my reasons for reaching the conclusion that Nash and Vaughan are not honest or reliable witnesses.

24 Nash and Vaughan were very poor witnesses. Mr Maxwell conceded that Nash's evidence was not satisfactory but he submitted that her evidence (see T77-T78 (25/10/06) and T20.18-35 (27/10/06)) that she was on the verge of a nervous breakdown ought be taken into account. I shall deal with that submission below.

(1) Nash on many occasions failed to answer the question addressed to her and instead proffered explanations that had not been sought and cut off questions before they had been asked. See for example T75, T79.16-23, T29.40, T30.10, T47-T49.

(2) She was constantly vague and elusive about dates.

(4) She, on a number of occasions, admitted that her evidence was not what she could recollect but in effect a reconstruction: T13.35, T15.34, T21.32-39, T28.48.

(5) She asserted a level of ignorance of legal processes, saying "I'm a criminal barrister. I'm not familiar with the terminology in civil cases as to what the documents are" (T5 (25/10/06) and see T42.29-34 (26/10/06)), and her professed ignorance of what was involved in verifying a defence and of what "I do not know after reasonable inquiries that the allegations of fact that are stated in the defence to be not admitted are true" meant is surprising given her education and experience.

(6) Her oral evidence on a number of occasions conflicted with her affidavit evidence: see for example T47 and T56 (26/10/06).

(7) She blamed Mr Velik, her former solicitor, for the contents of her first defence and her affidavit, where she found them to present difficulties.

(8) The collaborative manner in which she prepared her affidavit with Vaughan induces suspicion as to its veracity (see T12-T27 and T13.10-44 in particular), a suspicion only reinforced by her admission that her recollection depended on exchanges with Vaughan and that her recollection was in some respects completely defective (T63.34-T64.42).

(9) Her evidence that seeing what Lahood had said prompted her recollection also undermined confidence in its veracity, a matter to which I shall return.

26 Nash was not at any relevant time a director, secretary or shareholder of LNG. I set out the following passages from her cross examination at T76.8-48 and T78.54-T79.10 (25/10/06), which conveys the idea that she had no motive for giving the guarantees which it is claimed by Ferizis she did give: "PARSONS: Q. On 20 June 2003, you wanted the half million dollars to be made available to LNG and PED, didn't you?

NASH: A. I wanted the half million dollars to be handed over to Graham Vaughan, as I stated in my affidavit.

Q. And you knew, did you not, that that money was intended for LNG and PED; didn't you?

Q. And as at 30 September 2005, when you swore the original defence, you knew that that was so, that you wanted the money to go to LNG and PED, to be available to them?

A. I'm sorry, I object to your use of the word "wanted". It wasn't for me to want anything. It had nothing to do with me .

Q. Well, you were there trying to achieve that very end, weren't you? You were there at Mr Shad's office, trying to achieve the payment of half a million dollars for the developments of LNG and PED; that's correct, isn't it?

A. It was nothing that I wanted . I was there with Mr Vaughan, who was collecting the cheques, and I was told by Mr Lahood that he wanted both Mr Vaughan and myself to sign an acknowledgement that Mr Vaughan had taken the cheques. And that was all. It had nothing to do with what I wanted to happen .

Q. That last bit that you put in, about signing the acknowledgement, you make no mention of that in your affidavit, do you?

"Q. And you knew that Mr Vaughan was seeking to get mezzanine finance contributions from various lenders, didn't you?

Q. And you assisted him in that endeavour during 2003 and 2004, didn't you?

A. I answered the phone and I made applications to Capital Finance, Ray White Invest, to borrow money so that we could make sure that people who'd invested money in Balmain didn't lose their money, and I was prepared to take it over, but I was stopped by Mr Gorman, who would not hand over, after taking $528,000 from me, would not hand over the directorship and shares to me. That was my assistance, Mr Parsons."

27 She asserted that she did very little in relation to Balmain and whatever she did was at the request of Vaughan, who she said was the only person who had carriage of it - he was "in charge of everything": T86-T87.

28 The "secretarial", minor role theme, incidentally was elevated even further by Vaughan whose evidence was that he had asked Nash to come with him to Lahood's office: "Well, would you like to come with me for a drive to Bankstown?", and that she replied "Why not as I am not doing anything else" (paragraph 189 of Vaughan's main affidavit), and that when documentation for finance from a lending institution referable to purchase of the Balmain site was obtained she was in effect the tea lady: T294.10. From paragraphs 120-125 of her affidavit the implication is that she did not read the Option Deeds (and see T27.45 (25/10/06)), which would fit with someone who had no interest in the Balmain Project.

29 The significant involvement of Nash in the Balmain Project is demonstrated not only by the extensive contact she had with Ferizis and later Hughes & Taylor, but also by the fact that when Ferizis told Vaughan that Nash had said nothing about a profit share, Vaughan accepted that if Nash had said nothing about profit splits "we will honour it": paragraph 25 of Ferizis' first affidavit. It also fits in with the fact that Nash was planning to take over control of LNG. It is clear from pp 29, 26, 24, 21, 20 and 19 of Exhibit "B" (the earlier the number the earlier the date) and the evidence of Ms Hughes that Nash was in touch with her, giving instructions: T332.5-333.15, T335.1-3, T338.27-339.9, T341.29-342.27.

30 Leaving aside the unlikelihood that a barrister who had decided to retire after many years of practice at the bar to pursue a career in real estate development (which she had found more profitable and less stressful: paragraph 7 of Ferizis' affidavit; or "more profitable" and "hoping it would be less stressful than acting for murderers, paedophiles, drug importers and rapists": paragraph 101 of Nash's main affidavit), would play the minor role which she and Vaughan seek to ascribe to her, and leaving aside for the moment Ferizis' evidence of his dealings with her, Nash's extensive involvement in the Balmain Project is demonstrated by:

(a) the fact that by April or May 2003 she had commenced negotiations with Gorman for the transfer of his interest in LNG to her (T79.19-24 (25/10/06), T33-T34 (26/10/06));

(b) her admission that she saw herself as "the only person at that time in a financial position to make sure that the projects didn't collapse" (T79.20 (25/10/06));

(c) the fact that by 26 January 2003 she had spent $90,000 of her own money on the Balmain Project and the figure was not less than $70,000 prior to the date of payment by Ferizis. Nash admitted having expended a considerable amount of money but was unable to indicate the amounts: T36-T38 (26/10/06). The figures mentioned above were calculated by Vaughan in submissions and accepted by Mr Maxwell, and accepted as an "at least" figure by Mr Parsons;

(d) the fact that she herself received part of the $500,000 funds paid in by Ferizis, almost immediately they were extracted from the Hughes & Taylor trust account and paid to Taffia on Vaughan's instructions, and further it appears that some of those funds were paid to PED for purposes that were not, or not solely, referable to the Balmain Project, but connected to other projects in which Nash as well had an interest: see Exhibit "2" Tab 2, T390.12-18, T391 (16/3/07). Vaughan seemed to think that this was quite in order notwithstanding that Ferizis was never told that some of the funds invested by the Kallithea Trust were to be used for purposes unconnected with the Balmain Project;

(e) the fact that almost all of the contact with Ferizis was by her (see Exhibit "J") - she made, for example, three calls to Ferizis on 18 June and two on 19 June.

31 The attempt to minimise Nash's involvement with the Balmain Project was maintained notwithstanding her having conceded that she had a very real interest in the Balmain Project proceeding. She denied knowing the prices of units (T17.5-16, T18.28-34 (12/03/07)) but after further cross examination she conceded that she did: T19.3-6 (12/03/07). Notwithstanding the very clear evidence of her interest, and the financial benefit which she personally obtained by Ferizis' injection of funds, and the other evidence of involvement and interest, at T50.14-34 (26/10/06) there was the following exchange: "Q. You were dead keen to get the money through at that time, weren't you?

Q. You would have gone through any trouble to get that money through at that time, wouldn't you?

Q. You wanted to see the half million dollars come in for Balmain at that time, didn't you?

A. At that time that money was going to PED and LNG, not to me, Mr Parsons.

Q. You wanted to see that money come in for Balmain at that time, didn't you?

Q. What, completely immaterial to you, was it, is that what you say?

A. It was of significance to PED and LNG, it wasn't of significance in June 2003 to me ."

32 The defence filed by Nash and Vaughan contained an admission by Vaughan that he had executed the Option Deeds which guaranteed "certain obligations" (see paragraph 2(a), (b) and 7(a)), but denied that LNG had executed or entered into the Option Deeds and did not admit that PED had done so. The denial that LNG had entered into the Option Deeds sat strangely with Vaughan's assertion in his affidavit that he had executed them as a director of LNG, and then in his oral evidence as representing the director (Gorman) and with his permission.

33 The affidavits filed by Nash and Vaughan contain an identical account of what was said by Nash to Lahood and what was said by Lahood in reply. According to Nash (affidavit of 7 June 2006): "120. Lahood, Graham and I then set down at a table in the said offices of George Shad and Partners. Lahood then put 2 documents on the table that looked like option deeds.

Lahood then said words to Graham to the following effect: "Before I give you the cheque, you need to sign these documents, and you also need to get Matthew Kelly and Peter Dixon to sign the documents and bring them back to this office by today.".

I then observed Graham signing the two option deeds.

Lahood and I then said words to each other to the following effect: Lahood: "I have been given instructions that everybody has to sign these documents before I hand over the cheque, including you."

Me: "My signature is useless to you as I have no standing in relation to Balmain, as I am not a grantor and I am not a director of the grantor. I have no role in these documents.".

Graham then said words to the following effect: "Christine has nothing to do with Balmain."

Lahood and I then said words to each other to the following effect: Lahood: "Well, sign them anyway so that I can give you the cheque.".

Me: "Well, it will be worthless to you because I have no reason to be signing these documents I have no role in these documents. However if it means the cheque going to Graham, well then I will sign the documents.".

I then signed the documents. Lahood witnessed my signing of the documents and also Graham's signing of the documents.

We then said words to each other to the following effect: Lahood: "Before I hand over the cheque I also need to have Matthew Kelly and Peter Dixon's signatures on these documents and witnessed, and I need to have the documents back before George Ferizis gets on his plane at midday, so that I can ring George and tell him that its all done.".

Graham: "How are we going to do this given that Matthew and Peter are not here?.".

Graham: "Well, then give us the documents and we will drive over to Darling Harbour where Peter and Matthew have their office and get them to sign the documents and bring the documents back to you.".

Lahood: "Well, Christine, if you witness them signing the documents, I can then say to George that the documents are properly witnessed.".

Graham and I then drove to the office of PED in Cockle Bay Wharf Sydney with the said option deeds and got Peter Dixon and Matthew Kelly to sign the documents.

Graham and I then drove straight away back to the offices of George Shad Partners.

Graham parked the car in the carpark immediately adjacent to the office building where the said offices were located. I then waited in the car whilst Graham took the said option deeds into the said office building.

Graham then returned shortly thereafter with a cheque."

(See also paragraphs 192-199 of Vaughan's affidavit of 29 June 2006.)

34 It will be observed that Nash in her affidavit does not assert that Lahood told her that he had to obtain "an acknowledgment" for the cheque but rather that he could not hand over the cheque unless Nash signed the documents - which Nash described as two documents which "looked like option deeds": paragraph 120. It will also be observed that on neither Nash's version nor Vaughan's version was anything said by them to indicate that Vaughan need not sign or could not sign.

35 It will also be observed that there is a reference to "a cheque", not "cheques".

36 Nash and Vaughan were able to plead a new defence because the plaintiffs wanted to amend their claim. The new defence pleads as a fact that Lahood sought their signatures on the four signature page as acknowledgment of receipt of the cheques.

37 When Nash and Vaughan adopted their affidavits in Court, no attempt was made to lead evidence from Nash or Vaughan concerning the circumstances in which they came to execute the four signature page. Nash did give evidence of this, however in the course of answering a question in cross examination: see T76.36-44.

38 Mr Maxwell contended (both orally and see paragraph 28 of his written submissions of 5/04/07) that the transition from what had appeared in the Nash and Vaughan affidavits to the newly pleaded case of representation by Lahood inducing signature was not that great. I do not agree - in the first scenario Nash is protesting that she should not have to enter into a commitment because she is not a director and has no involvement, but is told that for the money to be handed over she must sign the Option Deeds, and on the second scenario she is induced by Lahood to believe that what she is signing is an acknowledgment of receipt of the cheques, received "by Graham" she says at T76.42.

39 There are a number of problems with the "acknowledgment" version:

(1) The four signature page is not expressed to be a receipt of anything. It makes no reference to an amount or an amount having been received.

(2) The four signature page refers to persons, not the companies to whom the monies due under the option agreement were to be paid, ie LNG and PED. If a receipt was required, it was required not from individuals but from the parties to the Option Deeds.

(4) The four signature page has the appearance of an execution page of a document, referring to "signed sealed and delivered".

(5) If the acknowledgment was to acknowledge receipt of one cheque, it would not be necessary to obtain two acknowledgments. In fact only one cheque was handed over (for $500,000): Exhibit "K".

(6) The cheque in fact handed over was a cheque made out to the trust account of Hughes & Taylor - there could be little concern about proof of receipt of funds.

(7) There is no evidence that Ferizis asked Lahood to obtain an acknowledgment (although there is evidence from Lahood that he told Nash and Vaughan that this was so).

(8) If a receipt was required it would be quite unnecessary to have four individuals (none of whom had, on this scenario, any reason to be executing the documents other than as directors, and one of whom had no reason at all) execute the acknowledgment yet that is what is asserted.

(9) Contrary to paragraph 125 of Nash's affidavit (and paragraph 205 of Vaughan's affidavit and paragraph 12 of Lahood's affidavit), Lahood did not witness Nash and Vaughan's signatures on the four signature page and, it would appear, they did not sign the four signature page in front of him.

(10) On Lahood's evidence, Nash said she was not a director but she did not say that Vaughan was not a director, and Vaughan did sign on behalf of LNG as director, which Lahood must have been aware of if he examined the document. The defendants' version does not accommodate that difference. Nor does it accommodate the fact that on Lahood's evidence he was told that Gorman was a director of LNG and yet had not signed: see T200.

40 It is difficult to accept that a legally qualified person, let alone a barrister of many years experience, would sign a document which Nash did sign in circumstances where she had no intention to take on personal liability at all and could discern no reason for her name being included on the document. It is even more difficult to accept that had she done so on the basis of an express assurance that she was only being asked to acknowledge receipt (by someone else) of a cheque, she would not have recalled that assurance as soon as it was asserted that by her signature she had incurred a liability to guarantee the obligations of LNG and PED. Yet Nash asserts that she did not recall the fact of the assurance until she saw Lahood's affidavit. She said that Lahood's version made sense "because I couldn't make sense of why I would've signed since I wasn't a director of Balmain, of LNG or PED": T86.11-17 and see T86.19-24. There is a perfectly logical explanation for why she signed the document knowing it to be a guarantee, notwithstanding the fact that she was not a director, and that is because she wanted to obtain additional funding for the Balmain Project so she could be repaid monies she had outlaid, and because she wanted the Balmain Project to remain on foot because her de facto was a shareholder in the company and she was planning to take over a role as director. The assertion that she did not have an interest in the Balmain Project or a reason for giving a guarantee to enable LNG and PED to obtain the funds which Ferizis was willing to invest on behalf of the Trust, was false.

41 The circumstances in which Lahood's affidavit was obtained are unusual, and in themselves do not reflect well upon Nash or her credibility: see T82-86 (26/10/06). Although she initially stated that she had not sought out Lahood (T82.46), she said she happened to see his name on the court list at Parramatta and "I thought that was the name I couldn't remember of the solicitor in the office and I thought that's the name, that's who I need to talk to": T84.50. She says she rang Lahood and asked him whether he remembered anything, and she wanted to know "whether he remembered why he obtained my signature": T84.17. The implication from her evidence is that he told her he did recall the circumstances but did not tell her what his recollection was, because she says that she was surprised and positively so when she saw his affidavit. Why she would ask him to provide an affidavit without knowing what he would say is odd, but a further complication is that Lahood positively denied having had any contact with Nash since June 2003 - he ascribing the origin of his affidavit as a statement taken by an investigator from a firm of investigators called Hughes: T70 (12/03/07).

42 It is well known amongst lawyers that as far as possible a witness's evidence should be obtained by someone other than the party herself. There are other more fundamental problems with Lahood's evidence but the manner in which the evidence was obtained only serves to increase the prospect that his evidence is of a very unreliable kind.

43 Since Nash and Vaughan were at all relevant times in a de facto relationship it would be naïve to think that they did not discuss the details of this case before trial. The process of preparation of their affidavits however seems once again to pay no regard to the importance of endeavouring to ensure that their sworn evidence is not the product of collaboration. That the affidavits of Nash and Vaughan are the product of collaborative effort is I think borne out not only by the precise identity of all of the paragraphs dealing with topics on which they both gave evidence, but by the evidence of Nash as to how they were prepared: see T12-T27 (26/10/06).

44 I have mentioned Mr Maxwell's submission concerning Nash's mental health. Nash made reference to her almost having a breakdown: T77 (25/10/06). She was quite vague about when that occurred, and when details were sought she seemed to move away from that (T78), and the reference to loss of $3 million of her own money (T78.40) seems to point to pressures after May-June 2003 and before her return to practice in the second half of 2004. I accept that the pressure induced by the collapse of the Balmain Project in late 2004 may well have precipitated a personal crisis but I am not persuaded that she was suffering from any such condition in the first half of 2003. There is nothing to support such a contention other than her own evidence and that of Vaughan.

45 Ferizis says that he asked for personal guarantees from the directors and that Nash at first indicated that they had never given guarantees, but then said they would give guarantees. It is not Nash's evidence that Ferizis asked her for directors' guarantees and that she refused. She says he never asked for guarantees and she never dealt with any such request from him. Her assertion that she knew of no request for guarantees is proven to be false because Ms Hughes' diary note records a telephone attendance on Nash following receipt of a letter from Lahood in which director's guarantees were sought and, according to Ms Hughes' note and Ms Hughes' evidence, she was told by Nash that director's guarantees were not agreed to. Nash denied having a conversation with anyone from Hughes & Taylor on 19 or 20 June about the Ferizis transaction proceeding: T47.35-T48.24 (12/03/07).

46 Nash's evidence in relation to witnessing of signatures is a further matter of concern which I shall deal with in the context of Lahood's evidence.

47 The impression I have of Nash is that she was prepared to say and do anything to persuade Ferizis or his client to invest in the Balmain Project and that she is prepared to say and do anything without regard to the truth that will avoid her having to indemnify Ferizis for the loss of his funds.

49 Vaughan frequently gave unresponsive answers to questions and was evasive.

50 On a number of occasions Vaughan proffered explanations for his conduct and statements which he was forced to admit were incorrect:

(1) In an attempt to explain that Ferizis was not of such importance to the Balmain Project as an investor, he asserted that Ferizis was only interested in the units as a lender and not as a buyer: T468.9-T471. At T478 Vaughan conceded that what he had said was inconsistent with what he had said in his affidavit and he tried to explain the discrepancy by his assertion that he had read the affidavit in the back of a taxi on his way to filing the affidavit in the Registry.

(2) Cross examination demonstrated that Vaughan could not have been on his way to the District Court Registry: see T479-T489.5; T490.

(3) Vaughan asserted that Ferizis in his evidence in this case had said that Vaughan had told him that Vaughan was not a director of LNG, saying that Ferizis had done so at T28, T29 and T30 of Ferizis' evidence, when in fact Ferizis had not said that at all. See T227-T235 (14/3/07) when Vaughan was asked about this.

51 Vaughan denied that when he had signed the Option Deeds on behalf of LNG he purported to be a director of LNG: T221.19. At T222.47-55 he agreed that he appeared to have represented himself as a director of LNG when in fact he was not, but asserted that he had done so mistakenly. He asserted that he had signed as a director of LNG because Gorman was "unavailable" and he was representing him: T224.16 (14/03/07). At paragraph 200 of his affidavit, Vaughan had said that he believed he was signing the Option Deeds as a director of LNG. At T247.51 Vaughan said that the contents of his affidavit at paragraph 200 came as a surprise to him.

52 In an attempt to assert that Ferizis had placed pressure on Nash and himself because Ferizis had not told them he was going overseas until the day before he was leaving and it came "out of the blue" (see paragraph 188 of his affidavit), but Nash said she was told that: T28 (27/10/06). At T266 (14/3/07) Vaughan used the supposed pressure to explain why he could not obtain Gorman's signature. What may have come unexpectedly and late was Ferizis' insistence on guarantees by the directors, but that could not be asserted by Nash and Vaughan since it was Nash's (and Vaughan's) position that Ferizis never sought such guarantees.

53 In his affidavit at paragraphs 193 and 194 Vaughan asserted that he had not read the Option Deeds. At T409.56-T410.14 Vaughan denied that he would have signed the Option Deeds without reading them, and denied having said that he had signed the Option Deeds without having read them: T410.3-6.

54 When Vaughan was confronted with discrepancies between what he was asserting and what he had said in his affidavit, he resorted to assertions as to the haste with which the affidavit had been prepared, and this became entwined with the assertion that he had read the affidavit and signed it in the back of a taxi on the way to the Court Registry. Vaughan said that although he had read his affidavit a number of times, he had missed the reference to having signed as a director. He said this came as a shock to him. The answers in cross examination from T247.51-T253.3 (14/03/07) is, as Mr Parsons submits, a further example of the poor quality of Vaughan as a witness.

55 At T306.53-T307.4 (15/03/07) Vaughan asserted of Nash: "She had really no involvement with it - with LNG or anything else that I was doing, she was still a public defender and was working in her job full time."

When taxed with this he said that he could be wrong and then said that he withdrew the statement: T307.25. Vaughan's assertion that he did not recall arranging for repayment to Nash of $75,000 out of the Taffia money obtained from Hughes & Taylor's trust account was difficult to accept. Vaughan denied that Nash had been giving instructions to Hughes & Taylor (T311) but then said that what she had done had been under his instructions: T312.37-44.

56 At T395.41-58 he said that he kept the books in relation to the Balmain Project and indicated that he understood that he was being asked whether he maintained them in a bookkeeping or in an accounting sense. He asserted at T397.15 that the book entries were true - he conceded at T398.49 that the entry to which his attention was drawn was incorrect and at T399.48-51 he says that the books were in fact put together by a bookkeeper whom he then blamed for the error: see T400. He said he thought Mr Parsons had asked him whether he had kept the accounts, meaning "held" them: T400. Mr Parsons' question at T395.53 referred to "maintain as a bookkeeper or in the accounting sense". Even questions about something he had said in Court (reading transcript of Nash's evidence) led to him seeking to change his evidence: see T282-T283.

57 Vaughan was, as at May and June 2003, an undischarged bankrupt. He claims that he only learnt that that was so when he and Dixon, Kelly and Gorman were informed of that fact by McLoughlin Financial Services ("MFS"), a lending institution, around the end of August 2002. He says that as a result of learning that fact he indicated on 30 August to Gorman that he would resign as a director of LNG and by letter in September 2002 he confirmed his resignation: see T272.7-17. According to an ASIC search he resigned as a director of LNG on 23 August 2002: Exhibit "5" Tab 21. Vaughan nevertheless purported to act as a director of LNG throughout 2003 and he signed the Option Deeds as director of LNG: see pp 252 and 324 Exhibit "A". He continued on as a director of Taffia, notwithstanding his own professed knowledge that he was not permitted to do so, and was unable to give any explanation for having done so: T392.49-53.

58 Nash's statement to Ferizis that she and Vaughan were directors of the joint venturer with PED on Balmain and Vaughan's failure to correct it is quite a serious matter, made even more so in the context that Vaughan (at least) knew he was not a director and that he was an undischarged bankrupt.

59 Vaughan, in my view, was prepared to say anything, without regard to the truth, to assist Nash to avoid liability to Ferizis. I would not be prepared to accept any evidence of Vaughan unless it was corroborated by an independent witness whose credibility was itself not under question.

60 I unhesitatingly accept the evidence of Ferizis over that of Nash and Vaughan wherever it is in conflict.

61 Lahood is a solicitor and an officer of the Supreme Court and what I have said about the significance of an adverse finding as to Nash's credibility applies equally to him. I have touched on the circumstances in which Lahood came to be a witness in the matter. Although he was cross examined extensively, the cross examination was not completed and on the day on which it was due to resume Lahood did not attend. A medical certificate was provided to explain his non-attendance - it is "MFI-24" and signed by one Dr James R Lahood. As a result of Lahood's non-attendance, agreement was reached by the parties that Mr Parsons would not be precluded from making submissions adverse to Lahood that had not been put to him: see "MFI-25".

62 Lahood was demonstrated, in my view, to be a very unreliable witness, whose evidence I would not accept unless corroborated by an independent reliable witness, and for the following reasons:

(1) He swore in his affidavit to having received two cheques from Ferizis and having handed over two cheques to Vaughan. There was in fact only one cheque: see Exhibit "K". The fact that it was only one cheque might seem to be an unimportant detail but it has more importance than would first seem warranted, because if there were two cheques it might explain why there were two "acknowledgments". The fact that there was only one cheque was detrimental to the defendants' case.

(2) He swore in his affidavit that he had witnessed the execution by Nash and Vaughan of the four signature page. He did not in fact witness the signatures, as he was forced to admit. Witnessing their signatures on an acknowledgment for a cheque is itself somewhat strange but not witnessing signatures on an acknowledgment for a cheque, if that is what was intended, did not make sense when they would have to be in front of him when he handed over the cheque. I have already referred to the problems with the "acknowledgment" version in [39] above, which are also relevant in considering Lahood's evidence.

(3) He swore to having kept the four signature page separate from the Option Deeds at all relevant times - but the objective evidence points to the document having been added to the Option Deeds after Ferizis signed his counterpart and before the Deeds were taken away by Vaughan and Nash, and that the two four signature pages were always part of the Option Deeds thereafter: see Exhibits "D", "G" and "L". It should be noted that Exhibit "G" is a copy of the documents as sent by Vaughan to the Land and Property Information Office in order to have the caveat withdrawn. The copies of the Option Deeds found on Shad Partners' file (Exhibit "H") have the four signature page in the same position as it is found in Exhibits "D", "G" and "L".

(4) He swore to having told Nash and Vaughan that Ferizis insisted on them acknowledging receipt of the cheque but in his affidavit he gave no evidence of Ferizis having given him those instructions. He gave oral evidence that Ferizis instructed him to obtain Vaughan's acknowledgment of receipt: T76.3, T135.50-54. He could not explain why he did not have Nash and Vaughan sign the supposed acknowledgment of receipt in front of him: T104. He was, on his version, expecting others to sign a document acknowledging receipt of a cheque when they on any view were not present to receive it and when he says his instructions were specifically to obtain Vaughan's acknowledgment. His statement "I sent both of them [Vaughan and Nash] to get those documents signed properly" at T103.20 is far more likely to relate to guarantees than an acknowledgment of receipt of a cheque.

(5) He accepted that Ferizis had instructed him to obtain guarantees. His evidence on who would provide the guarantees is found at T144.36-T145.35: "HIS HONOUR: Q. On the morning of the 20th you understood the deed did have a provision for guarantors?

Q. Who did you understand would be providing the guarantees?

A. I didn't know who was providing the guarantees, your Honour. There was - the only thing that I turned my mind to there was that the directors who were signing the documents would be giving that personal guarantee.

Q. Are you saying then that your understanding was that the guarantors would be the directors who were going to sign the document?

Q. In other words, the directors of the companies that were going to be parties to the option and the option deed--

Q. --those directors were going to be the guarantors?

A. I didn't know who they were. I was not told who those people were - not at all.

Q. How did you expect to ascertain that the documents had been properly signed if you didn't know who were the directors who ought to be signing them?

A. I took it on - on its value. I had no other instructions to do otherwise. I didn't have a company extract to work with. The usual course would have been to do a company extract to confirm who the directors were.

Q. That the usual course would have been to get a company extract to see who the directors were?

A. Of course, I know where the - that was the advice that I gave to Mr Ferizis and he specifically told me not to.

Q. Mr Ferizis did not specifically tell you not to undertake company searches.

A. That's one of the things that he specifically told me not to do. He also told me not to - not to undertake the title - well, the disbursements that I suggested to him included title searches. It included company searches and he told me not to and that was at the time when he negotiated with me the price for us to perform the work."

(6) If Lahood did not have a search and was not told who was to provide the guarantee, the only thing he had was the four signature page. If he did not understand that the persons named on the four signature page were to be the guarantors then he could not know who should sign. That he did not know who the four persons were, means that he could not have drafted the four signature page. That he did not do so is confirmed by the fact that he did not have that document when Ferizis executed the Option Deeds at Lahood's office, and by the fact that a copy of the four signature page was added to the Hughes & Taylor computer file and retained on it: see Exhibit "F" and Ms Hughes' evidence.

(7) There is no note or letter recording a recommendation to Ferizis and which Ferizis rejected to obtain a search of LNG and PED (a search that, incidentally, would have cost $15 according to Lahood), nor any note that the cheque had been handed over and an acknowledgment received.

(8) Lahood said that his memory of what occurred when he made his statement to the investigator and on which the affidavit was based was good, because only six months before he had had to review the file for the purposes of discussion with Mr Shad or another solicitor at Mr Shad's office. In fact that discussion, he subsequently conceded, had taken place in late 2004.

(9) Lahood did not have the Shad file (Exhibit "H") when he swore his affidavit. Mr Maxwell argued that this had to be taken into account when considering the established errors in his evidence. In my view, Lahood's willingness to swear to matters without access to the file is a further matter adverse to his credit - if he needed access he should have said so and refused to swear his affidavit until he had seen it: see paragraphs 1, 20 and 21 of Lahood's affidavit.

(10) His attitude to Ferizis was very negative and he seemed to want to ascribe Ferizis' position to Ferizis' own errors rather than his: see for example T101.34 and T145, and see T137 where he asserted that Ferizis had no interest in actually purchasing the unit - an untruth asserted by Vaughan that Vaughan had to admit was erroneous. I accept Ferizis' evidence that he did not tell Lahood not to obtain searches of LNG and PED. If Lahood's evidence was accepted then his handling of the matter was at the very least negligent, since he did not clarify who should be executing the documents. Lahood asserted that he believed that given clause 21, the directors did not need to execute the document in a personal capacity, a surprising position for a solicitor to take. If he did not know who the directors were, he could not know whether all of the directors of LNG and PED had executed the Option Deeds on behalf of LNG and PED and therefore could not fulfil the instructions he said he had received to obtain directors' guarantees. On his version he was told by Nash that Gorman was a director of LNG and yet he could observe that Gorman's name was not on the four signature page and Gorman did not sign on behalf of LNG. Even putting aside the other problems with Lahood's evidence, I find it difficult to accept that Lahood would not have appreciated that the four signature pages were the means by which the proposed guarantors, referred to in clause 21 as a class, made themselves personally liable. Even if he thought that the four persons were not listed for that purpose, he must have realised that those persons' names were on the document because they were, or were thought to be, the directors of LNG and PED. On his evidence he was told by Nash that she was not a director and that Gorman was a director, yet he made no note of what he says she told him and what he told her, and did not delay exchange so he could seek further instructions. If he could not obtain further instructions (which he said was the position) his extant instructions to obtain guarantees from the directors could not be fulfilled. Lahood's assertion that he had thought he should take as "much precautions as I possibly can so that I wouldn't have to be giving evidence in a professional negligence suit" (T101 (13/3/07)) makes his omissions to act and to record even more remarkable.

(11) No copy of the supposed acknowledgment was placed on the Shad file (see Exhibit "H") as a separate document (it is in the file only as part of the two Option Deeds) and there is no reference to any acknowledgment in that file - indeed there is in Exhibit "H" a file note of a conversation by someone at Shad Partners attending on Lahood on 1 December 2004, noting that the Option Deeds were prepared by Hughes & Taylor and that Nash and Vaughan "held themselves out as directors of LNG" and that the guarantee page was signed "by all four parties".

63 It will be recalled that Nash, Vaughan and Lahood all attested to the fact that Lahood witnessed Nash and Vaughan's signatures on the four signature page. It was clear that he did not, and it was not contended otherwise in submissions. Nash, when confronted with the fact that Lahood had not witnessed her signature, gave an explanation of how her signature and those of Vaughan, Kelly and Dixon had been appended.

64 Nash said that she and Vaughan took the documents away to Kelly and Dixon at Cockle Bay Wharf: T40.1. She said that she could not remember exactly but that she witnessed them sign the four signature page: T41.30. She said that they came down to the car to sign (T41.26-40) and she saw them sign there but did not witness (in the sense of endorsing the documents) their signatures. She also said that she knew that PED had executed the two deeds: T41. Notwithstanding this she did not admit in the defence that PED had entered into the Option Deeds, saying that she was advised not to admit it: T42 and see T43.20-25. She said in her affidavit that she had offered to Lahood to witness Kelly and Dixon's signatures (paragraph 126). In her oral evidence she said that she had agreed to do so but said that by saying that, she did not mean that she had to sign as witness. She said (at T44.19 (26/10/06)): "A. Mr Lahood said as long as I saw them sign it, and the witness was being in used in that way, not as a witness with my signature there as a witness, as long as I saw, in that sense, witness, Peter and Matthew sign it, he was content with that."

65 This explanation was the subject of cross examination over a number of pages of transcript (T44-47) and at T46.57 she said that she remembered Lahood saying "As long as you see them sign", something which she had not said in her affidavit: T47.4-11. Nash also asserted that (T47.48-T48.23 (26/10/06)): "A. I think what happened was that he had somebody in his office witness my signature and Graham's signature, then he got us to go over there and see Peter and Matthew and get them to sign the documents, and because I was prepared to say that I did see them sign the documents, he got the same person in that office to witness them. That's just going back on memory. I can't even remember whether it was a male or female. I can't remember who was in that office.

Q. So you're saying that somebody in Mr Lahood's office witnessed your signature? Is that right?

A. And then took my word for it that that was Peter and Matthew's signature, because I had just witnessed in the sense of having seen them sign it.

Q. During 2003 if that had happened, you would have known that that was the wrong thing to do, wouldn't you?

A. Not necessarily. If I'm prepared to swear that that is definitely their signature.

Q. You would have known, wouldn't you, that it was a wrong thing for somebody to sign a document as witness when they hadn't actually witnessed the person affixing their signature to the document, wouldn't you?

A. Well I accepted that if they accepted my word that that is definitely those people's signature, there's nothing wrong with that."

66 Lahood said he had given the Option Deeds and four signature page to Nash and Vaughan to take away and have signed by Dixon and Kelly (T103), but he could not explain why he did not ask Nash and Vaughan to sign it in front of him: T104.33-45. In his affidavit he had said that he had asked Nash to witness the signatures of Dixon and Kelly (paragraph 13). He denied that he had asked Nash to witness the other persons' signatures in the sense that Nash asserted or that he arranged for anyone in his office to witness signatures that had already been appended at some other location. He said that such a course would be unethical and completely unacceptable from a practising lawyer and likely to lead to disciplinary action: T160.49-T161.41. This view of the obligations of a practising lawyer (which in my opinion is clearly correct) was not shared by Nash: see T48.11-T49.12.

67 Mr Maxwell made the point that in examining Lahood's evidence, regard should be had to the lack of any connection between Lahood and Nash, as a possible explanation for him promoting an untruthful account of what occurred. He also pointed out that if the plaintiff was unsuccessful against Nash and Vaughan, that would very likely lead to a claim in negligence against Shad Partners so that Lahood's evidence was against his interests.

68 Lahood is no longer employed by Shad, so in that sense the interest is less important, but I accept that, broadly speaking, Lahood's evidence as to what he said to Nash is in a sense against his interest. No obvious motive for concocting the version advanced by Lahood was apparent, save perhaps for a perception of Lahood (that had no basis in fact) that Ferizis was responsible for putting Lahood in an awkward position at the time and a desire subsequently by Lahood to blame Ferizis as the author of his own misfortune. I take into account the submission, but the absence of any established clear and logical motive does not alter my view as to the very unreliable quality of Lahood's evidence.

69 The notion that it was all Ferizis' own fault does not come out of the diary note of the attendance upon Lahood on 1 December 2004 to which I have referred, save that there is a reference to Ferizis accepting the risk. Ferizis himself (paragraph 9 of his affidavit of 19 March) says he told Lahood he was willing to take risks, but those risks did not include the risk that the guarantees would be ineffective. There are two other diary notes of Lahood that are found in the file - they were not the subject of evidence from Lahood or cross examination and although they purport to be contemporaneous notes of 19 and 20 June 2003, they offer no support for Lahood's version of events.

70 The lack of credibility of Lahood and Nash (I do not think that Vaughan ventured evidence on this topic), coupled with the inherent implausibility of the "acknowledgment" version, lead me to conclude that Nash and Vaughan have failed to establish on the balance of probabilities that any representation was made to them by Ferizis or anyone acting on his behalf.

71 Ferizis says Nash agreed that the directors would give personal guarantees. Nash says that she did not agree that the directors would give guarantees.

72 Leaving aside for the moment the credibility of Ferizis compared to that of Nash, there is material that points to Nash having agreed on behalf of herself, Vaughan, Dixon and Kelly that guarantees would be given:

(1) Ms Hughes wrote down the four names (in a telephone conversation with Nash) that found their way onto the draft of the four signature page that was stored on her computer as at 20 June and in the final form of the documents. They were the same names that Ferizis had written down at his first meeting with Nash and Vaughan (see p 28 Exhibit "A" and see paragraph 15 of Ferizis' first affidavit).

(2) Dixon and Kelly each signed the four signature page as well.

(3) The four signature page is found as part of the agreement in all its manifestations (see Exhibit "A" pp 250 and 322, Exhibit "C", Exhibit "D", Exhibit "H", Exhibit "G", Exhibit "L"), and this notwithstanding Lahood's evidence that it was a separate document relevant to receipt of funds.

(4) Ferizis' instructions to Lahood were that guarantees were to be obtained, and the transaction would not proceed without them. It is most unlikely that an exchange could be organised if there was not agreement on a critical term.

73 Accepting, as I do, the evidence of Ferizis, I find that Nash did agree with Ferizis that she and Vaughan (and Kelly and Dixon) would provide guarantees.

Did Nash know that Vaughan was an undischarged bankrupt as at May-June 2003?

74 Nash was very vague about when she learnt that Vaughan was an undischarged bankrupt - although she initially said she learnt about it when Vaughan did (see T28.25-34), she moved away from this (see T29) in an unconvincing manner: T29-T32 and T33.10 (all 25/10/06). Vaughan stated that he had told Nash at the time of his resignation as a director of LNG (see T275.33) and that she had been "a little bit shocked by it all", but he too resiled from that evidence in a most unconvincing manner: see T276-T278.36.

75 In addition to the initial admission of discussion with Vaughan as to his bankruptcy at the time that Vaughan himself learnt about it, and the unconvincing attempt to resile from that evidence by both Nash and Vaughan (which in Nash's case included her asserting that Vaughan learnt of his status from Mr Greg Nash, when according to Vaughan he learnt from MFS), there was other material which makes it likely that Nash knew that Vaughan was an undischarged bankrupt:

(1) She was preparing to take over as director of LNG on Gorman's proposed departure, notwithstanding the fact that she was not a shareholder and had not been a director, and notwithstanding the fact that Gorman understood Vaughan was the person taking over his interest (see Exhibit "5" Tab 27).

(2) Vaughan was not a guarantor of the obligations of LNG and PED to Guardian Trust Australia Ltd (providing finance for LNG and PED), and Nash must have known that this was so, because not only did she witness the signatures of Gorman, Dixon and Kelly (see Exhibit "E"), she purportedly gave independent advice to them about the transaction. I say purportedly because since her de facto held shares in LNG she was not, in my opinion, in a position to give independent advice.

(3) Dixon, Kelly and Gorman all knew that Vaughan was an undischarged bankrupt because they were present when MFS informed them and Vaughan of the problem. It led to Vaughan having to resign as a director immediately. It is not at all likely that Vaughan would not discuss this significant development with Nash, not simply because she was his de facto partner but because she was involved in projects with which he was connected, and especially so when the other individuals connected with the joint venturers, ie Gorman, Kelly and Dixon, were well aware of it and had to incur liability as guarantors without the benefit of Vaughan's guarantee.

76 I am satisfied on the balance of probabilities that Nash, as well as Vaughan, was aware that Vaughan was bankrupt at least from 28 September 2002, and hence in May and June 2003. This finding does not of itself impact directly upon the legal issues but it is relevant to the context of what occurred, and is also of relevance to the credibility of both Vaughan and Nash.

77 There is a diary note of Ms Hughes made on 1 December 2004. It contains the following: " Christine Nash

Do not respond until next week [because] problem [with] existing partner - will know where going next week.

Did deal [with] him. Took personal g'ee from Christine Nash.

Moved to Bowral - had to rent out Glebe [because] couldn't afford to live there.

Told DPP interested in doing Picton, Campbelltown, Goulburn."

78 The words emphasised are the critical words and are relied on by Ferizis as an admission by Nash that she did give a guarantee to Ferizis.

79 Nash in her evidence denied that she was referring to Ferizis when she said she had dealt with him and given a guarantee. The reference, she said, was to Mr Greg Nash, a solicitor but not a relative, to whom she had given a guarantee for $500,000. The diary note, she said, must have been misfiled by Ms Hughes because the discussion had nothing to do with the Balmain Project or Ferizis.

80 Mr Parsons argued that not only was the note relevant as an admission but it was also relevant to Nash's credit generally because of the evidence that Nash gave about this note.

81 It is important to read the note in the context of the file. On 30 November 2004, the day before, Shad Partners had written on behalf of Ferizis to Ms Hughes (see p 13 Exhibit "B"). The letter referred to a conversation between Mr Valarezo of Shad Partners and Ms Hughes but in respect of which no diary note was made, and enclosed a copy "of a Deed of Option entered into between our respective clients". It then said "Can you please contact the writer to advise as to the progress of the development?".

82 Ms Hughes (whose credit was not impugned by either party) says that her telephone attendance on Nash related to the request for information from Shad Partners about the Balmain Project and that the instruction "Do not respond until next week" was directly referable to that request. The diary note, she said, related to the Balmain Project and was created in connection with the request from Shad Partners although it did make reference to Nash's career moves as well. Ms Hughes did say that her belief was that Nash in describing problems with an existing partner (which was given as the reason for the instruction not to respond) was not a reference to Ferizis. Ms Hughes also said that she did not understand Nash in referring to "took personal guarantee from Christine Nash" as being a reference to Ferizis: T360.34-40.

83 Mr Parsons pointed out that although there was no dispute that Nash did give a guarantee to Greg Nash in the amount of $500,000, that guarantee was not given in respect of Balmain Project but in relation to Dee Why, and that Vaughan's evidence was that it related to one unit in the Dee Why Project: see T309.32-T310.5 (see Nash's evidence at T38.15-34 where she did say that the Dee Why guarantee involved two units).

84 Since it was Nash's evidence that she only ever gave one guarantee to anyone and that the one person was Greg Nash in respect of Dee Why, and Greg Nash was an investor in Dee Why, never a partner, the reference to "guarantee" on p 12 cannot be a reference to the Dee Why Project, Mr Parsons submitted.

85 Given the context in which the note arose, I think it is clear that the Balmain Project was the subject under discussion, and that the "him" is a reference to the person making the enquiry about the Balmain Project. It makes little sense for Nash to be telling Ms Hughes that she had given a guarantee over the Dee Why property (to someone else). The note refers to two units totalling $500,000 and cannot on its face be a reference to a guarantee for one unit on the Dee Why Project. I think it is clear that the note came into being because of the letter of 30 November and that the discussion down to "$500,000" related to the Balmain Project. Ms Hughes' belief as to whom it was that Nash was referring as the person to whom the guarantee was given is not relevant, but in any event, in my view, it is erroneous. Ms Hughes also said she thought that Nash had been merely a point of contact with Vaughan - a view that was also incorrect, she knowing nothing, apparently, about Nash's financial input and the proposal that she take over as director. I draw the inference that the reference to "guarantee" was a reference to the Balmain Project and to a guarantee taken from Nash by Ferizis. It is an admission by Nash that she believed at that time that she had given a guarantee to Ferizis, and it is entirely inconsistent with the acknowledgment version which she now seeks to propound. I would reach the conclusion I have reached in this matter without the admission but it does reinforce the view to which I have come.

(1) LNG and PED were joint venturers in the Balmain Project (inter alia).

(2) Nash approached Ferizis seeking an investment by him in one of the projects with which she and Vaughan were connected.

(3) Nash and Vaughan provided to Ferizis the document at pp 1-27 of Exhibit "A".

(4) Nash told Ferizis in the presence of Vaughan that she and Vaughan were not directors of PED but were directors of the company in joint venture with PED for the development of Balmain, which Ferizis understood or came to understand was LNG. Page 19 of Exhibit "A" indicated that this was the company in joint venture with PED for the Balmain Project and the form of the Option Deeds confirmed that this was so (see also (13) below).

(5) Ferizis was led to believe that Nash and Vaughan were directors of LNG, when in fact at no relevant time were they directors.

(6) Vaughan was in fact an undischarged bankrupt and was aware of that fact, as was Nash.

(7) Ferizis told Nash and Vaughan that he would not be interested in investing in the Dee Why Project which had been mentioned in the brochure but might be interested in investing in the Balmain Project. He asked to see the form of option and Nash arranged for an Option Deed used on the Dee Why Project to be sent to Ferizis.

(8) On 12 June Ferizis sought Nash's agreement to an option purchase price of $675,000 on Unit 7 and $700,000 on Unit 8 to which Nash agreed (paragraph 22 of Ferizis' affidavit of 24/01/06).

(9) On 13 June 2003, Ferizis spoke with Lahood, an employee of Shad Partners, a firm of solicitors, and asked him to handle possible investment by the Kallithea Trust in the Balmain Project on his behalf, which Lahood on behalf of Shad Partners agreed to do.

(10) On 13 June Ferizis told Nash that his client (he may not have mentioned the name but there is no dispute that the Kallithea Trust was the entity on whose behalf Ferizis was acting) would be proceeding with the purchase of the options and Nash enquired whether he would be interested in the Dee Why Project or Chatswood. Ferizis said he was not interested in Dee Why but expressed interest in Chatswood at which point Nash put Vaughan on the phone. In that conversation Ferizis told Vaughan that his clients would have to be able to on-sell the units before settlement, and Vaughan said in that circumstances Ferizis' clients would have to share their profit equally with LNG/PED. Ferizis said that no mention had previously been made of profit sharing and he had not discussed that with his client. Vaughan said if Nash had agreed to that he would not insist on profit sharing.

(11) On or before 19 June, Lahood rang Ferizis and recommended that he be instructed to obtain personal guarantees from the directors.

(12) Ferizis asked Nash for a schedule of finishes and a feasibility study for the Balmain Project and Nash said she would send what she had. Dixon sent some documents to Ferizis on 18 June: see Tab 7 Exhibit "A".

(13) On 18 or 19 June 2003, Nash phoned Ferizis and they had the following conversation: Nash: "Is the money ready as it is imperative to close the deal before you go overseas, otherwise other people will jump in and take it."

Ferizis: "The money is ready, however the funds are provided by a Trust and I would need more security. I would need personal guarantees by all four directors."

Nash: "We have never given personal guarantees. It is not the done thing."

Ferizis: "I spoke to the solicitor and he advised me against it unless there are personal guarantees."

Nash: "Who is your solicitor? I will ring him and talk to him."

Ferizis: "Irrespective of that I will still need the guarantees. The money cannot be advanced without them."

Nash: "I will talk to the others and get back to you."

(14) On 19 June Lahood wrote on behalf of Ferizis (and the Trust) to Hughes seeking her clients' instructions to a number of matters (see letter of 19 June p 18 Exhibit "B"). There was no formal response to that letter but there is a diary note of Ms Hughes, which it appears records the response of Nash as communicated to Ms Hughes (see p 21). It appears to have been dated "18/6/03" and changed to "19/6/03" and when viewed together with p 18 it records "No" in response to item 3 of Lahood's letter, ie the request for directors' guarantees. From this I find that Nash did tell Ms Hughes on 18 or 19 June that guarantees would not be given. There were changes to the Option Deeds, including paragraph 21 that Lahood drafted, but contrary to Mr Maxwell's submissions (paragraph 29 (5/04/07)) I do not think that at T126.25 (13/03/07) Lahood claimed to have drafted the four signature page, but only the amendments: see also T75.27-58.

(15) On 19 or 20 June Nash phoned Ferizis and said "We will provide you with personal guarantees on this deed but it is not the done thing". That constituted an agreement on behalf of herself, Vaughan, Dixon and Kelly to give personal guarantees.

(16) After speaking with Nash, Ferizis rang Lahood and told him that he had spoken to Nash and that the four directors had agreed to provide personal guarantees.

(17) The Option Deeds were prepared by Ms Hughes at Hughes & Taylor, and the four signature page was, on the balance of probabilities, prepared by her or someone in her office (see Exhibit "F", including former "MFI16", and the undated diary note in Exhibit "B", it being stored in her computer on 20 June 2003 - see also Ms Hughes' evidence at T376-385, particularly coupled with the unlikelihood that Lahood prepared the four signature pages and sent them to Ms Hughes). Lahood said at T75.44-49 (12/03/07) that he did not remember drafting the four signature page. The four names that appeared on the four signature page were given to Ms Hughes by Nash. The Option Deed was sent by her to Lahood initially without the four signature page but that page was subsequently sent by Ms Hughes or someone in her office to Lahood after Ferizis had signed his copy of the Option Deed. Page 19 of Exhibit "B" contains the four names that appear on the four signature page, and they were clearly communicated by Nash to Ms Hughes. The fact that Nash rang Ferizis on the afternoon of 19 June (see Exhibit "F") and the existence of this diary note is entirely consistent with Ferizis' evidence that although Nash initially did not agree that she and the "others" would provide guarantees, they did decide to do so and asked Hughes or someone at her office to prepare an attestation page that could be included in each of the Option Deeds. That Nash initially informed Ms Hughes that guarantees would not be provided is not inconsistent with what she initially told Ferizis nor with her change of position as communicated to Ferizis.

(18) On 20 June Ferizis visited the office of Shad Partners and saw Lahood there. He took with him a cheque of the Kallithea Trust (the Trust did not have its own dedicated cheque book) and after he had signed the two Option Deeds (see Exhibit "D") he asked Lahood to whom he should make out the cheque. Either Ferizis or Lahood suggested that the cheque be made out to Hughes & Taylor's Trust Account, and Ferizis then completed the cheque in the amount of $500,000 made payable to Hughes & Taylor and crossed and marked not negotiable: see Exhibit "K".

(19) When Ferizis signed the Option Deeds the four signature page had not arrived. Lahood added it later after it was received from Hughes & Taylor.

(20) Ferizis told Lahood not to hand over the cheque without the four directors' personal guarantees, and only if all the documents were in order: paragraph 31 of Ferizis' main affidavit and paragraph 11 of his affidavit of 19 March 2007, and Lahood understood that Ferizis wanted the personal guarantees of the four directors.

(21) Lahood did not himself undertake any searches of the title or of LNG and PED, and did not recommend any search to Ferizis: paragraph 13 of Ferizis' affidavit of 19 March 2007. I find that Ferizis accepted the recommendations for amendment and obtaining of personal guarantees as Lahood recommended and that Lahood offered no other advice as to steps that ought be taken by Ferizis.

(22) Ferizis did not instruct Lahood to obtain a receipt for the cheque: paragraph 13 of Ferizis' affidavit.

(23) Nash and Vaughan attended at the office of Lahood on 20 June and handed over the document in the form in which it is found (as a copy) at pp 240-311 Exhibit "A" for the Unit 7 Option Deed and at pp 312-383 of Exhibit "A" for the Unit 8 Option Deed. It is likely that they attended more than once and went away to have signatures witnessed. They received from Lahood in return a counterpart of each of the two Deeds, executed by Ferizis. The Option Deeds executed by LNG and PED had the four signature page as part of each document with the signatures of Nash and Vaughan and Kelly and Dixon on them.

(24) Vaughan then took the cheque to Hughes & Taylor and the funds were deposited into Hughes & Taylor's bank account.

(25) Vaughan then instructed Hughes to pay the $500,000 out of the trust account to Taffia, which she did.

(26) Taffia used the $500,000 in part to repay money to Nash ($75,000) and to pay money to PED for expenses not wholly connected with the Balmain Project.

87 Mr Parsons submits that "Guarantor" in clause 21 ought be read as "Grantor". Mr Maxwell, and Mr Vaughan, submit the clause is not ambiguous and "Guarantor" should be taken to mean just that (and the absence of any named guarantor means that the clause can have no effect), but if it is ambiguous it should be construed in favour of the surety relying on Coghlan v SH Lock (Australia) Ltd (1987) 8 NSWLR 88 at 93. Reference I think should also be made to Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28 at [17]-[23], following Ankar Pty Ltd & Arnick Holdings Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549.

88 The Option Deed (like all contracts) must be considered as a whole: see Fitzgerald v Masters (1956) 95 CLR 420 at 437 per McTiernan, Webb and Taylor JJ, and: "… it is in this natural and common sense approach to problems of construction that justification is to be found for the rejection of repugnant words, the transposition of words and the supplying of omitted words … the intention of the parties is to be ascertained from the instrument as a whole and that this intention when ascertained will govern its construction."

See also Lewison, "Interpretation of Contracts", Sweet & Maxwell, 2nd ed, para 6.02, and St Edmundsbury & Ipswich Diocesan Board of Finance v Clark (No 2) [1973] 3 All ER 902 at 915.

89 It was said in Wilson v Wilson (1854) 5 HL Cas 40 that both Courts of Law and of Equity "may correct an obvious mistake on the face of an instrument without the slightest difficulty" per Lord St Leonards at 66. See Westpac Banking Corporation v Tanzone Pty Ltd (2000) 9 BPR 17,521; [2000] NSWCA 25, in which the NSW Court of Appeal referred to Fitzgerald v Masters and other cases, and held that a number of words should be added to the clause in question to avoid an absurdity.

90 Clause 21 is poorly drafted and the absence of express linkage between that clause and the four signature page and the failure to complete or ensure completion of the schedule is not what would be expected of a competent solicitor. In my view, the word "Guarantors" in the second line of clause 21 was clearly an error. It does not make sense for the directors to guarantee the obligations of the "Guarantor", and looking at the document as a whole, particularly the four signature page and clause 21, and notwithstanding the failure to complete the schedule, it is clear that it was intended by the parties that the individuals whose names appear on the four signature page would be the guarantors and were the persons referred to in clause 21 as the directors, whether or not they were in fact directors. Viewed in that light, there is in my view no ambiguity which would attract the application of the general rule of construction of ambiguity in a manner favourable to a surety. The conversation between Ferizis and Nash which I have set out in 86 and the preparation of the two four signature pages only serve to confirm that that is what objectively was intended by Ferizis on the one hand and Nash and Vaughan on the other. In my view, Nash and Vaughan, by executing the four signature page, agreed to guarantee the obligations of LNG and PED.

91 The plaintiffs assert that in the circumstances Nash and Vaughan are precluded from denying that they were directors of LNG notwithstanding that, as a matter of fact, they were not so. The following matters are relevant:

(1) Nash's statement to Ferizis that she and Vaughan were directors of the company carrying out the Balmain Project together with PED.

(2) The fact that LNG was the company carrying out the Balmain Project with PED.

(3) The fact that Nash told Ferizis that the individuals involved with the Balmain Project were herself, Vaughan, Kelly and Dixon.

(4) The fact that Ferizis asked Nash for directors' guarantees, and Nash after having said she would speak to "the others" responded subsequently saying "we will give" guarantees.

(5) The fact that Vaughan did sign as director of LNG, in the presence of Nash.

(6) The fact that knowing that Ferizis wanted guarantees from directors of PED and LNG, the solicitors acting for PED, LNG and Nash and Vaughan created a document to form part of the Option Deeds which included the names of the two persons who Ferizis had been led to believe were directors of LNG.

92 Whether the estoppel is to be characterised as one of estoppel by convention or estoppel by representation, the words of Dixon CJ in Thompson v Palmer (1933) 49 CLR 507 at 547 are relevant (cited by Spencer Bower and Turner, "Estoppel by Representation", 3rd ed, Butterworths, and described as containing "all of the essentials of estoppel proper" at 6): "The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct, as in Yorkshire Insurance Co. v. Craine [101], at pp. 546-547; cp. Cave v. Mills [102], at pp. 746-747; Smith v. Baker [103], at p. 357; Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. [104], at p. 612; and Ambu Nair v. Kelu Nair [105], at p. 271; or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so; or because his imprudence, where care was required of him, was a proximate cause of the other party's adopting and acting upon the faith of the assumption; or because he directly made representations upon which the other party founded the assumption. But, in each case, he is not bound to adhere to the assumption unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted."

93 I think it is clear that Ferizis (on behalf of himself and the Kallithea Unit Trust) was under the impression, an impression induced by Nash and Vaughan, that each of the four named persons were directors of either LNG or PED and that Nash and Vaughan understood that their signatures were required because Ferizis held that belief induced by them. This conclusion is reinforced by the conversation Ferizis had with Nash shortly before execution of the documents. Secondly, if I am wrong in concluding that the four persons were executing the four signature page as guarantors, irrespective of whether they were in fact directors, their execution of the document itself created an estoppel by convention that precludes them from now denying that they were directors, subject to the issue of what Lahood said to them. Nash and Vaughan propound a purpose for signing the four signature page which would provide a reason for execution other than as directors, but if that is rejected, as in my view it ought be, the conclusion I draw is that they were executing the four signature pages as the "directors" referred to in clause 21 and hence as guarantors. In my view subject to the matters discussed below Nash and Vaughan are both estopped from denying that they were directors of LNG. To allow Nash and Vaughan to now assert that they were not in fact directors and hence not bound as guarantors would place Ferizis in a position of material disadvantage.

94 The first question is whether Nash did tell Lahood that she was not a director, and the second is that if she did, whether that is sufficient to preclude the estoppel from operating. I have already indicated that I would not accept Nash's evidence unless corroborated by an independent and reliable witness (and Vaughan and Lahood do not meet that description) but even if I were to have found that Nash did say that she was not a director, she did not tell Lahood that she had by her conduct led Ferizis to believe that she and Vaughan were directors. I am inclined to the view that what she said to Lahood (on her evidence) was not sufficient to adequately inform Lahood, as Ferizis' agent, of the true position. To tell Lahood that she was not a director without telling him that she had told Ferizis that she was a director and that is why the document bore her name, was in a sense a half truth and did not constitute a revocation of the representation. There is a further matter and that is that it has been held that the effect of a false representation cannot be undone where only the agent of the representee knows the true position: Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 37 per Burchett J, Sheppard J concurring; see Heydon, "Trade Practices Law", LawBook Co, para 11.745. This would seem to me to be very pertinent here, but I do not need to invite submissions on this point and examine this issue further in view of my earlier conclusions.

95 I answer the questions set out in [14] above that require answers as follows:

(4) Yes through the agency of Nash. It was not argued that if Nash did say what Ferizis said she said to him she had no authority on behalf of Vaughan.

(6) The defendants are estopped by reason of having represented to Ferizis that they were directors from denying that they were directors.

96 Dealing with 14, I think this is an extension of the estoppel argument since Vaughan represented himself in the document as a director (and not only before the execution of the document). If, contrary to my view, the four signature page were not relevant, then there is clearly a representation by Vaughan that he is a director of LNG and hence an estoppel by convention that precludes him from denying that he was a director. I have some difficulty with the proposition that execution by a director of a company can at the same time amount to execution of the document in a personal capacity, and as the matter was not adequately explored in submissions and it is not necessary for me to do so, given my other conclusions, I will express no view upon it.

97 Dealing with 14, it was argued by Nash and Vaughan that there could be no regard paid to the oral agreement of guarantee because of clause 12.1. Mr Parsons pointed out that if Nash and Vaughan were not parties to the Option Deeds (as they asserted they were not) then they could not rely on clause 12.1.

98 On the view I have taken as to the construction of the Option Deeds, the question does not strictly need to be addressed. If Nash and Vaughan were not parties to the Option Deeds then they cannot rely on clause 12.1 - and a previous oral agreement that they would guarantee the obligations of LNG and PED would not be affected.

99 It follows that in my view there should be judgment for the plaintiff in the amount of $500,000 plus interest to be calculated to the date of judgment. The plaintiff is also entitled to an order for the costs of the proceedings. I will not make any formal orders until the parties have had the opportunity to be heard on the amount of interest and on costs.

100 Nash, on my findings, represented to Ferizis that she and Vaughan were directors of LNG when they were not and when Vaughan was an undischarged bankrupt. There are other matters as to the conduct of Nash and Lahood which cause disquiet including, but not limited to, Nash's own evidence that she was prepared with Lahood to be a party to a false witnessing of documents by a third party (a version of events rejected by Lahood). In the circumstances I propose to direct the Registrar of the Court to forward a copy of these reasons to the Office of the Legal Services Commissioner so that consideration may be given by the Commissioner as to what further action or investigation, if any, should be undertaken. For that reason too I will direct that the exhibits not be returned until three months after today, in the absence of an appeal.

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