Fohec Pty Ltd v Kahila [2024] NSWSC 1120 | Case summary

Supreme Court of NSW|2023-10-10|Before: Kunc J

Summary

Setting aside the factual and legal complexities raised by the parties, these proceedings are a dispute between two brothers, George Kahila and David Kahila, about whether David is personally liable for the repayment of a loan made by George's company to David's company. If David is liable, then there is a further dispute over what property his obligation is secured. Without disrespect, I will refer to the protagonists by their given names.
The plaintiff (Fohec Pty Ltd) is a company of which George is the sole director, secretary and shareholder. RSA Civil Pty Ltd was a company of which David was sole shareholder and director. It has since been wound up in insolvency.
There is no dispute that in December 2018, Fohec advanced $250,000 to RSA Civil by way of a loan repayable in three months (and from which Fohec deducted prepaid interest and fees). As the hearing progressed, it also became apparent that there could be no dispute that David had executed a suite of loan documents in the presence of his solicitor, Mr George Bazouni of New South Lawyers, in relation to the advance from Fohec to RSA Civil. Those documents included a mortgage, which incorporated the terms of a memorandum of common provisions (MCP) that also included a guarantee by David of RSA Civil's obligations to Fohec.
There is also no dispute that the executed loan documents were never physically delivered on behalf of RSA Civil and David to Fohec or its agents. What is hotly in dispute between the parties is whether or not, despite the physical non-delivery, David is bound by the mortgage.
Assuming that he is bound, the next question is over what property David's obligations under the mortgage are secured. This aspect of the dispute also involves David's wife, Chantell, the second defendant.
There are two properties which are in issue: 1. David and Chantell were the registered proprietors as joint tenants of a property at Pemulwuy. It has been sold and $364,437.60 (being half the net proceeds of sale representing David's interest) was paid into Court pending determination of Fohec's claim. 2. Chantell was the sole registered proprietor of her and David's family home at Kellyville, which was also sold in the months before the hearing. Chantell has applied the net proceeds of sale to the purchase of a new property of which she is sole registered proprietor. Fohec contends that half of Kellyville (and therefore half of the net sale proceeds) was held by Chantell on resulting trust for David.
The third and fourth defendant/cross-claimants are debtors of RSA Civil, who as part of their commercial arrangements with that company had the benefit of a deed of guarantee and indemnity from David for any amounts RSA Civil might owe to them. Subject to the reservation of some costs issues, the third and fourth defendant/cross-claimants' claims were resolved by consent orders which I made on the fourth day of the hearing, with payments out of the funds held in Court being made to those defendant/cross-claimants.
In summary, for the reasons which follow, the Court has determined: 1. David executed the loan documents, including the mortgage, with Mr Bazouni as witness, and Mr Bazouni had given David thorough advice about the documents he (David) was signing. David became bound by the mortgage (including the guarantee) either at the time he signed it, or shortly after when he telephoned George and told the latter that he (David) had signed the loan documents. Fohec is therefore entitled to judgment against David for the advance less: 1. $57,000 which the Court has found RSA Civil repaid Fohec; and, 2. The balance of David's share of the proceeds of sale of Pemulwuy that remain in Court and to which the Court finds Fohec is entitled. 1. Fohec's case against Chantell fails. It is not necessary for the Court to determine whether any part of Kellyville was held on resulting trust for David by Chantell. Even if it were, Fohec has not pleaded or articulated any basis on which Fohec would be entitled to a money judgment against Chantell, including now that she has used the proceeds of sale of Kellyville to acquire a new property in her sole name. If there had been a resulting trust in favour of David over Kellyville, Fohec would only have had a security interest in David's interest enforceable against David under the mortgage. Chantell owed no trust, fiduciary or other obligations to Fohec which would entitle it to relief against her in respect of the proceeds of sale of Kellyville.
Mr D Allen of Counsel appeared for Fohec. Mr P D Reynolds of Counsel appeared for David and Chantell. Mr D Harris of Counsel appeared for the third and fourth defendant/cross-claimants.

Procedural history

The proceedings were conducted by reference to Fohec's statement of claim filed on 10 May 2023. Mr Reynolds made it clear throughout the hearing that his clients were holding Fohec to its pleading. However, as the hearing developed, and it became apparent that there could be no dispute that David had executed the loan documents in the presence of Mr Bazouni, the issue of whether or not the loan documents (in particular the mortgage) were deeds that became binding on delivery came sharply into focus.
After the conclusion of oral submissions, the hearing resumed on 10 October 2023 for the purposes of dealing with an amendment application by Fohec. The proposed amended statement of claim did two things. First, it abandoned claims against David and Chantell under s 37A of the Conveyancing Act 1919 (NSW) in relation to both Pemulwuy and Kellyville which had been pressed during the hearing. Second, it added this pleading: "42A Further, the Loan Documents were executed as a Deed and delivered upon execution, or alternatively, by David Kahila informing George Kahila that he, David Kahila had signed the Loan Documents."
While Mr Reynolds opposed the amendment, he properly accepted that he was unable to point to anything else his clients would have done differently by way of evidence at the hearing if that allegation had been before the Court. He accepted that, as matters stood then, the new allegation raised legal arguments that could be dealt with by additional written submissions. Given those concessions, the Court gave leave for the amended statement of claim to be filed and a timetable was ordered for the exchange of further written submissions to conclude the hearing.

Chronology

The Court finds the following facts. Except where indicated otherwise, they were either uncontroversial or not seriously contestable, including being evidenced by contemporary records.
On 11 July 2006, David acquired Pemulwuy for $300,000. This was prior to his marriage to Chantell.
Between 2006 and 2008, Chantell and David had conversations in which they agreed they would hold Pemulwuy as joint tenants.
On 18 May 2010, George was convicted at the Downing Centre Local Court of offences including obtaining money by deception.
On 20 January 2011, George was convicted at Sydney District Court for offences including using a copy of a false instrument.
On 1 July 2011, David caused Chantell to be added to the title of Pemulwuy as a joint tenant with him for no consideration.
Fohec was incorporated on 18 October 2011 and is in the business of private lending.
On 25 February 2016, RSA Civil was incorporated. David was its sole director and shareholder.
On 20 September 2016, a mortgage was given to ANZ over Pemulwuy, in part to fund the purchase of Kellyville.
On 31 October 2016, Chantell's purchase of Kellyville as sole registered proprietor settled for $1.95 million. Mortgages were given over Kellyville securing loans to which both David and Chantell were listed as parties.
By November 2018, David was in discussions with George about the latter providing a loan in lieu of another lender. On 19 November 2018 at 8:49pm David texted George: "Are you confident you can do it if no bro please I got the other ready to go I don't want to fuck myself up just in case he finds out I'm going elsewhere and dumps me. Your industry everybody knows everybody I'm worried he will find out and get the shits and dump me. I'd rather you do it 100 but need you to be 100 sure I won't be left up shit creek. I've been dealing with him for 2 years but obviously I'd rather deal with you I just need you to reassure me you've got this Please I'm not doubting you I'm just being cautious honest"
George's text response was "can I call you later".
On 20 November 2018 at 11:08am, the office manager for RSA Civil, Ms Elizabeth Memory, emailed George (copied to David) RSA Civil's aged receivables as at 20 November 2018.
On 25 November 2018, David texted an invitation to George to attend Christmas eve celebrations at his (David's) house, and an invitation to the RSA Civil Christmas party.
On 26 November 2018 at 5:32pm, David texted George: "What's going on man honest. We are really cutting it fine. Need an answer ASAP."
On 29 November 2018 at 3:29pm, Ms Memory emailed George, copied to David, a copy of RSA Civil's asset register including to inform George which assets were still subject to finance and which were not.
After some exchanges on 3 December 2018, on Tuesday, 11 December 2018, David texted George "running out of time dude", to which George replied "righto … I've progressed it. We'll have it done by Friday."
At 4:31pm on Tuesday, 18 December 2018, David sent George the account details for RSA Civil and then texted "Please confirm you have it. Did u get it?"
The evidence also included a summary of text messages between David and George for the period between 18 December 2018 and 20 December 2018 taken from George's phone and which included: ID FROM TO DIRECTION DATED TEXT 98020 David Kahila RSA +61414 889 920 In 18/12/2018 9:40:19pm Did u get the money (+61416501501) 98038 +61 414889920 David Kahila RSA Out 19/12/2018 11:00:06AM Don't stress it will be done today (+61416501501) 98040 David Kahila RSA +61414 889 920 In 19/12/2018 12:12:12PM Call when u can (+61416501501) 98053 David Kahila RSA +61414 889 920 In 19/12/2018 4:57:52pm Still nothing (+61416501501) 98054 +61414 889 920 David Kahila RSA Out 19/12/2018 5:06:51pm Had to be deposited into solicitor trust account. Confirmation it's done. See attached receipt (+61416501501) 98055 David Kahila RSA +61414 889 920 In 19/12/2018 5:08:06PM So when do I get it lol (+61416501501) 98056 +61414 889 920 David Kahila RSA Out 19/12/2018 5:17:51 PM Tomorrow (so need these docs signed first thing in the morning (+61416501501) 98057 David Kahila RSA +61414 889 920 In 19/12/2018 5:21:26 PM Were [sic] do you want me to do it at (+61416501501) 98058 +61414 889 920 David Kahila RSA Out 19/12/2018 I'm waiting for a call back from Bazouni. He always calls me back (+61416501501) 5:28:45 PM 98092 David Kahila RSA +61414 889 920 In 20/12/2018 9:17:19 AM I need that $ ASAP (+61416501501) 98108 David Kahila RSA +61414 889 920 In 20/12/2018 9:56:51 AM Call me when you can (+61416501501) 98121 David Kahila RSA +61414 889 920 In 20/12/2018 12:48:56 PM Cal me (sic) (+61416501501) 98125 David Kahila RSA +61414 889 920 In 20/12/2018 12:57:29 PM On my way to you (+61416501501)

As will be apparent from that table, on 19 December 2018 George arranged for the funds for the advance to be paid into his solicitor's trust account. Fohec's solicitor was Mr Peter Skouteris of Andresakis & Associates.
In [34] to [43] below I set out the events which occurred on Thursday, 20 December 2018.
By no later than the morning of Thursday, 20 December 2018, George had, at David's request, made an appointment for David to see Mr Bazouni to obtain advice as to the loan documents.
At 12.26pm George emailed Mr Bazouni under the subject heading "PRIVATE FUNDING DOCS ATTACHED - RSA CIVIL AND KAHILA" and attachments "PRIVATE FUNDING DOCS - RSA CIVIL.pdf" with the message: "Hello George, Attached are the finance documents for todays (sic) appointment. Kind regards George Kahila"
George's signature block described him as business development manager of Chess Financial Group.
I describe the documents emailed to Mr Bazouni and the executed loan documents in more detail in [65] to [83] below.
At 12.57pm David texted George "on my way to you".
Shortly thereafter, and probably no later than 1.35pm (see [40] below) and definitely before 2.15 pm (see [41] below), David met George. George gave David a set of the loan documents to take to Mr Bazouni for advice and execution. These findings are based on three matters: 1. The text message in the previous paragraph; 2. It is inherently likely because all Mr Bazouni had been sent was the documents as an email attachment. It is unlikely as a matter of practice that anyone would have expected David to execute a printout of the email attachment; and 3. Mr Bazouni records the email attachment was incomplete, so it is likely that a complete original set is what David executed.
At 1:35pm George emailed Mr Skouteris with the subject line "cheque directions". The message was: "Hello Peter 1. Amount $234,500 payable to, Acc Name: RSA Civil [then setting out RSA Civil's bank account details]" [The balance of the email in evidence was redacted]
Between 2:15pm and 3:30pm, as recorded by Mr Bazouni, David met with Mr Bazouni and signed the loan documents given to him by George (including the mortgage) in the presence of Mr Bazouni.
Shortly (given David's urgent need for the advance as appears from the text messages in [27] to [31] above) after leaving Mr Bazouni's office, David telephoned George and said "I've just signed the loan documents at George Bazouni's office. Please transfer the funds as soon as possible." The reasons for this finding are in [129] to [134] below.
An Andresakis & Associates trust account statement in the name of Fohec records an EFT payment of $234,500 on 20 December 2018 to RSA Civil with the bank account details set out in George's email of that day (see [40] above). For the reasons set out in [136] below, the Court finds that transfer occurred after David's call to George recorded in the preceding paragraph.
On Friday, 21 December 2018, George texted David with the name of the entity to which loan repayments were to be made, being "Evolution Mortgage" and its bank account details.
For the reasons set out in [153] to [156] below, the Court finds that between March 2019 and September 2020 repayments totalling $57,000 were made by RSA Civil to Fohec in respect of the advance.
On 1 April 2019, George sent David the same details as those in [44] above.
On 2 April 2019, George texted David saying "Bro please do not write interest on loan when transferring money across. Please write loan to GK." To which David replied "Ok dick head lol".
On 20 May 2019, a new company called RSA Civil Construction Pty Ltd was registered with Chantell as the sole director, secretary and shareholder. She held those positions until 13 September 2022.
On 2 March 2020, David ceased to be a shareholder, director and secretary of RSA Civil.
On 3 February 2021, Mr D Frisken was appointed liquidator of RSA Civil.
In his report to creditors dated 3 May 2021, Mr Frisken reported that RSA Civil had no assets, and liabilities of $2,318,289. Fohec is not listed as a creditor in the report.
On 9 June 2021 at 3:56am, George emailed what was described as a "statement of account" to David at an RSA Civil email address saying: "Please find attached Statement of Account, for your immediate and urgent attention. Full payment of the outstanding balance must be paid within 21 days, from the day of this email be sent to you (9 June 2021)."
The statement of account is numbered as "Statement No. 3". George accepted in cross-examination that this was in fact the first time he had sent a statement to David and that the reference to "No 3" was "an error".
The statement records the loan of $250,00 having been drawn down on 19 December 2018, with three months interest paid in advance and legal and establishment fees totalling $18,800 being debited on 19 December 2018.
The statement also records on 19 December 2018 a debit of $231,200 with the description "balance of $231,200 transferred to client account".
The statement refers to the loan being extended for a further three months on 19 March 2019 and extended for a further six months on 22 June 2019 so as to expire on 21 December 2019. This statement also records the expiry of the loan and increase in interest rate upon default on 21 December 2019. Allowing for the $57,000 in payments which Fohec accepts (as does the Court) were made to it, the balance of the loan is recorded as $401,194.
More than two weeks later on 26 June 2021, David sent this email to George, copied to his (David's) solicitor in these proceedings Mr Nicholas Hallasso: You will be hearing from my solicitor So much for no interest for last year yeah please tell me that wasn't the conversation. That's ok seen as you always go back on your word then this is the only way. I have no interest in anything you have to say or want we may share the same last name but you're an absolute disgrace. Nick this is another one I got sucked into by my brother the one I forwarded you the email that threatened if we didn't take the loan then we would be up for interest payments and some other crap which we now know not to be true. With this one in particular I have email correspondence I have text messages I have date and times of calls of all the promises that were made and fancy your own brother trying to rip his own brother off. Unfortunately there will be a lot to this nick [sic] as he hasn't put half the repayments made as well as cash payments that were given to him which I do have bank receipts for as well as payments made to his personal account as well as a whole list of monies that I'm owed that is all in black white I have numerous loans that I have given him as well that he hasn't credited as well as a bond when he took his children overseas that he never paid back. There is also the fact that I do have some concerns on the approval process of this loan as when we were asked for documentation of the business register it wasn't the same as what was used form the approval process. Also I want a full audit on the contract as him being my brother took me to one of his friends who's was a solicitor and really it was just a in and out process and force covered [sic] the cost Now also in saying that I will be asking you to demand that the caveat be removed of my interest in Pemulwuy as pone thing [sic] that I was assured that this would not happen and it has held up my settlement of another loan that your dealing with and I could incur significant Financial [sic] loss to which I have already incurred The solicitor acting on this matter is also mer scoutries [sic] who acted for me when we signed our life away with this other second mortgage There are also numerous amounts of money that I haven't given him that he thinks shouldn't be allocated for some reason and the ridiculous amount of interest should be charged. And as we may share the same surname nick [sic] I have absolutely no relation to this person
On 19 November 2021, the sale of Pemulwuy was settled. David's 50 percent share of the net proceeds of sale was paid, by agreement with several caveators (including the fourth and fifth defendants and Fohec) into the controlled monies account of Madison Marcus Law Firm pending further order of the Court. They were subsequently paid into Court.
On 22 August 2022, Fohec sent David a further account statement for the period 19 March 2019 to 22 August 2022 showing a total balance owing of $776,561.25.
On 24 October 2022, Chantell obtained a loan from the Commonwealth Bank in the sum of $2,300,000 secured over Kellyville and another property at Kenthurst.
By summons filed on 7 November 2022, these proceedings were commenced by Fohec against David. Other parties were subsequently joined.
On 1 March 2023, Fohec sent David an account statement for the period 19 March 2019 to 21 March 2023 recording a balance owing of $876,714.41
On 8 May 2023, Chantell's sale of Kellyville was completed. Chantell applied the net proceeds to the purchase of another property in her sole name.
On 4 September 2023, Fohec sent David an account statement for the period 19 March 2019 to 21 September 2023 recording a balance owing of $1,308,997.04.

The documents produced by Mr Bazouni

The most important evidence in this case was material produced on subpoena by Mr Bazouni, who neither party called as a witness.
Mr Bazouni produced two categories of documents: 1. A set of the loan documents emailed to him by George (see [35] above) containing Mr Bazouni's markings and annotations which the Court accepts record at various points his advice to David and things which David told him (Mr Bazouni). I refer to these documents in what follows as Mr Bazouni's working copy of the loan documents. Based on those markings and annotations the Court has no hesitation in finding that Mr Bazouni was thorough both in his review of the loan documents and the advice he gave to David; and 2. An executed 'version' (I use this word advisedly) of the loan documents, but reproduced only with David's signature or initials up to page 26 of the MCP (with no explanation as to why the executed version stops there). David accepted that his signature appeared throughout the executed version of the loan documents. As the case developed, it became clear beyond doubt, that David had executed all of the loan documents either on his own behalf or on behalf of RSA Civil on 20 December 2018 and that his signature had been witnessed by Mr Bazouni. The Court finds accordingly, and that Mr Bazouni gave David the advice recorded in the various notations on Mr Bazouni's working copy and the certificates which formed part of the loan documents and (the Court finds) were signed by Mr Bazouni. I note in passing that no point was taken that insofar as both RSA Civil and David were "Debtors" (see [141] below) it could be argued that Mr Bazouni was not "independent" in respect of David as mortgagor/guarantor when he (Mr Bazouni) was also advising David as director of RSA Civil. No criticism of Mr Bazouni is intended by drawing this to attention.
As to the second category, I have used the word "version" because Mr Bazouni answered the subpoena addressed to his firm electronically, the subpoena having called only for copies rather than original documents. It is therefore impossible to say whether what Mr Bazouni has in his possession is a colour copy of the executed loan documents or the original executed loan documents.
George's position was that, to his knowledge, the original executed loan documents bearing David's and Mr Bazouni's signatures and initials were with Mr Bazouni. David's position (at least at one point) was that he had taken the originals with him from Mr Bazouni but was no longer able to find them.
The documents sent to Mr Bazouni by George began with a page that said: To: George Bazouni (New South Lawyers) By Email We are advised that you (or your firm) (you) act on behalf of the Debtor(s) and we therefore enclose for review and execution by the Debtor(s) the following documents: 1. Mortgage(s) with Fohec Pty Ltd Memorandum 2017; 2. Schedule A; 3. Schedule B; 4. Cheque directions; 5. Authority & direction; 6. Borrower(s)' ancillary documents; 7. Guarantor(s)' ancillary documents. (collectively, the security documents) Instructions Legal advice It is the Lender(s)' requirement that each Debtor(s) obtains legal advice on the security documents from a current practicing Australian Legal Practitioner (solicitor) prior to executing them. In circumstances where a Debtor(s) is a third party guarantor/mortgagor (someone who gains no benefit from entering into the security documents) it is an essential requirement of the Lender(s) that: 1. the legal advice is independent and provided by a solicitor independent of any other Debtor(s); and 2. the legal advice must not be received in the presence of any other Debtor(s). Execution of security documents Each page of the security documents must be signed by the Debtor(s) and witnessed by a solicitor. Review of security documents Once signed by your client the security documents a copy of the executed security documents must be emailed to yulia.gurdina@summerlawyers.com.au for review. Collection of security documents We will not accept security documents by mail or delivered by the Debtor(s) Once the executed security documents have been reviewed and approved by us, we will arrange a courier to collect them from you. Should you have any questions in respect of the requirements of the Lender, please do not hesitate to contact our office. Yours faithfully, FOHEC Pty Ltd
In what follows, I shall refer to the sections "Review of security documents" and "Collection of security documents" as the Instructions. I shall next set out the relevant features of the loan documents, including the notes made on his working copy by Mr Bazouni. I also note that everyone at the hearing (and by reference to a notation made by Mr Bazouni also him) observed that the solicitor referred to in the section headed "Review of security documents" was the wrong solicitor. It should have been Mr Skouteris, but nothing ultimately turns on the error.
The first document is the mortgage over Pemulwuy between David as mortgagor and Fohec as mortgagee, as well as over the assets of RSA Civil and of David. Somewhat curiously, Fohec is described as mortgagee both as to 80/100 tenants in common and 20/100 tenants in common, although again nothing ultimately turns on this.
The mortgage records its commencement date as 19 December 2018 for a principal amount of $250,000 repayable three months later. The mortgage referred to a second registered mortgage over Pemulwuy and charges over the assets of RSA Civil and David. The document describes RSA Civil as the borrower and David as the guarantor.
There is an execution section headed "mortgagor execution" which provides for a witness and nothing more. However, there is a further execution page after Schedule A to the mortgage signed by David on behalf of RSA Civil (described as "Borrower 1/Mortgagor") in the presence of Mr Bazouni and by David in his own right (described as "Guarantor 1/Mortgagor) expressed as signed, sealed and delivered by David in the presence of Mr Bazouni. There are identical execution provisions to Schedule B to the mortgage. Schedule A expressly incorporates the MCP, Clause 28 of which is the guarantee provision.
The documents include one headed "cheque directions" executed by David on behalf of RSA Civil in the presence of Mr Bazouni. This is the document executed on behalf of RSA Civil stating "the Borrower authorises Fohec Pty Ltd to pay the Principal Amount as follows….". This records an amount to be transferred to the borrower (after payment out of various lender's fees) of $231,200. Next to the space on the form for borrower's bank details to be inserted, Mr Bazouni (there was no dispute that this was Mr Bazouni's handwriting) records "already transferred by lender to borrower". I find this is what David told Mr Bazouni.
The loan documents include a Debtor's Advice Declaration dated 20 September 2018 executed by David and witnessed by Mr Bazouni concerning David's understanding of the mortgage and including the statement that he "had the opportunity of obtaining legal advice from an independent Australian legal practitioner prior to executing the Mortgage as to the legal effect of the Mortgage and my obligations under it".
The next document is an Australian Legal Practitioner's Certificate dated 20 December 2018 and executed by Mr Bazouni including the statement that "I have explained to the nature and the effect of the Mortgage to be executed by him/her and each of its terms and the legal effect of the Mortgage and its terms."
On the "acknowledgement of legal advice by proposed guarantor" Mr Bazouni added: 1. the words "and individual capacity" after the reference to "David Kahila in my capacity as director of RSA Civil" as the person acknowledging the advice given; 2. a reference to the MCP in the list of the loan documents about which he had given David advice; and 3. an extra paragraph: "7. The meeting commenced at 2:15pm and concluded at 3:30pm @ NSW Lawyer in the Arnie meeting room."
Attached to Schedule A are some pages showing Mr Bazouni's notes on the documents emailed to him by George. These include his note that he was with David from 2:15pm to 3:30pm on 20 December 2018 and a note, which the Court is satisfied reflects what he was told by David, that "David has '900k' of his personal money in an account and does not want to use it because he is sick of putting his own money into RSA Civil. RSA Civil owed 400k from clients which it will receive just after Christmas and pay the loan of 235k (paid interest in fees in advance) to his brother (George Kahila) (the Director of the Lender). Can pay the loan tomorrow if I want to using my 900k - no issue - I also have cars and boats paid off over $1,000,000 - loan repayment no issue".
In relation to the check list of required supporting documents there is a note "all documents have been provided to the broker. George Kahila".
In relation to the mortgage itself, Mr Bazouni notes that the commencement date of 19 December 2018 is "yesterday" and that Kellyville is not being provided as security. He notes the interest rates are approximately 20% and 40% per annum and records "go to a mainstream lender" which the Court accepts is what he advised David. In relation to the prepaid interest of $13,500 he has marked it as "paid". He has also noted the charged assets as including the "plant, equipment" of RSA Civil and next to David's name "cars plus anything else in your name".
In the Australian Legal Practitioners Certificate next to the entry "signatory told me that he/she signed the Mortgage of his/her own free will", Mr Bazouni has written (and the Court finds that he provided this advice) "seek independent financial advice", i.e. he advised David to seek independent financial advice.
On the Guarantor's Advice Declaration, Mr Bazouni has circled the words "undue influence or pressure" in the expression "the Guarantee has been freely and voluntarily executed by me and without undue influence or pressure from any third party" with the words "no one forced me to sign these documents". The Court finds that this reflects Mr Bazouni's explaining this section to David and the latter's reply to the effect that no one had forced him to sign the documents.
Finally, on the front page of the working copy of the MCP, Mr Bazouni has recorded "incomplete memorandum - I printed out the memorandum from the email George Kahila sent me - it goes to clause 31.2 not 12.1".

Fact finding and credit - legal principles

In these proceedings I have applied the legal principles which I summarised in Saravinovska v Saravinovski (No 6) [2016] NSWSC 964: 464 First, at the forefront of the Court's approach has been the oft cited statement of McClelland CJ in Equity in Watson v Foxman (1995) 49 NSWLR 315 at 318-319: Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction (1995) 49 NSWLR 315 at 319 rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not … attained or established independently of the nature and consequence of the fact or facts to be proved" including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding": Helton v Allen (1940) 63 CLR 691 at 712. 465 Second, the concept of actual persuasion was elucidated by Emmett J as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers appointed) (In liquidation) (No 2) [2011] FCA 1123; (2011) 297 ALR 56: 48. Under s 140(2) of the Evidence Act 1995 (Cth) (the Evidence Act), the Court must, in deciding whether it is satisfied that a case has been proved to the requisite standard, take into account: ● the nature of the cause of action or defence; ● the nature of the subject matter of the proceeding; and ● the gravity of the matters alleged. When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-2). 466 Third, there is the statutory successor of the rule in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 in s 140 of the EA: 140 Civil proceedings: standard of proof (1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities. (2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account: (a) the nature of the cause of action or defence, and (b) the nature of the subject-matter of the proceeding, and (c) the gravity of the matters alleged. 467 Fourth, evidence is to be preferred which is inherently probable in the circumstances or is given by a witness against their interest. 468 Fifth, evidence of independent witnesses, i.e. persons who have no reason to be partisan, may be decisive in resolving the conflicting evidence of interested parties. 469 Sixth, where a witness has been found to be lying about one thing that does not automatically mean that they are to be disbelieved about everything else. The Court is not bound to accept or reject a witness' evidence in its entirety. This approach was expressed by O'Loughlin J in Cubillo v Commonwealth of Australia (No 2) [2000] FCA 1084; (2000) 103 FCR 1: 118 Before commencing a detailed analysis of the evidence in this case, I desire, in the first instance, to make clear the approach that I have taken to the evidence of a witness where I have found some, but not all, aspects of the evidence of that witness to be unreliable. Simply because I find against a party or a witness on one issue and reject some part of the evidence of that person, it does not mean that what remains is tainted, or otherwise lacks probative force, with the consequence that I should dismiss all the evidence of that person. The principles enunciated in the cases indicate that the trial judge is entitled to believe part of the evidence given by a witness and to reject the rest. After making an assessment of the evidence, after utilising the advantage of having seen and heard all the witnesses, and after forming an impression of each, the confidence that the judge reposes in a particular witness is assessed accordingly. Where evidence has a logical probative value, a judge will rely on it; where it contains discrepancies, displays inadequacies, is tainted or otherwise lacks probative force, the judge will, in all probability reject it or, at least, not rely on it. I mention some authorities that support those propositions. … 121 A trial judge is not restricted in his or her assessment of a witness. By this I mean that if, on peripheral issues, the trial judge reaches conclusions adverse to the credibility of a party, it does not necessarily follow, consistently with such conclusions, that these must be findings adverse to that party on the issues that are central to the determination of the matter. There is no rule of law or practice that states that an adverse finding on any aspect in the evidence of a witness means that the whole of that witness' evidence must be rejected. 470 Seventh, and closely related to the preceding point, in Sangha v Baxter [2009] NSWCA 78 Basten JA (with whom Handley AJA agreed) cautioned against global credibility findings: 155 There are risks in making global findings about credibility of any particular witness. Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases. 156 Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, King v Collins [2007] NSWCA 122 at [44]. 471 Eighth, disbelieving a witness that "X" was the case does not mean that "not X" has been proven. The Court respectfully adopts what fell from Gibbs J (as his Honour then was) in Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694 (citations omitted): The fact that a witness is disbelieved does not prove the opposite of what he asserted: Scott Fell v. Lloyd [1911] HCA 34, (1911) 13 CLR 230, at p 241 ; Hobbs v. Tinling (C.T.) & Co. Ltd. (1929) 2 KB 1, at p 21 . It has sometimes been said that where the story of a witness is disbelieved, the result is simply that there is no evidence on the subject (Jack v. Smail [1905] HCA 25, (1906) 2 CLR 684, at p 698 ; Malzy v. Eichholz (1916) 2 KB 308, at p 321 ; Ex parte Bear; Re Jones [1945] NSWStRp 50, (1945) 46 SR (NSW) 126, at p 128 ), but although this is no doubt true in many cases it is not correct as a universal proposition. There may be circumstances in which an inference can be drawn from the fact that the witness has told a false story, for example, that the truth would be harmful to him; and it is no doubt for this reason that false statements by an accused person may sometimes be regarded as corroboration of other evidence given in a criminal case: Eade v. The King [1924] HCA 9, (1924) 34 CLR 153, at p 158; Tripodi v. The Queen [1961] CHA 22, (1961) 104 CLR 1. Moreover, if the truth must lie between two alternative states of fact, disbelief in evidence that one of the state of facts exists may support the existence of the alternative state of facts: Lee v. Russell (1961) WAR 103, at p 109 . 472 Ninth, for reasons set out in Saravinovski (No 5) at [76] and following, the Court gave leave for certain of Chris' affidavits to be relied upon, notwithstanding that his loss of mental capacity meant that he could not be cross-examined. The way such evidence should be treated was considered by Hallen J in Fulton v Fulton [2014] NSWSC 619: 111. However, affidavit evidence, however good, which, for whatever reason, is not subject to cross-examination when cross-examination is required, will always be discounted, as appropriate, if the affidavit is used with leave without cross-examination. The degree to which it will be discounted may depend on various factors, including the circumstances that lead to cross-examination being dispensed with, the nature of the evidence and its centrality and degree of significance to the case. The degree of discount appropriate will be judged according to all the circumstances of the case: Re O'Neil, Deceased [1972] VicRp 35, [1972] VR 327, per Anderson J, at 333 - 334; Citibank Ltd v Liu; ABN Amro Bank Ltd v Liu [2002] NSWSC 86, per Hamilton J, at [5]. 473 Tenth, the Court can only do the best it can on the evidence which it has. Some issues may need not be resolved or should not be resolved. It may be that they cannot be resolved given the nature of the evidence which the parties have adduced. This case has many similarities to the family dispute considered by Robb J in Aytul Ak-Tankiz v Ferat Ak & Ramazan Ak [2014] NSWSC 1044. Of the evidence in that case, his Honour said: 187. The principal evidence relating to these issues consisted of the uncorroborated evidence of the witnesses, or alternatively the only corroboration available was the testimony of other witnesses. The evidence distilled into the word of one witness against the word of one or more other witnesses. Most of the events relevant to the issues occurred many years ago. The evidence relevant to the issues generally consisted of a series of assertions, and counter-assertions by various witnesses. Evidence of the objective context was generally not available, so it has not been feasible to test the versions of events that were in contest by reference to the objective probabilities, based upon uncontroversial contemporary circumstances. Though the issues are not entirely irrelevant, their significance is limited, and their resolution has not been necessary for the purpose of determining the real issues in the case. Any attempt to resolve the issues by making judgments about the relative credibility of the individual witnesses on an issue-by-issue basis was likely to be based on illusory foundations.
To these I would respectfully add and have applied this recent summary by Leeming JA (sitting at first instance) in Dedakis v Deligiannis; The estate of Rebecca Deligiannis (also known as Rebeka Deligiannis) [2024] NSWSC 1018; 15 All of the events occurred more than a decade ago, and many occurred more than three decades ago. Memory is fallible and malleable, especially memory concerning past beliefs. One of Lord Leggatt's first judgments contains an extensive and influential consideration of the frailties of memory, including (relevantly for present purposes) that memories of past beliefs are revised to make them more consistent with present beliefs: Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) at [18]. It is usually desirable to start with reliable contemporaneous documents and uncontroversial facts. "Usually, the rational resolution of an issue involving the credibility of witnesses will require reference to, and analysis of, any evidence independent of the parties which is apt to cast light on the probabilities of the situation": Camden v McKenzie [2008] 1 Qd R 39; [2007] QCA 136 at [34] (Keane JA). That is not to deprecate the potential significance of testimonial evidence. In particular, as was said by Bell P in ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; 388 ALR 128 at [27]-[29], testimonial evidence may provide valuable assistance in explaining the context of, and omissions from, the contemporaneous documents…..

The protagonists' credit

Each of George, David and Chantell were cross-examined. I do not accept Mr Allen's submission that the resolution of these proceedings does not turn on George's credit. Each party relied upon evidence of conversations which were disputed and were not the subject of contemporaneous file notes or other documentary corroboration. Furthermore, the present antagonism between George and David was obvious. For reasons which will become apparent, it was ultimately only necessary for the Court to come to a view about the credit of George and David.
As might be expected, each party asserted the honesty of its own witnesses and challenged the reliability of the opposing witness or witnesses. For the reasons which follow, the Court concludes in relation to each of George and David that their evidence should only be accepted if it is inherently probable, against interest or otherwise corroborated by an independent witness (of which there were none) or contemporaneous documents.
In relation to George: 1. He was a former policeman who had been convicted of serious dishonesty offences, including making false statements. Those convictions do not provide a basis in and of themselves to reject George's evidence out of hand. However, because of those convictions I approached George's evidence with caution. I accept Mr Reynolds' submission that George appeared to demonstrate no remorse or insight as to what had occurred which had given rise to his convictions, but sought to give excuses for his behaviour such as that he had been misled by his then barrister, that he had just said yes to anything and that there were no victims of his offending. The charges had arisen in relation to mortgage brokering which he had operated as a side business while he was a NSW Police detective. 2. He maintained, despite clear evidence to the contrary, that he had instructed Mr Skouteris not to transfer the advance to RSA until he (Mr Skouteris) had received the signed loan documents. 3. His evidence that he had "verbally instructed" his solicitor to transfer the funds once the signed documents were in his [the solicitor's] hands (Tcpt 12 September 2023, p 52 (49-50)) - something which appeared in none of his affidavits - struck me as a recent invention in the witness box. If it was true, it flew in the face of what in fact occurred, given it was common ground that Mr Skouteris did not receive the executed loan documents. His vacillation during cross-examination as to whether or not he had instructed his solicitor not to advance the funds until the solicitor had seen the executed loan documents left me with the strong impression that his evidence about what he in fact required before the funds would have been advanced was completely unreliable. This culminated in this statement (Tcpt, 12 September 2023, p 56(12-13)): "It was confirmation that he's - or according to his word, that he has gone to the solicitor and - and signed the documents. We've still got to sight them". But he ultimately accepted, contrary to his case, that mere verbal confirmation that the loan documents had been signed would not be sufficient to warrant the advance of the funds. George reiterated (Tcpt, 12 September 2023 p 56(31)): "Common - common practice to ensure that documents have been signed and delivered in order to release the funds, the - it would be absolutely crazy to release them under other situation or verbal confirmation." 1. George was unable to offer any explanation why, if obtaining the executed loan documents had been so important to him (including the mortgage) he agreed to a request from David that Fohec not lodge a mortgage or caveat. 2. His insistence that he had not met with David prior to David seeing Mr Bazouni was inconsistent with the text message suggesting that David was on his way to see George (see [31] above). Furthermore, as noted in [39] above, I accept David's submission that Mr Bazouni's file supports the inference of David having an execution copy of the loan documents in his possession which must have come from George. 3. In the face of it being obvious that Mr Skouteris (or George personally) had never received the executed loan documents, George gave this completely unconvincing answer (Tcpt, 12 September 2023, p 69(33-34)): "Well, they obviously haven't been able to find them. Yes. Something's happened. Beyond my control. " 1. George's answer concerning whether or not David had given the mortgage is revealing in terms of George's confusion about Mr Bazouni's role. George clearly believed that Mr Bazouni was George's representative when it came to the execution of the loan documents (Tcpt, 12 September 2023, p 69(4)) (emphasis added): "Well he did through my representative under my instructions, that's what I'm meant to believe and there is a copy for yourself to see. Its signed. Are you suggesting that its forged? I don't understand the question, you're acting like it hasn't been signed. " 1. George appears to have simply made up conversations in the witness box with his solicitors to check that they had sighted the executed loan documents (Tcpt, 12 September 2023, 63(14-17)). He had given no such evidence in his several affidavits about insisting that he instructed his solicitor not to advance the funds until they had seen the executed loan documents. 2. Finally, I accept Mr Reynolds' submission that, overall, George's evidence in the witness box was characterised by an apparent unwillingness to answer questions in a straightforward and candid way. Instead, he gave answers in a way that gave the impression that he was more interested in skewing his evidence to what he thought would advantage Fohec's case.
As to David's credit, the Court's concern originally arose not so much as to his honesty, but his unreliability due to a poor memory in relation to the events central to this case.
David originally instructed his solicitor (as appears from his solicitor's affidavit sworn at an early interlocutory stage) that he (David) had no recollection of signing the loan documents and that he did not believe that he had done so. Through his solicitor he said "he has a recollection of being given documents by George that George wanted him to sign, however, he does not recall signing them and does not believe he did so".
Mr Reynolds submitted that it was to David's credit that when Mr Bazouni's documents eventually became available, even in the witness box David said he did not recall telling Mr Bazouni the things which Mr Bazouni plainly recorded as matters of instructions from David. David's explanation for his poor memory was consequences of a period of drug addiction.
I do not accept Mr Reynolds' submission. For the reasons set out in [130] to [134] below, I have concluded that David took refuge in non-recollection when the only alternative would have been to make concessions in the face of what was clear from the documents produced by Mr Bazouni. As I record in [133] to [134], I am satisfied that David was prepared to lie to avoid liability to Fohec.
There were other unsatisfactory aspects of David's evidence. For example, when his attention was drawn to the communications between RSA Civil's office manager, Ms Memory, and George attaching an asset register obviously sent as part of establishing RSA Civil's creditworthiness (see [28] above), David was reluctant to accept that the assets in the register were RSA Civil's.
He also said he was unable to recall what, in my respectful view, would be fairly obvious matters as to whether or not he had provided RSA Civil with any working capital or plant and equipment.
As for Chantell, much of her evidence was characterised by answers to the effect that she did not recall or was "not one hundred percent sure". She sometimes gave the impression of trying to avoid answering questions, but I formed the view that on many occasions this was because she may not in fact have known the answer. It has not proved necessary for the Court to come to a concluded view as to her credit. As the case against her has turned out (see [157] and following below), none of her evidence has proved to be of dispositive importance.

The critical conversation

Because no particular legal significance is sought to be ascribed to them by any party, it is not necessary for the Court to resolve the various disputes in relation to conversations prior to what occurred on 19 and 20 December 2018.
The parties' evidence of conversations must be assessed against what little can be gleaned from the documentary record and what the parties ultimately accepted could not be contested, including: 1. The advance was paid out of Andresakis & Associates' trust account before that firm had received the executed loan documents. 2. There is no record that anyone on behalf of Fohec followed up either David or Mr Bazouni for the executed loan documents, either in the days immediately after the advance or at any time thereafter. 3. George did not cause a statement of account in respect of the loan to be sent to RSA Civil until June 2021 (see [52] above).
Against that background, it is instructive to set out the course of the relevant affidavit evidence.
In an affidavit sworn on 21 October 2022 in anticipation of commencement of the proceedings, George said: 6 On 19 December 2018, the plaintiff contacted the defendant, requesting the details of his solicitor, to whom the mortgage documents were to be forwarded to. The defendant initially requested the documents be forwarded to Andresakis and Associates, which was refused as, Andresakis and Associates were acting on behalf of the plaintiff in this matter. 7 The defendant asked the plaintiff to be referred to another solicitor. The plaintiff informed the defendant of two law firms, Takchi and Associates and New South Lawyers, both of which practise in the Parramatta CBD. The defendant immediately chooses New South Lawyers, as he had recently dealt with George Bazouni, in other unrelated matters. 8 On 20 December 2018, the plaintiff advanced to the defendant the net sum of $250,000.00. The funds were transferred to the defendant's bank account by Andresaskis and Associates, who at the time were acting for and on behalf of the plaintiff.
In an affidavit sworn on 27 April 2023, George said: "41 A total of $234,500.00 (net) was transferred to David's nominated account in the company at the time being RSA Civil Pty Ltd. 42 Fohec made the payment by first transferring funds to the trust account of its solicitors, Andresakis & Associates, and then those funds were conveyed an EFT transfer"
In an affidavit sworn on 15 May 2023, George said: 4 Fohec agreed to advance those funds on certain terms. 5 On 20 December 2018 at 1:27pm, and at the request of the first defendant, David Kahila (David), I sent an email to David's solicitor, George Bazouni of New South Lawyers (Mr Bazouni), which contained the following attachments: a. Written Mortgage; b. Mortgage of Common Provisions; c. Schedule A to the Memorandum; d. Schedule B to the Memorandum; e. Authority and Direction; and f. Various other documents, which together formed the loan documents (Loan Documents). Annexed and marked "B" is a copy of the email and the attachments I sent to Mr Bazouni. 6 To the best of my recollection and later that same day, I had a telephone conversation with David where he said words to the effect of "I've just signed the loan documents at George Bazouni's office. Please transfer the funds as soon as possible." 7 After receiving verbal confirmation from David that he had signed the Loan Documents, I understood and took this to mean that David had agreed to the terms contained in the Loan Documents and had physically signed them in the presence of his solicitor. I then transferred to sum of $250,000 (less capitalised interest at the lower rate) to David in accordance with the Loan Documents. I would not have caused Fohec to advance the sum of $250,000 without first receiving confirmation that the Loan Documents were signed. 8 After the Loan Documents were signed, I had a conversation with David. David said: "Can you please not lodge any mortgage or caveat? It will hinder any refinance to pay you out." I said: "That's fine."
In affidavit sworn on 24 July 2023, David said in response to George's affidavits, including those from which I have quoted in the preceding paragraph: 32 In or about mid to late 2018, I became really sick and was unable to work. I had suffered a spinal injury which rendered me inactive from my job. I was diagnosed with a c5 and c6 displacement which was cutting off the circulation to my arteries and I was losing feeling and mobility to my right arm and leg. At the time, I was a director of RSA Civil Pty Ltd (RSA Civil). At the time, I employed approximately 55 staff 33 At or around the time, I had a conversation with George to the following effect: Me "My company will need to get a loan from Daniel at Australian Capital Finance soon to make sure that the business isn't effected whilst I am sick. George: Don't worry about that. I have just come into some money and I am more than happy to help. I know what you have done for the family since Dad has passed away. How much money do you think your company needs? I think I can give about $250,000, but I will need about $30,000 of it. Pay back what you can and I will cover the rest. There will be some documentation that you will need to sign so I can show my investors where their money is going." Me: "That is fine. I will pay you back but my company can't afford to pay interest. You know that I am not working." George: "I am your brother. Don't be silly, I am not going to charge any interest" 34 At no time during the conversation, did we ever discuss that RSA Civil would be charged interest, that a mortgage or other security would be taken over the assets of RSA Civil and myself, that I would provide a personal guarantee or how any loan was to be structured. 35 I believed at the time that George was advancing funds on these terms to repay me or make up for all of the funds that I had provided to our family after our father had passed (see paragraph 10 above}. 36 In or about December 2018, we had a conversation to the following effect: Me: "George, when can you give my company that money that you said you would give to me? If you can't give it to me, I will need to look elsewhere." George: Don't be silly, I will give the money. I will send you to a solicitor that I know and he can sign you up." 37 George then recommended New South Lawyers to me. 38 Or about 20 December 2018, George and I met in Parramatta prior to my attendance at the office of New South Lawyers. I had never previously engaged New South Lawyers. The firm was recommended to me by George. 39 George set up the meeting with New South Lawyers on my behalf. 40 Prior to me entering the office of New South Lawyers. George handed me a bundle: George: "This is the paperwork that I need you to sign." Me: "What is all of this? Why am I signing so much paperwork?" George: "Don't worry. The solicitor will explain it all to you. You just sign them." 41 The meeting between George Bazouni and I commenced between 2 and 2:30pm on 20 December 2018. 42 I signed the documents that George had handed me at the meeting and handed them to Mr Bazouni. Mr Bazouni reviewed the documents and gave me certain advice regarding the documents. I maintain my privilege in respect of that advice. Mr Bazouni took a copy for his file and handed me back the original documents. We then had a conversation to the following effect: David: "Thank you for your time, please do not send those documents to anyone unless I tell you to do so. Mr Bazouni: "Thanks David. I will not send the documents unless I am instructed to do so. 43 l recall leaving the office of New South Lawyers with a hard copy of the documents I do not have any recollection as to where those documents are or where I have placed them, but I know for certain that I did not provide the documents to George or solicitor or other agent acting for George. 44 At no stage did I ever instruct New South Lawyers to send the signed documents to George or any solicitor or other agent acting for George. 45 After the meeting with New South Lawyers, I called George and we had a conversation to the following effect: Me "Why are you trying to screw me with these documents? We never agreed to any mortgage, caveat or any interest. The deal was that you would pay my company $250,000 but you would take out some money for yourself and take care of the rest." George "Don't worry about all of that, I am not going to chase you for the money just pay for whatever you can and I will take care of the rest. I have already transferred the money to you anyway". 46 After the conversation referred to above. George did not ask me to provide him signed copies of the documents. …. Affidavit of George Kahila - 15 May 2023 62 In relation to paragraph 6, I did not have that conversation. The conversation that took place is as stated in paragraph 47 of this affidavit. (This must be a reference to paragraph 45)
In his affidavit in reply sworn on 4 September 2023, George said 11 I refer to paragraph 33 of the DK Affidavit. I deny having a conversation with David to that effect. I recall having a conversation with David in or around November 2018 to the following effect: David said: "My company needs to take out a loan to cover the next 2 to 3 months or so as I am owed over $1.4 million in works completed. My customers are slow payers and with Christmas around the corner, I need to ensure I have enough cashflow to pay my workers over the Christmas period. I usually use Australian Capital Finance for short term funding but their interest rates are too high, around 3.5% per month. Can you see if you can get me a better deal? I need around $250,000. I said: "Let me have a look into it for you. Can you send me your company's financials so I can assess its ability to repay? I'm pretty sure I can get you a better deal than 3.5% interest and I won't charge you any brokerage fees. David said: "Please try your best. I'll send you what you need." 12 Shortly thereafter, David provided me with some financial documents including RSA Civil's aged receivables and RSA Civil's asset register. Appearing at pages 13-18 of the exhibit are copies of those documents. At this stage, it appeared to me that RSA Civil was doing well financially and I felt comfortable that it and David would be able to repay the loan …… 14 I refer to paragraphs 34 and 35 of the DK Affidavit. I was able to organise the loan funds through other investors and communicated this to David. In or about early December 2018, we had a conversation to the following effect: I said: "I have organised the funds you need for the company through some investors. As I told you, I won't be charging you any brokerage fees and no loading on the lower rate of interest, which is 1.8%. I will have the loan documents prepared and let you know once they are ready to be signed with a solicitor." David said: "Not a problem, I will wait for the loan documents to be prepared. Try and get it ready as soon as possible". 15 At no point in time did I ever mention to David that the loan won't be subject to interest or there won't be any security charged over the loan. Also, at no point in time did David and I ever discuss that Fohec is advancing the loan to repay funds he had provided to our family. I do not know what David is referring to when says he allegedly provided funds to our family. The first time I have heard of this allegation is during the course of these proceedings, specifically in David's solicitor's (Mr Nicholas Hallasso) affidavit sworn on 10 May 2023. 16 I refer to paragraph 36 of the DK Affidavit. I deny having a conversation with David to this effect. I did however receive text messages from David and the office manager of RSA Civil Pty Ltd at the time, Liz Memory (Liz) in November and December 2018 following up on the loan. Appearing at pages 2-4 of the Exhibit are text messages between myself and David, and appearing at pages 19-20 of the Exhibit are text messages between myself and Liz where they follow up on the loan to RSA Civil. Liz's number is recorded as +61481520151 and referred to as 'Liz RSA Civil'. 17 I refer to paragraph 37 of the DK Affidavit. On or around 19 December 2018, I recall having a conversation with David to the following effect: I said: "The loan documents will be ready tomorrow. You'll need to meet with a solicitor to get legal advice and have the documents signed." David said: "I want to sign the loan documents with Peter Skouteris [to Andresakis & Associates]." I said: "No you can't use Peter because he's Fohec's solicitor for this deal. Try find someone else." David said: "Can you recommend anyone in Parramatta?" I said: "There's Eddie Takchi [of Takchi & Associates] or George Bazouni [of New South Lawyers]. I can't think of any others off the top of my head." David said: "I've known Bazouni for a long time I'll go with him. Can you please call him and organise for me to see him tomorrow to sign the documents? I'm flat out running around, and you know me, Ill forget". I said: "Yep, no worries I'll confirm a time and email him the documents when they're ready and I'll let you know." 18 I refer to paragraph 38 of the DK Affidavit. I deny meeting with David on 20 December 2018 prior to his attendance at the office of New South Lawyers. I do recall that David and I had arranged that he would meet me at Fohec's office before going to New South Lawyers, but because he was late and I had to pick up my kids from school, I told him to head straight to New South Lawyers. I also recall David asking me words to the effect of "Do I really need to sign the loan documents" to which I replied words to the effect of "If they're not signed I cannot authorise the release of the funds to you, meaning you're not getting the money." As I mentioned above in paragraph [17], David had previously told me that he had known George Bazouni for a long time. 19 I refer to paragraph 40 of the DK Affidavit. I deny meeting with David on 20 December 2018 prior to his attendance at the office of New South Lawyers, handing him a bundle of documents and having a conversation to that effect. As I refer to in paragraph [5] of my Fourth Affidavit, I had emailed the loan documents to George Bazouni at David's request, so there was no need to give David a hard copy. 20 I refer to paragraph 45 of the DK Affidavit. I deny having a conversation with David to that effect.
Given the legal issues that have been raised, the critical piece of evidence for Fohec's case is George's evidence that David rang him and said: "I have just signed the loan documents at George Bazouni's office. Please transfer the funds as soon as possible". After some preliminary observations and setting out the parties submission, that is the issue which will then be addressed.

Fohec's case against David - some preliminary observations

The parties accept that sometime on 20 December 2018 by a payment from its solicitors' trust account, Fohec advanced $234,500 of a total loan of $250,000 to RSA Civil. From that the Court was initially confronted with a dispute on every significant factual and legal point. This was not least because David had contested (by non-admission) that he had signed the loan documents until his affidavit of 24 July 2023 (see [102] above) and Mr Bazouni's documents being sought late and only produced on 28 August 2023, only days before the hearing. The discovery that David had in fact signed the loan documents should have caused both sides of the record to rethink and perhaps simplify their case theories fundamentally.
So it was that they persisted with what in my respectful view was a distracting dispute about the legal characterisation of what occurred. By its amended statement of claim, Fohec says that by sending the loan documents to Mr Bazouni on 20 December 2018 it was thereby offering to lend $250,00 to David on terms. It further says that David's verbal confirmation on that date that he had received and signed the loan documents was an acceptance of the offer, which meant that Fohec and David agreed to be bound by the terms of the loan documents. Alternatively, by its amendment, Fohec submits that the loan documents were executed as a deed and delivered upon execution by David, or alternatively when David informed George that he, (David) had signed the loan documents.
For his part, David admits that in December 2018, by reason of a conversation between George (in his capacity as a director of Fohec) and David (in his capacity as direct of RSA Civil), those companies reached an oral agreement that Fohec would lend funds to RSA Civil. David says that pursuant to that agreement, whatever its other terms may have been, Fohec caused $234,500 to be transferred to RSA Civil.
As I have noted, the case had been pleaded and prepared on the basis that the actual execution of the loan documents was in issue. Curiously, there was no allegation in terms that the loan documents had been executed by David until the introduction of the amendment (see [11] above). The parties ultimately conducted the hearing on the basis that David had in fact executed the loan documents, although there was a faint suggestion (which the Court rejects) that the Court should find based on the incomplete copy from Mr Bazouni's file, that David had ceased initialling the MCP on page 26 of 41 (which on this theory meant that David had not initialled the pages containing Clause 28, being the guarantee provision).
As the case was in fact conducted in relation to David, the dispositive issue was presented as whether or not David was bound by the loan documents, or, more precisely, the mortgage, pursuant to which he was both a mortgagor and guarantor. If he was, then the Court was asked to resolve a subsidiary dispute as to quantum.
I should also record that while ultimately not relevant to the outcome, the parties were diverted at various points of the case by the question of what had happened to the original executed loan documents.
Finally, there was some evidence and debate concerning whether or not interest was payable on the advance. At the factual level, this turned on David's evidence (which the Court rejects as uncorroborated) that George had told him that interest would not be charged. This debate goes nowhere because in the case as argued, David gave that alleged statement no legal significance. For example, there is no cross-claim alleging that by virtue of the alleged representation, Fohec is estoppped from denying that interest was not payable in whatever arrangement was being reached between the parties.
No case was presented by David that if he was bound by the mortgage there was some reason why he was not bound to pay interest as specified in the mortgage. Furthermore, subject to argument about the quantum of repayments, David's case was run on the basis that if his defences were unsuccessful, then Fohec was entitled to the funds in Court.

Fohec's case against David - Fohec's submissions

Mr Allen's case for Fohec rested on four propositions.
First, the loan documents had been signed and, where relevant, sealed. They had been delivered upon execution or when David told George that he had signed the loan documents. The court should accept George's evidence that David rang him to tell him that.
Second, by reference to the ordinary principles of contract, the provision of the loan documents to Mr Bazouni as David's solicitor constituted an offer. David's acceptance of that offer was his execution of the loan documents or telling George that he (David) had executed the documents.
Third, there was insufficient evidence for the Court to conclude whether the advance had been paid on 20 December 2018 before or after the execution of the mortgage. If it had been paid before execution of the loan documents, then there was no problem of past consideration because, either the mortgage was a deed or, in the alternative, the payment was sufficiently contemporaneous with the execution of the loan documents to be part of the one and the same transaction.
Fourth, the Court should find by reference to RSA Civil's own records that $57,000 had been repaid by RSA Civil to Fohec in respect of the advance.

Fohec's case against David - David's submissions

David's factual and legal submissions may be summarised as follows.
George's contention that the advance was made to David should be rejected. It is convenient that I immediately record that I do reject it, to the extent it was a contention of any relevance. As I have already observed, the parties essentially focused on David's liability under the loan documents. However, under the loan documents, including the mortgage, it was quite clear that RSA Civil was the borrower of the advance.
The Court should find that any loan was interest free. For the reason given in [111] above, I reject this submission as irrelevant.
Turning to the events on 20 December 2018, the Court should find that, contrary to George's evidence, David did meet George. This is corroborated by the text message set out in [31] above and that fact that David was apparently able to give Mr Bazouni a complete copy of the loan documents. While ultimately not a point going to more than credit, as I have recorded in [39] above, I accept this submission.
The Court should also find that the advance was made to RSA Civil before David had executed the loan documents. This is because of George's email to Mr Skouteris at 1:35pm on 20 December 2018 (see [40] above) and because of the two occasions in Mr Bazouni's notes where he records (as the Court accepts) David told him that the funds had been paid. I consider this submission further in [132] to [134] below.
The Court should accept David's evidence that he became angry in Mr Bazouni's office, especially concerning the interest.
It was further submitted that the Court should accept Mr Bazouni's notes as accurate. Neither party suggested that they were inaccurate as far as they went and, as I have set out in [66] above, I accept them as accurate.
Consistently with accepting George's evidence that he became angry in Mr Bazouni's office, the Court should also accept David's account of his conversation with George after David had left Mr Bazouni's office.
In relation to what Mr Reynolds' referred to as the contract case, it was submitted that there had been no verbal acceptance. Even if the Court was satisfied that David had told George that he (David) had signed the loan documents, that was no more than signalling the start of the steps required by the Instructions. In any event, even if the contract came into existence at that point (which was denied), there was no contract because the funds had been advanced before that. Past consideration was not good consideration.
In relation to the question of the mortgage's status as a deed, it was contended: 1. A mortgage does not become a deed until registered: Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361. Here the security required was a registered second mortgage. 2. Alternatively, if the test was to determine objectively whether the executing party intended to be immediately bound (see Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253) it was clear that David was not intending to be immediately bound from the fact that he had only incompletely executed the loan documents and had instructed his solicitor not to deliver them to anybody. Furthermore, he could not have intended to be immediately bound when it was plain from the Instructions that there were a number of steps which had to be taken by Fohec upon receipt of the executed loan documents. 3. So far as Fohec sought to rely on the terms of the mortgage, Fohec had not discharged its onus of establishing it was a deed because the indications in the loan documents were equivocal. 4. Delivery had not occurred for a number of reasons, including that the loan documents contemplated the steps to be taken by Fohec in the Instructions (noting that the wrong solicitor for Fohec had been identified in the Instructions) and for the delivery of a mortgage in registerable form. 5. Finally, even if the mortgage was a deed that had been delivered, it had been disclaimed, waived or abandoned.
Finally, as to quantum, it was submitted RSA Civil's MYOB records showed that $144,600 had been paid. With the exception of one matter resulting in a concession by David of $7,600, the balance of the figures had not been cross- examined upon. This meant the Court should find that $137,000 had been repaid.

Fohec's case against David - consideration

The Court accepts George's evidence that on 20 December 2018 David rang him shortly after 3.30pm and said "I've just signed the loan documents at George Bazouni's office. Please transfer the funds as soon as possible." The reasons for this finding, and taking into account the guarded view I have formed about George's credit, are: 1. The fact of his having signed the loan documents is corroborated by the existence of the copy of the signed loan documents produced by Mr Bazouni dated 20 December 2018; 2. It is consistent with the text messages between the men the previous day to the effect that David needed the funds urgently, but that George had made it clear they would not be advanced until the loan documents had been signed (see [31] above); 3. Mr Bazouni's notes record his conference with George concluding at 3.30pm, leaving plenty of time in the business day for David - who wanted the funds urgently - to make the call to George and for the funds to be transferred from Fohec's solicitors' trust account; 4. I accept Mr Allen's submission that David "let slip" during his cross-examination that he had made the call as deposed to by George (noting that I found David's attempt to resile from his answer completely unconvincing) (Tcpt, 14 September 2023, p 211 (7-28)): Q. After you left the meeting, you telephoned your brother George, didn't you? A. I did. Q. You said to George that you had signed the documents, didn't you? A. I did. Not. Sorry, I didn't understand the question. Q. You told George that you signed the documents. A. I wasn't even listening to the question. I'm sorry. No, I didn't tell him I signed the documents. Q. You did tell him that you signed the documents, didn't you? A. No, I didn't. I thought you were going to ask me "Did you have a heated conversation with him?" Sorry, I should listen to the question. Q. You've been listening to my questions all morning, haven't you? A. I have. Q. You've comprehended all the questions I've asked you until now, haven't you? A. Until the last question. I shouldn't have just. I should've just waited before I answered it. I'm sorry. Q. When you left Mr Bazouni's - sorry, could you go, then WITNESS: Your Honour, can I have a toilet break, please?
In reaching this conclusion, the Court rejects David's evidence about what occurred at and after the meeting with Mr Bazouni, including that he (David) signed the loan documents before he had received Mr Bazouni's advice (it is beyond fanciful to think Mr Bazouni would have witnessed David's signatures before giving the advice he had been retained to give); that he (David) got angry about the references to interest rates; that he told Mr Bazouni not to send the documents to anyone; and, that he immediately phoned George in an angry rant. None of this is consistent with the documents produced by Mr Bazouni and his notations on them.
David could have refused to sign the documents. Had he done so, I have no doubt given his thorough notes that Mr Bazouni would have recorded that. It also makes little sense that, having signed the documents with the solicitor acting for him, that he would then tell that solicitor not to send them to anybody. Even if this had occurred, again I am confident Mr Bazouni would have recorded such important, and in some respects counterintuitive, instructions.
Such behaviour on the part of David is also quite inconsistent with what he is recorded, and the Court has found, that he told Mr Bazouni. In the face of Mr Bazouni's advice, including presumably about the high interest rates and the suggestion David seek financial advice, Mr Bazouni records David telling him that he (David) could "pay the loan tomorrow if I want to using my $900k - no issue" with a long explanation of why that was so. That advice included what Mr Bazouni recorded next to the extremely broad definition of "Money" as what was repayable pursuant to the MCP: "VERY IMPORTAN(T) EXPLAINED IN DETAIL". Furthermore, in relation to the Guarantor's Advice Declaration, Mr Bazouni records David as acknowledging "no one forced me to sign these docs".
The matters in the previous four paragraphs are also very significant for the Court's view of David's credit more generally. It is possible to take a benign view that the reliability of David's evidence was, as he contended, affected by memory loss due to his history of substance abuse. However, for David to invent what I am well satisfied, given the seriousness of the finding, is a completely false narrative about what happened at and after the meeting with Mr Bazouni takes matters well beyond such a benign conclusion. I find it incredible that David originally denied ever having signed the loan documents in circumstances where he had a done so in the presence of his solicitor over the course of a one hour and fifteen minute conference where that solicitor carefully explained the documents in detail. The Court concludes that David was a witness prepared to say whatever he thought would help him, including to lie, to avoid liability to George.
I am fortified in this conclusion by the confident picture as to repayment that David painted to Mr Bazouni. This picture is in sharp contrast to David's text messages to George about his urgent need for the funds. I conclude from that contrast that David was prepared to say whatever he thought was in his interests, whether true or not, including to his own solicitor Mr Bazouni. Events proved the falsity of what David told Mr Bazouni about how easily the loan could be repaid. I am satisfied that in the witness box David likewise remained prepared to, and did, say whatever he thought would deflect the liability for which he was being sued.
It is next convenient to say something about the mystery of the whereabouts of the original executed loan documents. In doing so I acknowledge that a finding on this is not necessary and the parties, no doubt for their own different forensic reasons, were content to rely on what had been produced by Mr Bazouni. However, these observations may be made: 1. I reject the suggestions in Mr Reynolds' submission that I should accept David's evidence that he (David) walked out of Mr Bazouni's office with the original executed loan documents. Apart from anything else, that makes no sense when taken with David's assertion (which the Court does not accept in any event) that he told Mr Bazouni not to send the documents to anyone without his (David's) further instructions. 2. I reject the suggestion that David stopped executing (by initialling in this case) the MCP at page 26 because that is all that was produced by Mr Bazouni. This became a moot point, because the parties ultimately accepted that the MCP was incorporated into the mortgage whether or not each page had been present or signed. Just as Mr Bazouni recorded that what George had emailed him was incomplete, I am satisfied he would have recorded that on the documents if it had occurred. A possible explanation is that in copying the documents for his records, or scanning them to produce to the Court (given that only copies were called for and production was electronic) the last pages of the initialled MCP may not have been completely copied or scanned. The parties did not pursue the matter further with Mr Bazouni. 3. Similarly, the parties seemed to accept that Mr Bazouni continues to hold the original executed loan documents, although what he may have produced could have been a colour scan of a colour copy of the originals. The parties did not seek to put before the Court any evidence to clear this point up, and given that neither of the protagonists could produce the originals, the Court concludes to the extent necessary that the complete original loan documents executed by David remain with Mr Bazouni. I draw this conclusion notwithstanding Mr Bazouni's notation on the page headed "checklist of required supporting documents" that "all documents have been provided to the broker George Kahila" with circles around four of the document types. This is consistent with Mr Bazouni recording David telling him (Mr Bazouni) that David had already provided those documents (such as a council rates notice, for example) to George.
The next issue is when the funds left Fohec's solicitors' trust account to be advanced to RSA Civil. Given the views I have expressed in [129] above, the Court finds on the balance of probabilities that the transfer occurred after David had told George that the Loan Documents had been signed. In particular: 1. That accords with George's text message of the day before that the funds would not be advanced without signed loan documents (see [31] above); 2. That accords with normal practice where documents are required to be executed in relation to a loan and, as such, is the more inherently likely sequence of events; 3. I do not accept that George's emailing RSA Civil's bank account details to his solicitors at 1.35pm is of itself a sufficient basis to conclude the funds left the solicitor's trust account at that time. In reaching that conclusion I have not overlooked that the email's subject is "cheque directions". In my view, if the purpose of the email was to be an instruction to pay immediately (as opposed to just passing on the bank details), George would have said so in the email. 4. In reaching this conclusion, I have taken into account that Mr Bazouni twice records David as telling him (Mr Bazouni) that the funds had been "paid" or "already paid". As I have noted in [130] above, David may not have been truthful with Mr Bazouni. Alternatively, it seems to me possible that because George had demonstrated to David by text (see [31] above) on 19 December 2018 that the funds were in George's solicitors' trust account pending execution of the loan documents, David conflated this with the funds having been advanced. On any basis, David's statements do not outweigh the matters I have referred to in the preceding sub-paragraphs.
The question of the timing of the advance was relevant to Mr Reynolds' submission that past consideration would not have been good consideration. By reason of my finding, that submission does not arise. However, even if I am wrong, I accept Mr Allen's submission that the advance and the execution of the loan documents were sufficiently contemporaneous to overcome the application of the past consideration principle. The evidence established a "window" of no greater than two hours. The advance could not have occurred earlier than 1.35pm (the time of George's email to Mr Skouteris) and the loan documents must have been signed by the conclusion of David's conference with Mr Bazouni at 3.30pm. Another way of putting that submission is that this is a case where the general proposition that the law does not take notice of periods of less than a day should be applied.
The next question is whether the loan documents (or more precisely the mortgage) are a deed and, if so, whether delivery occurred. I observe in passing that while the mortgage itself left blank the document reference for its terms and conditions, there was no doubt that the parties intended the MCP to apply given it had been provided as part of the suite of loan documents and was incorporated by reference in Schedule A of the mortgage.
It is the case that in one place David executed the mortgage as mortgagor by reference to the word "executed" and elsewhere he did so as "signed, sealed and delivered" as "guarantor 1/mortgagor". However, I do not accept Mr Reynolds' submission that the status of the mortgage as a deed was equivocal.
Clause 4.1 of the MCP provides: 4. Nature of this Mortgage 4.1 This Mortgage is a deed and the Debtor acknowledges that: (a) this Mortgage has been executed as a deed: and (b) it shall not contend: (i) in any court of law; (ii) in any tribunal: or (iii) to any Government Authority - that this Mortgage is not a deed or that it has not been executed as a deed.
The MCP also includes the guarantee provisions in Clause 28, to which David is bound because he has executed the mortgage expressly as guarantor. Contrary to Mr Reynolds' submission, "Debtor" includes David. This is because the MCP defines "Debtor" as: "Debtor" means the Borrower and/or the Mortgagor as the case may be: (a) where the Borrower and the Mortgagor are the same person the expression means both the Borrower and the Mortgagor. (b) where the Borrower and the Mortgagor consists of more than one person, the liability of those persons under this Guarantee shall be joint and several;
"Mortgagor" is then defined as "the person named in Schedule A as the Mortgagor". Schedule A identifies David as "Guarantor 1" and then defines the "Mortgagor(s)" as "Borrower(s) and Guarantor(s)". In my respectful opinion, those express provisions put beyond doubt that the mortgage is a deed.
The next issue is when did the deed become binding?
In Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500 at 9503, Rogers J (as his Honour then was) said: "The submission makes it necessary to explore yet again the significance of and the purpose of the requirement of law that there be delivery of a deed. My own researches have led me to consider Report No 10 of the Law Reform Commissioner Victoria "Delivery of Deeds", a note in 55 ALJ 113; an article by A J Bradbrook "The Delivery of Deeds in Victoria" 55 ALJ 267; "Deeds - the Problem of Delivery" by Mr Butt 52 ALJ 454 and the decision of Zelling J in Rose v Commissioner of Stamps (SA) (1979) 79 ATC 4499 . Counsel for the defendant referred me to Vincent v Premo Enterprises (Voucher) Sales Ltd [1969] 2 QB 609 and Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109 . From this wealth of authority, I think the following emerges: (1) Delivery is required before a deed can take effect. "Delivery" means an act done so as to evince an intention to be bound. Intention must be ascertained by considering the nature and circumstances of the case: Lady Naas v Westminster Bank Ltd [1940] AC 366 at 399. (2) One starts from the position that if all one knows about a document is that it purports on the face of it to have been signed, sealed and delivered, then the fair inference in the absence of other evidence is that it is in fact a deed: Xenos v Wickham (1866) LR 2 HL 296 at 312 and at 322. (3) The presumption of delivery may be rebutted.
Before turning to the conduct of the parties, there are at least two textual indications, in addition to the words "signed, sealed and delivered", that the mortgage was intended to become binding, that is to say to have been delivered, on execution. The first is clause 28.16: 28.16 Notwithstanding that this Guarantee may be intended or expressed to be executed and given by more than one person it shall, in fact, be valid and effectual as a guarantee and indemnity binding upon and enforceable against any person or persons that has executed it forthwith upon their execution and shall continue to be binding and enforceable against any person that has executed it notwithstanding the fact that any proposed or contemplated party shall not subsequently execute this Guarantee.
While it did not in terms apply because there was only one guarantor, it would be a strange result that in this case the one guarantor might not be bound on execution, whereas if there had been two to sign, one guarantor would have been bound even if the other hadn't signed. A guarantor executing a deed in that situation of multiple guarantors would have been bound at law upon execution "because of the special rules as to deeds": Marston v Charles H Griffith & Co Pty Ltd (1982) 3 NSWLR 294 at 301 per Powell J (as his Honour then was).
The second textual indication is that the power of attorney which David executed as part of the loan documents which empowered Fohec's solicitors to complete various documents on his behalf was expressed to operate "immediately", which I consider means upon its execution.
Further to these textual indications, on the facts of this case, the Court finds from the objective conduct of the parties on 19 and 20 December 2018 that their intention was for delivery to occur upon execution or, if that be wrong, upon George being notified that the loan documents had been signed. In short, the contemporaneous text exchanges show that David was anxious to receive the funds and George was prepared to make the advance once the loan documents had been signed with George having had the benefit of Mr Bazouni's independent advice. That is what the Court has found occurred.
Whether by way of rebutting the presumption of delivery on execution or simply as going to intention, Mr Reynolds placed particular emphasis on: 1. The detailed Instructions for return of the documents to Fohec's solicitors; 2. The need to provide a second mortgage in registrable form; and 3. George's evidence in the witness box about the "usual practice" being not to advance funds without seeing the executed loan documentation.
I do not accept that any of those matters is sufficient to negative the conclusion which I have reached by reference to the parties' conduct. From a contractual point of view they are all matters for the benefit of Fohec which, as such, it was entitled to waive. The conduct which the Court has found demonstrates such a waiver by George on behalf of Fohec.
That approach also offers some explanation, if any be required, for why there was no follow up by Fohec to obtain the executed loan documents. During cross-examination George tellingly (but wrongly in this particular case) referred to Mr Bazouni as his representative (see [88(7)] above). Mr Bazouni was known to George and George had certainly organised for David to see Mr Bazouni. George obviously considered Mr Bazouni to be in Fohec's camp, so it is unsurprising that he may have been content to leave the executed loan documents with Mr Bazouni as a practical matter, having been told by David that they had been executed.
Finally, I do not accept the submission that the legal obligations evidenced by the loan documents (in particular the mortgage) were disclaimed, waived or abandoned. Any such conclusion is unsustainable when it is part of David's case that RSA Civil was making repayments in 2019 and 2020 (which is accepted by Fohec) and where Fohec sent accounts from 2021.
Turning to the question of quantum, David relied on three RSA Civil MYOB records to establish that repayments totalling $144,600 had been made. The first of these referred to the payee as "GK - Evolution" (being the name he had been given by George for repayments - see [44] above) for payments between April 2019 and September 2020 totalling $64,600. However, David accepted in cross-examination that a payment listed for $7,600 was unrelated to the repayment of the advance. With that deduction, Fohec accepted that $57,000 had been repaid.
The other two MYOB records list the payee as George. One has an identifier of "RSA Civil" and lists payments from May 2019 to 28 February 2020. The other says "Demo" and lists payments from 31 December 2019 to 1 July 2020. David's evidence was that these were payments made to George referable to the advance by means of cash cheques. George denied he had received the payments. Given his denial, nothing can be made of the fact that David was not specifically cross-examined about those two records because the issue was clearly in contest.
While there were text messages in evidence where George said a payment should not be described as interest, and other messages from George chasing David for money, these did not appear to link directly to the payments in the other two MYOB records. Nor was there any satisfactory explanation from David as to why they appeared to be accounted for on separate records but overlapped as to periods of time. If they were repayments for the advance, even by cash cheques, RSA Civil's own records could have shown them on the same list referred to in [153] above.
Given the view the Court has taken of David's credit and the lack of a corroborated explanation why the records were kept in that form, I am not actually persuaded on the balance of probabilities by those two other records that the payments, if they were made, were repayments of the advance. Accordingly, the Court finds that only $57,000 was repaid by RSA Civil to Fohec in respect of the loan the subject of these proceedings.

Fohec's case against Chantell

Because of the view to which I have come about this aspect of the proceedings, I can deal with it concisely.
By its amended statement of claim, Fohec sought this relief against Chantell: Relief against the second defendant 7 A declaration that the Kellyville Property is held in the name of the second defendant on constructive or resulting trust for the first defendant. 8 Alternately, a declaration that the Kellyville Property is held in the name of the second defendant on a constructive or resulting trust in proportion to the contribution made by the first defendant for the purchase of the Kellyville Property. 9 Alternately, a declaration that the proceeds of sale arising out of the sale of the Kellyville Property are wholly or partly charged with repayment of the monies owing by the first defendant to the plaintiff, pursuant to the Loan.
It will be recalled that Kellyville was held by Chantell as sole registered proprietor, but subject to a mortgage to the ANZ Bank to which both David and Chantell were parties. The loan from ANZ was subsequently refinanced with a loan from the Commonwealth Bank of Australia to which only Chantell was a party.
David and Chantell's evidence on this aspect of the case was directed to establishing that it had always been their intention that Chantell would be the sole legal and beneficial owner of Kellyville. This was strenuously disputed by Fohec, which pointed to evidence that the funds for the purchase and payment of the loans in respect of Kellyville came, at least in part, from David or RSA Civil or both. To the extent that the presumption of advancement is still part of Australian law (see Bosanac v Commissioner of Taxation (2022) 275 CLR 37; [2022] HCA 34), Fohec submitted that the presumption had been rebutted such that a portion of Kellyville (which Fohec asserted as 50 percent, with the evidentiary basis for that assertion being quite unclear) was held on either resulting or express trust by Chantell for David.
While the question of whether or not Chantell held any part of Kellyville on trust for David was contested, certain other facts were not. These were that on 8 May 2023, Chantell's sale of Kellyville was completed with the net proceeds of $570,516.06 being paid to her. Her evidence in the witness box was that she had then applied those funds to the purchase of a new property in her name.
By reason of the facts referred to in the preceding paragraph, the Court accepts Mr Reynolds' submission that Fohec is not entitled to the declarations sought in its amended statement of claim (see [158] above) because there is no utility in them. In this context, it is important to note that no tracing claim was pleaded or contended for by Fohec in relation to the proceeds of sale of Kellyville.
The lack of utility in the declarations seems to have been accepted, at least implicitly, in Mr Allen's written submissions for Fohec, which in relation to the case against Chantell included: "Analysis - relief 111. When Chantell sold Kellyville, David's share of the net proceeds was $235,238. 112. The sum is still impressed with a trust. 113. This amount is charged with payment to Fohec. 114. Judgment ought to be given against Chantell for this amount."
There is, in my respectful opinion, a very large gap in factual and legal reasoning between paragraphs 113 and 114. The latter is, significantly, silent on for whom judgment should be given against Chantell, although I have no doubt Mr Allen meant it to be in favour of his client. The parties' forensic attention had been completely focussed on the question of whether David was the beneficiary of a resulting trust in some proportion of Kellyville with Chantell as the trustee. For the following reasons, I accept Mr Reynolds' submission that Fohec's case as to how a finding to that effect should sound in relief for Fohec against Chantell was "obscure and unsupported by the pleadings". There are procedural and fundamental reasons why Fohec could never get a money judgment against Chantell on the case it has advanced.
First, no judgment against Chantell in any amount is sought in the amended statement of claim.
Second, it is instructive to consider the relevant part of the pleading in the amended statement of claim against Chantell: 31 In the premise, it was the mutual and express intention of the first and second defendant that the Kellyville Property would be held on trust jointly for the first and second defendant. 32 On 26 March 2023, the Kellyville Property was sold for $3,300,000.00. PARTICULARS Rea/estate.com.au extract appearing at Annexure F of GK Affidavit 27.04.2023 33 By reason of the matters pleaded at paragraphs 23 to 32 above, the first defendant has an interest of at least 50% in the Kellyville Property, or some other proportion determined to be just and equitable by the Court. 34 In the premise, the interest of first defendant in the Kellyville Property up until its sale, was held in the name of the second defendant on trust for the first defendant. 35 In the alternative, the Kellyville Property, up until its sale was held in the name of the second defendant, on trust in a proportion to the contribution made by the first defendant for the purchase of and payment of the mortgage for the Kellyville Property. 36 By reason of the matters pleaded at paragraphs 23 to 32 above, the sale proceeds of the Kellyville Property, in a proportion of at least 50% or some other sum determined by the court, are held by the second defendant on trust for the first defendant.
While the pleading asserts that at least a proportion of the sale proceeds of Kellyville were held by Chantell on trust for David, the pleadings are devoid of any allegation as to how Fohec is entitled to a judgment against Chantell.
The failure of Fohec's case against Chantell depends upon something more fundamental than that deficiency in pleading, important as it is. That fundamental difficulty may be demonstrated in the following way. Let it be assumed in Fohec's favour that: 1. Chantell held 50 percent of Kellyville on a resulting trust for David; 2. David's equitable interest in 50 percent of Kellyville was subject to a charge in favour of Fohec pursuant to the mortgage (to which Chantell was not a party); 3. Chantell held 50 percent of the net proceeds of sale of Kellyville on express or resulting trust for David; and 4. Chantell paid away the entire net proceeds of sale of Kellyville for her own purposes.
Assuming all those matters in favour of Fohec, I am unable to identify, and Mr Allen did not identify in his written or oral submissions, any basis on which Fohec would have a cause of action that could give rise to a judgment in Fohec's favour against Chantell for 50 percent of the net proceeds paid away. No trust or fiduciary obligation owed by Chantell to Fohec was pleaded or maintained against Chantell. David might have had a cause of action against Chantell for breach of trust in paying away the entire net proceeds of sale to her own benefit, but it was certainly never suggested that Fohec was somehow subrogated to any rights David may have had against Chantell. Therefore, while the amended statement of claim included a prayer for "equitable compensation", assuming that to be what Mr Allen was referring to as the source of the "judgment" claimed in his submissions (see [163] above), no equitable obligation on Chantell's part to Fohec has been identified which Fohec pleads was breached so as to sound in equitable compensation.
Furthermore, there was no accessorial claim pleaded or maintained against Chantell. It could not have been, because, as a first step, Fohec would have had to establish that David held his interest (assuming there to be one) in Kellyville subject to trustee or fiduciary obligations owed by him to Fohec. This would not be possible because the relationship between Fohec and David was one of creditor and debtor, with the mortgage granting Fohec a proprietary interest in David's assumed interest in Kellyville. However, it is clear from the mortgage that what it granted to Fohec was a security interest over David's property, which is not the same as the equitable ownership of a beneficiary under a trust.
In the assumptions set out in [168] above, I have deliberately excluded the issue of whether or not Chantell had notice of Fohec's interest, on this hypothesis, in David's equitable interest in Kellyville or the net proceeds of its sale. I have done this for two reasons.
First, notice or knowledge of someone else's interest in property may be relevant in the following ways in equity: 1. The assertion of an equitable proprietary claim in property either by reference to a claim to priority or by tracing; or 2. Claims in knowing receipt or knowing assistance.
The amended statement of claim pleads none of these against Chantell.
Second, the Court is not satisfied that Chantell had notice of any interest in Kellyville on the part of Fohec of any juridically relevant kind. I have reached this conclusion conscious of the fact that paragraph 2(k) of the amended statement of claim makes this floating allegation in relation to Chantell: "At all material times, and prior to the sale of Pemulwuy Property and Kellyville Property, [Chantell] had knowledge and was aware of the first defendant's indebtedness to the plaintiff"
This allegation is denied by Chantell in her defence.
I have described this as a "floating" allegation because it is not tied into anywhere else in the pleading. Given what I have said in [172] and [173], the allegation is immaterial and would have been liable to be struck out accordingly.
However, assuming it to be material, two things may be said about it.
First, an assertion that Chantell knew that David owed money to Fohec takes Fohec's case nowhere.
The same conclusion applies if "the first defendant's indebtedness to the plaintiff" in the allegation is read by reference to the preceding pleading in relation to David in paragraph 1(n) that he "was jointly and severally liable to the plaintiff, under the terms of Mortgage and Loan Agreements entered on or about 20 December 2018".
In my respectful opinion, in order to take the matter anywhere, Fohec would have had to have pleaded and proven knowledge on the part of Chantell of the arrangements between Fohec and David sufficient to warrant the conclusion that she knew or ought to have known at the time Kellyville was acquired (being when the alleged express or resulting trust in favour of David arose) that Fohec had an equitable interest in David's equitable interest in Kellyville. The amended statement of claim falls far short of that.
Second, and in any event, while the amended statement of claim contains the pleading set out in [174] above, there is no evidence that Chantell knew, even at the level of generality, that David owed money to Fohec when Kellyville was purchased. Even more pointedly, there is no evidence that Chantell knew that David had mortgaged or charged his real and personal assets to Fohec. Nor was it put to Chantell in cross-examination that she knew of these things either at the time Kellyville was purchased or when she applied the net proceeds of the sale of Kellyville to her own purposes. Even assuming it could have been relevant, there was also no question put to Chantell as to her understanding of the claims made against David in these proceedings.
It follows that it is not necessary for the Court to determine whether or not David had a beneficial interest in Kellyville or the net proceeds of its sale. Fohec's case against Chantell fails on more fundamental grounds.

Conclusion

As to the case against David, the parties will be given an opportunity to bring in short minutes to give effect to these reasons.
As to Fohec's case against Chantell, it will be dismissed with costs.
To the extent agreement is not possible, the Court will hear the parties on the question of costs, including arising from the reservation of costs in the orders giving effect to the settlement with the third and fourth defendant/cross-claimants.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 September 2024

Trade Practices Act 1974(Cth)

Fohec Pty Ltd v Kahila

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