[2009] VSCA 297

[2008] VSC 168 (Hargrave J)

CONTRACT - Formation - Intention to create legal relations - Heads of Agreement - Not signed by all named parties - Whether binding as between signatories - Subsequent conduct - Whether admissible as evidence of existence of agreement - Breach - Failure to complete sales of land under contracts contemplated by Heads of Agreement - Whether breach of Heads of Agreement - Repudiation - Whether attempted evasion of tax, other improprieties and attempts to re-negotiate Heads of Agreement evinced an intention no longer to be bound thereby.

TRUSTS AND TRUSTEES - Constructive trust - Whether terminated upon variation of underlying contract.

EQUITY - Estoppel - Statements by party of no longer being involved in project - Whether unconscionable later to assert rights as if still involved in project - Whether estopped as against third party dealing with project on faith of statements.

CORPORATIONS - Shares - Directors - Transfer of share and issue of further shares implemented by disqualified de facto director - Whether valid - Whether appropriate to make validating orders - Corporations Act 2001 (Cth), ss 201M(1), 254E, 1322(4).

1 This is an appeal from a judgment given in the Commercial List in two proceedings concerning the ownership and control of land situate at 61 and 63 -67 Buckley Street, Footscray ('the Buckley Street properties').

2 The appellants ('Bloomingdale' and 'Gangemi') were the plaintiffs in the principal proceeding. Gangemi was a builder and property developer and used Bloomingdale as the vehicle for his building and property development activities. The respondent, Pasquale (Percy) Lanciana ('Lanciana') was a property developer and businessman and he used Pre Need Services Pty Ltd ('Pre Need') and Clapana Pty Ltd ('Clapana') as corporate vehicles for his development and other business activities. Until the events in issue in the proceedings, Gangemi and Lanciana were close friends.

3 The respondent, 63 Buckley Street Pty Ltd ('63 Buckley'), was the registered proprietor of the Buckley Street properties. It was incorporated at the behest of Gangemi and Lanciana as a corporate vehicle for investment in and development of the Buckley Street properties ('the Buckley Street project'). To begin with, Gangemi was the sole shareholder and director of 63 Buckley. One of the issues in the principal proceeding was whether Gangemi was still the sole shareholder and director of 63 Buckley.

4 The respondent, Kourosh Jafari ('Jafari'), was also a property developer and, until the events in issue in the principal proceeding, he too was a friend of Gangemi. He invested $350,000 for a 25% interest in the Buckley Street project. He claimed that, as a result of arrangements between Gangemi and Lanciana in 2003, and between Lanciana and Jafari in 2005, he became entitled to sole legal and beneficial ownership of 63 Buckley and, as such, entitled to develop the Buckley Street properties for his sole benefit. He also claimed damages pursuant to s 118 of the Transfer of Land Act 1958 (Vic) resulting from caveats lodged by Bloomingdale over the titles to the Buckley Street properties.

5 The respondent Richard Osborne ('Osborne') was another close friend of Gangemi. He agreed to invest $200,000 for a 12.5% interest in the Buckley Street project on condition, as the judge found, that the $200,000 was to be repaid with interest of $50,000 if the necessary planning permit for development were not obtained within 18 months of the investment. In the events which occurred, the permit was not obtained in that time and, in the second proceeding ('the Osborne proceeding'), which was tried with the principal proceeding, Osborne sought repayment of the $200,000 plus the $50,000 interest and interest thereon.

6 Following an extensive analysis of the evidence and competing contentions[1] the judge found that:

1. Lanciana, Gangemi, Jafari and Osborne had invested in the Buckley Street properties and the Buckley Street project in return for an agreed percentage of ownership of the Buckley Street properties, and an agreed percentage of the ultimate profits of the Buckley Street project, as follows:

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

(c) Gangemi and Lanciana together invested borrowings of $504,000 ('the Perpetual loan') (which was secured by a mortgage over the Buckley Street properties and guaranteed by Gangemi and Lanciana), the value of their work, and all moneys (including consultants' fees and permit fees) required to obtain a planning permit to allow the Buckley Street project to proceed. It was intended that they should receive in return a 62.50 per cent (31.25 per cent each) interest but be jointly responsible for repayment of the Perpetual loan of $504,000 from their own moneys or share of the profits of the project;

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

2. Initially, it was intended that the investments by Lanciana, Gangemi, Jafari and Osborne be held through unit holdings in a unit trust to be established under the name of 'The Buckley Street Unit Trust'. But in fact no such unit trust was ever established.

3. Osborne invested $200,000 in the Buckley Street project on the condition that, if the development permit were not obtained within 18 months, Gangemi and Lanciana would repay $200,000, together with $50,000 interest. The planning permit was not obtained within 18 months, which expired on 4 September 2003, and Osborne was accordingly entitled to judgment against Gangemi for $250,000 together with interest on that amount from 4 September 2003.

4. Initially, Gangemi and Lanciana were jointly responsible for the payment of Osborne's debt but, by Heads of Agreement executed between Gangemi and Lanciana in 2003, Gangemi gave up his right to contribution from Lanciana.

5. There was no substance in claims made by Gangemi that his execution of the Heads of Agreement and of other instruments signed by him pursuant to the Heads of Agreement were procured by duress. Even if there were, Gangemi had by his conduct affirmed the Heads of Agreement and further or alternatively was by his conduct estopped from contending that the Heads of Agreement were not binding by reason of duress.

6. The Heads of Agreement constituted a binding agreement between Lanciana and Gangemi.

7. There was no substance in claims by Gangemi that the Heads of Agreement were terminated or abandoned.

8. Pursuant to the Heads of Agreement, in 2003 Gangemi transferred full ownership and control of 63 Buckley to Lanciana and, in 2005, Lanciana transferred full ownership and control of 63 Buckley to Jafari. In each case, the steps involved in the transfers were attended by gross informality and procedural error. But the processes were nevertheless valid or else should be declared valid under s 1322(4) of the Corporations Act 2001 (Cth).

9. Each of Gangemi and Lanciana had represented to Jafari, in trade or commerce, that the Buckley Street properties would be purchased unencumbered, and they had thereby engaged in conduct which was misleading or deceptive or likely to be mislead or deceive contrary to s 9 of the Fair Trading Act 1999 (Vic). Although Jafari made no claim against Lanciana in that regard, he sought contribution or indemnity from Lanciana and, in those circumstances, it was appropriate to declare that each of Gangemi and Lanciana had engaged in misleading and deceptive conduct contrary to s 9 of the Fair Trading Act 1999 (Vic). Questions of causation and quantification of any loss or damage suffered by Jafari by reason of the contravention, and issues concerning contribution or indemnity between Gangemi and Lanciana, were left to be determined in a separate trial.

10. Bloomingdale had not had reasonable cause to lodge caveats over the Buckley Street properties. The caveats which it lodged had the effect of preventing Jafari and 63 Buckley from dealing with the Buckley Street properties, and it was apparent that it had caused each of them some damage. Accordingly, they were entitled to a declaration that Bloomingdale had no reasonable cause to lodge the caveats, and for an order for compensation to be assessed under s 118 of the Transfer of Land Act 1958 (Vic).

11. There were a number of revenue matters which needed to be referred to the Attorney-General for investigation and possible referral to revenue authorities and, if it transpired that Gangemi or Bloomingdale were liable for any duties or taxes arising out of the Heads of Agreement or their implementation, Lanciana was bound to indemnify them in respect of that liability. The only exception to that was in respect of any stamp duty payable by Gangemi upon his acquisition of Lot 17 in the Hoddle Street development.

1. In the Osborne proceeding, judgment for Osborne against Gangemi for $250,000 together with interest thereon computed from 4 September 2003. Gangemi's claim against Lanciana for indemnity or contribution was dismissed.

2. In the principal proceeding, declarations as follows:

(a) In September 2003 Gangemi transferred the only issued share in 63 Buckley to Lanciana. That share transfer was not invalid by reason of any contravention of the provisions of the constitution of 63 Buckley.

(b) In September 2003, Gangemi resigned as the sole director of 63 Buckley and appointed Lanciana to act as a director in his place. The appointment of Lanciana as a director of 63 Buckley was not invalid by reason of any contravention of the constitution of 63 Buckley.

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

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

(e) Bloomingdale lodged caveats numbered AD824331J and AE12488F with the Registrar of Titles without reasonable cause.

(a) for 63 Buckley and Jafari against Bloomingdale for compensation to be assessed under s 118 of the Transfer of Land Act 1958 (Vic); and

(b) for Jafari against Gangemi for damages to be assessed in respect of the contravention by Gangemi of s 9 of the Fair Trading Act 1999 (Vic).

8 Under cover of Grounds 1 to 8, it was submitted that the judge erred in that, having found that 63 Buckley at one point held the Buckley Street properties on constructive trust for Jafari, Osborne, Bloomingdale and Lanciana, his Honour failed to make a declaration to that effect. Under cover of Grounds 9 to 28, it was further submitted that the judge erred in finding that the Heads of Agreement were effective to terminate the constructive trust and vest the beneficial interest in the Buckley Street properties in 63 Buckley or in Lanciana in his capacity as shareholder of 63 Buckley. In effect, those two submissions were parts of but one complaint that the judge should have found that Gangemi was still beneficially interested in 63 Buckley. The appellants, however, advanced a number of arguments in support of that contention, with which it is appropriate to deal in turn.

Whether Heads of Agreement a valid and binding agreement

9 The first argument was that the Heads of Agreement was not a valid and binding agreement because it expressly provided that 'the terms of settlement will take effect upon the signing of these Heads of Agreement by the parties', and because the Heads of Agreement were not signed by Clapana, Pre Need, Daniel Leigh Lanciana, Sam Abate and 87 Stevedore Street Pty Ltd (who were all referred to in the Heads of Agreement as 'parties').

10 The judge gave the following reasons for concluding that the Heads of Agreement were valid and binding despite being signed only by Gangemi and Lanciana:

1. There were three meetings between various of the parties to resolve their differences over the Buckley Street project and, by the time of the third meeting, it was clear that none of Osborne, Jafari or Abate wished to continue as an investor in the project. Abate had only made a small investment, which had been repaid or was the subject of agreement with Lanciana that it be repaid, and, therefore, Abate was not making any claim against 63 Buckley, Lanciana, Gangemi, Osborne or Jafari. Osborne and Jafari wished to have their investments in the Buckley Street project repaid, and did not care who repaid them, and there appeared to be no issue that Osborne and Jafari would be repaid. The Heads of Agreement thus described their investments as 'loan monies' and the only issue was how the repayments would be achieved, which in turn depended on resolution of the wider dispute between Gangemi and Lanciana.

2. The wider dispute involved only Gangemi and Lanciana. Although there were a number of companies and unit trusts holding the assets involved in Gangemi's and Lanciana's joint endeavours, each such company and trust was under the effective control of either Gangemi or Lanciana. Viewed objectively, therefore, this was a dispute between two businessmen, Gangemi and Lanciana.

3. In an endeavour to resolve the dispute, Gangemi and Lanciana had engaged the 'mediation services' of Mick Gatto and Mario Condello, and none of Osborne, Jafari, Abate or Daniel Lanciana was involved in that process.

4. Each of Gangemi and Lanciana had engaged solicitors to assist them to resolve the dispute and those solicitors dealt only with each other, Gangemi and Lanciana, Gatto and Condello. Between them, they produced a number of drafts of the Heads of Agreement.

5. Gangemi and Lanciana attended the third meeting willingly and, if viewed objectively, it appeared that their purpose was to endeavour to resolve the overall dispute between them.

6. The final draft of the Heads of Agreement was prepared by Gangemi's solicitors on his instructions and represented the terms upon which he was prepared to settle his dispute with Lanciana. Gangemi took it with him to the third meeting.

7. Gangemi and Lanciana were the only natural persons named as parties who attended the third meeting.

8. The third meeting consisted of a commercial negotiation at the end of which Lanciana and Gangemi signed and initialled the Heads of Agreement and, viewed objectively, their conduct signified an intention that they be bound by the Heads of Agreement as so amended, without need for the other proposed parties to sign the document.

9. There was no evidence of any subsequent request by Gangemi, Lanciana or any other person that the Heads of Agreement be signed by any other proposed party.

10. The subsequent conduct of the parties, viewed objectively, reinforced the impression that Gangemi and Lanciana had intended to conclude an agreement between them on the terms set out in the Heads of Agreement.

11. There was no commercial reason for the Heads of Agreement to be signed by Daniel Lanciana, Abate, Clapana, 87 Stevedore or 63 Buckley, because:

a. Daniel Lanciana was a mere 'puppet' director for his father, Lanciana. The companies of which he was a director, Clapana and Pre Need, were under the effective control of Lanciana. Gangemi well knew that to be so, and there was no doubt, as the judge found, that Lanciana had full authority from Daniel Lanciana to bind Clapana and Pre Need to any obligation which Lanciana thought fit.

b. None of Clapana, 87 Stevedore or 63 Buckley undertook any obligation, or received the benefit of any promise, under the final draft or the Heads of Agreement as signed. Clause 2 of the Heads of Agreement contained acknowledgements and agreements on the part of the Gangemi parties and the Lanciana parties, but none of Clapana, 87 Stevedore or 63 Buckley was included in the definitions of 'the Gangemi parties' or 'the Lanciana parties'. The obligations for which the Heads of Agreement provided included procuring that contracts of sale would be executed by Clapana as vendor and Gangemi and Gangemi's mother-in-law, or their nominees, as purchasers but it did not impose obligations on Gangemi's mother-in-law or nominee. The Gangemi parties and the Lanciana parties agreed that Gangemi would remain the builder at the Hoddle Street project but, in effect, that was a promise by Lanciana as controller of Clapana.

c. Abate was not a necessary party because there was no evidence that he was making any claim. His investment in the Buckley Street project had either been repaid or was the subject of agreement between him and Lanciana that it would be repaid.

d. Gangemi's solicitor, Mr Alderuccio, had adopted a cautious approach and endeavoured, on a 'belts and braces' basis, to protect his client by including all possible parties. But at the end of the day, after the final negotiation, the evident intention of Gangemi and Lanciana, objectively discerned, was to proceed on the commercial terms stated in the Heads of Agreement as a concluded agreement between them alone.

12. Gangemi and Lanciana were between them in effective control of Clapana, Pre Need, 87 Stevedore and 63 Buckley and, to the extent necessary, they were authorised to bind those companies to the Heads of Agreement.

11 Counsel for the appellants submitted that Clapana was a necessary party because it owned apartments 15 and 16 in the Hoddle Street, Richmond project, which the Heads of Agreement provided would be sold to Gangemi for a nominal consideration, and Lot 17 (also known as Lot S2) in the Hoddle Street Project, which the Heads of Agreement provided would be sold to Gangemi's mother-in-law for a nominal consideration; and that those sales were the principal benefit to Gangemi of the Heads of Agreement. In those circumstances, counsel said, it should surely be inferred that Gangemi would have regarded it as essential that Clapana be bound.

12 We do not accept that submission. It does not withstand the judge's finding that Lanciana had effective control of Clapana. The Heads of Agreement once signed were objectively to be seen as a binding promise by Lanciana to procure that Clapana enter into the sales proposed.

13 Counsel for the appellants further submitted that Daniel Lanciana, Pre Need Services, and Abate were also necessary parties, because the Heads of Agreement provided that they were to indemnify Gangemi against claims by third parties including claims of trade creditors, financiers, contractors and sub-contractors in respect of Clapana, Pre Need, Victoria Pre-cast Panels, 87 Stevedore Street, 63 Buckley and the Mitchell Street, Buckley Street and Bute Street Unit Trusts.

14 We do not accept that submission either. It is met by the judge's findings that Daniel Lanciana was a mere 'puppet' director for his father, and that Clapana and Pre Need were at all relevant times under the effective control of Lanciana who had full authority from Daniel Lanciana to bind Clapana and Pre Need to any obligation which Lanciana thought fit. Admittedly, that leaves Abate unaccounted for. But we see no reason to suppose that Gangemi considered his apparent commitment to the Heads of Agreement as conditional upon Abate undertaking to indemnify Gangemi in respect of companies in which Abate either had no interest or was forthwith to cease to have any interest.

15 Counsel for the appellants submitted that, inasmuch as Lanciana appeared to have concluded that there was no need for some persons to be parties to the Heads of Agreement, as was demonstrated by his deletion of the names of Victoria Pre-Cast Pty Ltd and Jafari from earlier drafts, it should be inferred that he intended that the parties whose names he did not delete would be parties to any agreement.

16 We do not think that takes the matter any further. Accepting, as we do, that the agreement was one in effect by Lanciana to procure certain actions by named parties under his direction and control, the fact that he may have deleted some previously named parties from the third draft of the Heads of Agreement seems to us to be irrelevant.

17 Finally, on this section of the matter, counsel for the appellants submitted that the judge erred in finding that Lanciana had full authority from Daniel Lanciana to bind Clapana and Pre Need to any obligation which Lanciana thought fit, and authority to the extent necessary to bind Clapana and Pre Need to the Heads of Agreement. As counsel would have it, the judge's conclusion in that regard was contrary to Lanciana's evidence that he did not sign the Heads of Agreement on behalf of Clapana; contrary to the fact that Lanciana was in any event disqualified for the time being from acting as a director; and belied by the fact that Daniel Lanciana was not called to give evidence as to Lanciana's authority.

18 Those submissions appear to us to be misdirected. They assume that the judge found that Lanciana executed the Heads of Agreement on behalf of Clapana and Pre Need. That was not his Honour's finding. He concluded that the Heads of Agreement as signed constituted an agreement to which Gangemi and Lanciana were the only parties, and that Lanciana's power to control Clapana and Pre Need, and the authority impliedly conferred on him by his 'puppet', Daniel Lanciana, of which Gangemi well knew, were considerations which, as a matter of objective assessment, impelled the conclusion that Gangemi and Lanciana were satisfied to proceed upon the basis of an agreement to which only they were parties.

19 The appellants' second principal argument was that the judge erred in holding that the parties had by their actions after signing the Heads of Agreement evinced an intention to be bound by the Heads of Agreement. It was submitted that, contrary to his Honour's conclusion, Lanciana had by his subsequent conduct evinced an intention to repudiate the Heads of Agreement.[2] Counsel relied on (1) Lanciana's subsequent conduct in failing to procure the other named parties to execute the Heads of Agreement; (2) Lanciana's failure to execute a Deed of Indemnity which, it was said, was contemplated by the Heads of Agreement; (3) Lanciana's instructions to Coadys, solicitors, who were retained to provide tax advice, that he was seeking advice in relation to an 'hypothetical' agreement; (4) Lanciana making demands by fax of 29 June 2004 that were said to be inconsistent with the Heads of Agreement, including a proposal that Lot 16, Hoddle Street be sold to him, that he pay Osborne and that Jafari be paid from the Hoddle Street

Project;[3] (5) Lanciana seeking to misappropriate Bloomingdale's 50% interest in the Clapana Hoddle Street Unit Trust; (6) Lanciana failing to procure the completion of the sale of Units 15 and 16 Hoddle Street, Richmond; (7) Lanciana causing the rescission of the contracts for those sales and entering into contracts to sell the properties to third parties; (8) Lanciana appropriating to himself the whole beneficial interest in the Mitchell Street, Maidstone property, which was held by Clapana as trustee of the Mitchell Street Unit Trust, and creating a fiction in order to defraud the revenue that Clapana held the Mitchell Street property on trust for the Mitchell Street Development Unit Trust; (9) Lanciana failing to procure the release of Gangemi from his guarantee in respect of 87 Stevedore Street Pty Ltd; (10) Lanciana seeking to enforce the contracts for the sale of apartment 5, 3-9 Anchor Place, Prahran, despite having failed to procure the release of Gangemi from all guarantees; and (11) in pleadings filed in proceedings for specific performance of the contract of sale, Lanciana denying that the Heads of Agreement were binding.

20 The argument reiterates a large part of submissions advanced below which the judge rejected. His Honour dealt with each of the matters on which counsel relied, and explained at length why, despite those matters, it was to be concluded that the parties reached a binding agreement. We are not persuaded that there is any error in that part of his Honour's reasoning.

21 Starting with Lanciana's failure to procure any other parties to execute the Heads of Agreement, the judge identified an array of indicators that Gangemi and Lanciana intended to be bound even though they were the only persons who signed the Heads of Agreement.[4] In addition to the matters already referred to,[5] they included the following:

a) There was no evidence of any subsequent request by Gangemi or any other person that the Heads of Agreement be signed by any other person.[6]

b) After the Heads of Agreement had been signed, Lanciana or Gangemi forwarded a copy of it to Suncorp Metway to have Gangemi released from his obligations as guarantor[7] and, when Suncorp refused to do so, Lanciana approached ANZ to refinance on terms that he be the sole guarantor.[8]

c) After the Heads of Agreement were signed, Gangemi entered into a contract to purchase Unit 5, 6 Anchor Place, Prahran for $735,000, and insisted upon a handwritten insertion to reflect a handwritten amendment to clause 8 of the Heads of Agreement providing for settlement '90 days from the signing of the contract provided release of all guarantees are obtained'.[9]

d) After the Heads of Agreement were signed, Lanciana caused a contract of sale of Lot 17 (also known as S2) in the Hoddle Street project to be prepared for the sale of that unit to Gangemi, and it was later transferred to Gangemi for nominal consideration, as the Heads of Agreement provided it should be.[10]

e) Following a later dispute about the appointment of Rala Nominees Pty Ltd to replace Capana as trustee of the Hoddle Street Development Unit Trust, Gangemi and Lanciana issued a joint letter of instructions to solicitors:

the parties will pursue the completion of the Contracts of all units sold (with the exception of LS2 which is being transferred to A. Gangemi by way of distribution without consideration from the Trust) expeditiously so that settlements will occur within 14 days of registration of the Instrument of Transfer aforesaid.[11]

In terms, the letter was consistent with a reaffirmation of the entitlement of Gangemi under the Heads of Agreement to receive Lot S2 for nominal consideration.

1. After the Heads of Agreement were signed, Lanciana caused contracts to be prepared for the sale of Lot 15 in the Hoddle Street project to Gangemi's mother-in-law and Lot 16 to Gangemi as the Heads of Agreement provided.[12]
2. By letter dated 14 April 2004 from Gangemi's solicitors, Gangemi relied upon and sought to enforce one of the terms of the Heads of Agreement relating to the sale to him of Unit 5, 3-9 Anchor Place, Prahran, which Gangemi had insisted be added to the Heads of Agreement.[13]
3. After the Heads of Agreement were signed, Lanciana contacted Perpetual Nominees, which was the financier of 63 Buckley, and arranged for Gangemi to be released as guarantor, as the Heads of Agreement provided.[14]
4. In a letter dated 24 May 2004 to Lanciana's solicitor, Gangemi's solicitors wrote:

...

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

• building agreement dated 1 June 2002

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

• Heads of Agreement dated 9 September 2003.

...

The Heads of Agreement signed by the parties sets out the terms of settlement between the parties and their related entities. However as there are still a number of unresolved disputes we suggest that the parties attempt to resolve these disputes informally and failing resolution agree to appoint an arbitrator.[15]

j) In February 2004, when Gangemi was served with a penalty notice for unpaid tax, he told Lanciana that he was required to pay all Clapana's liabilities to third parties under the terms of the Heads of Agreement, and Lanciana paid the penalty.[16]

k) On 17 January 2005, Gangemi wrote to Lanciana's solicitors in connection with the sale of Unit 6 in the Anchor Place development, as follows:

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

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

...

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

I am informed that my solicitor Mr Alderuccio is on annual leave until 21 January 2005 and I shall provide him with further instructions upon his return as to the enforcement of the entirety of the Heads of Agreement.[17]

l) In a letter to Gangemi on 2 June 2004 concerning the payments due to Osborne, Lanciana wrote:

...

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

Gangemi did not respond to the letter or otherwise deny that he was liable under the Heads of Agreement for repayment of Osborne's investment.[18]

22 In our view, it was well open to the judge to conclude that the foregoing evidenced an intention on the part of Gangemi and Lanciana that the Heads of Agreement be binding without the need of other named parties signing the document.

23 Counsel for the appellants argued that it was impermissible to have regard to the parties' conduct following the third meeting because, in his submission, the law is that the meaning of a contract must be determined at the time when it is made and, therefore, that evidence of subsequent conduct is inadmissible.

24 We reject that submission. The law is that post-contractual conduct is inadmissible in the interpretation of a written contract.[19] But where, as here, the question is one of whether a contract has been concluded, as opposed to the interpretation of a written contract about the existence of which there is no dispute, there is no doubt that it is permissible, and often necessary, to have regard to the parties' conduct following the supposed point of formation of agreement.[20]

25 The judge did not deal as such with the suggestion that Lanciana failed to execute the Deed of Indemnity contemplated by the Heads of Agreement. But the Heads of Agreement did not in terms refer to a Deed of Indemnity, simply to the Lanciana parties providing indemnities. There was no evidence of Gangemi ever requiring Lanciana to sign a Deed of Indemnity, as opposed to simply indemnifying Gangemi against third party liabilities. And, as has been noted, the judge found that, when Gangemi was served with a penalty notice for unpaid tax, and requested Lanciana to pay it as part of Lanciana's obligation to pay all Clapana liabilities to third parties under the terms of the Heads of Agreement, Lanciana paid it.[21] In those circumstances, we are not persuaded that the absence of a Deed of Indemnity is an indication that the Heads of Agreement were not binding.

26 The judge dealt specifically with the significance of the instructions to Coadys to advise in respect of a 'hypothetical' agreement. Based on a detailed consideration of the evidence, his Honour concluded that:

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

Furthermore, the evidence establishes that Mr Lanciana was of the view that, under the Heads of Agreement, he was obliged to assume all liability to pay stamp duty and taxes arising from the transactions contemplated by the Heads of Agreement, with the exception of any stamp duty payable in respect of any transfer of Lots 15, 16 or 17 (S2) in the Hoddle Street development (where the Heads of Agreement provided that the purchaser was to pay such stamp duty). Mr Lanciana was correct in that assumption. Clause 4(c) of the Heads of Agreement contains a broad indemnity which so provides. Based on this understanding, Mr Lanciana assumed all liability to pay any taxes owing, acted on the basis that there was no need for him to execute the deed of indemnity and in fact paid any unpaid taxes when Mr Gangemi brought them to his attention. As a result, Mr Gangemi has not been exposed to any tax liability at the present time. If, following investigation by the relevant authorities, Mr Gangemi or Bloomingdale are liable in respect of any unpaid taxes resulting from the transactions effected pursuant to the Heads of Agreement, other than stamp duty in respect of the transfer of Lot 17 (S2), Mr Lanciana must indemnify Mr Gangemi for that liability pursuant to his obligations under the Heads of Agreement.[22]

27 We agree with the judge that the evidence of the dealings with Coadys was not inconsistent with Mr Gangemi and Mr Lanciana treating the Heads of Agreement as binding upon them.

28 Counsel for the appellants argued that Lanciana's 'unilateral steps to ensure that any revenue obligations were avoided' were in truth unilateral steps to evade tax and, as such, evinced an intention to repudiate the agreement. In our view, there are at least three difficulties with that submission. First, even if Lanciana's conduct in attempting to evade tax could otherwise be viewed as repudiatory of the Heads of Agreement, there is no logical explanation for his having engaged in the conduct unless he conceived himself bound by the Heads of Agreement to indemnify Gangemi against tax and sought to escape the economic consequences of that liability. Hence, the nature of conduct does not detract from the judge's conclusion that Gangemi's conduct after signing the Heads of Agreement was indicative that he and Lanciana signed with the intention that the Heads of Agreement be binding upon them. Secondly, assuming once again that Lanciana's conduct in attempting to evade tax could be viewed as repudiatory of the Heads of Agreement, the repudiation was not accepted. To the contrary, Gangemi continued to assert vociferously that the Heads of Agreement were binding.[23] Admittedly, it may be that Gangemi did not know of Lanciana's conduct at the time, and so might have rescinded the Heads of Agreement after first learning of it.[24] But in fact he did not purport to rescind the agreement on that basis even after it was clear that he knew of the conduct. Thirdly, there was no such repudiation argument advanced below - the only case of repudiation put there was based on subsequent conduct in connection with an attempted renegotiation of the Heads of Agreement - to which we shall come later - and, as counsel for the appellants properly conceded, it is too late now to be advancing such arguments for the first time on appeal.[25]

29 The judge dealt specifically with Lanciana's demands by fax of 29 June 2004 and the question of whether they had the effect of bringing the Heads of Agreement to an end. His Honour concluded that:

... Although there are some confusing aspects of the later disputes and negotiations between Mr Gangemi, Mr Lanciana and their lawyers, there is no evidence of any concluded agreement being reached to put aside the Heads of Agreement and to replace them with any other agreement. I reject Mr Gangemi's reliance upon statements or acknowledgements made in draft proposals for settlement, which appear to have been based upon the parties putting the Heads of Agreement to one side and restating a different agreement. As I have said, none of these proposals were accepted and no agreement was reached.[26]

30 With respect, we are unable to discern any error in that aspect of his Honour's reasoning. Based on the evidence to which the judge referred, it appears to us that it was the appropriate conclusion to draw.

31 The judge was more concerned by the effect of Lanciana's apparent attempts to take control of the Clapana Hoddle Street Unit Trust. His Honour accepted that such conduct was inconsistent with the Heads of Agreement but, in the end, was satisfied that nothing turned on that because Gangemi was by that time in control of the trust and there was no evidence that the situation changed. As his Honour explained:

In December 2004, Mr Lanciana arranged for Clapana to issue further units in the Hoddle Street unit trust to him, so as to ensure that he had a majority unitholding. This conduct by Mr Lanciana is inconsistent with the Heads of Agreement, in the sense that the Heads of Agreement did not provide that Mr Gangemi or Bloomingdale were to transfer their interests in the Hoddle Street development to Mr Lanciana. No doubt the parties believed that they would continue to be equal joint venturers in the Hoddle Street development. That was the effect of the commercial arrangement reached and recorded in the Heads of Agreement. In these circumstances, Mr Lanciana's conduct in seeking to obtain control of the Hoddle Street unit trust was, probably, a breach of an implied term of the Heads of Agreement. However, nothing turns on this. Control of the Hoddle Street unit trust was by this time with Mr Gangemi and there was no evidence that this position changed as a result of Mr Lanciana's issuing of further units. Further, in the events which transpired, although the Hoddle Street project yielded sufficient income from sales of apartments to repay the loans provided by Suncorp Metway, there were no profits arising from the Hoddle Street project available for distribution to unit holders. In its capacity as trustee of the Hoddle Street unit trust, Clapana remained indebted to various creditors at the time that it was placed in administration, liquidation and was deregistered.[27]

32 We agree with the judge. In our view, Lanciana's attempt to obtain control of the Hoddle Street Unit Trust was a breach of the Heads of Agreement. But for present purposes the breach was immaterial. As his Honour elsewhere remarked, even if the breach evinced an intention to repudiate the Heads of Agreement, the repudiation was not accepted, notwithstanding that Gangemi learned of the relevant circumstances;[28] and the fact that Lanciana did not rescind, and that he and Gangemi thereafter continued with the Hoddle Street project to completion as they did, is consistent with a binding agreement in terms of the Heads of Agreement.

33 The suggestion that the judge erred in his conclusions concerning the rescission of contracts for the sale of Units 15 and 16 in the Hoddle Street project to Gangemi, and the subsequent sale of those units to third party purchasers, appears to us to be unwarranted. Evidently, the argument advanced below was that, because Clapana rescinded the contracts of sale, and because Clapana was under Lanciana's control, Lanciana acted so inconsistently with the Heads of Agreement as to imply that the Heads of Agreement were not intended to be binding. The judge disposed of that argument summarily and, with respect, correctly, with the observation that:

... in my view, no breach [of the Heads of Agreement] was involved. Mr Lanciana's obligation under the Heads of Agreement was to procure that Clapana entered into the contracts of sale [which was done]. No obligation was cast upon him to ensure that those contracts were completed.[29]

34 On appeal it was sought to put a different argument. Counsel for the appellants argued that it was an implied term of the Heads of Agreement that Lanciana would do all such things as were necessary on his part to enable Gangemi to have the benefit of the Heads of Agreement;[30] that, by misappropriating funds from the Hoddle Street project to Lanciana's other interests, Lanciana had deprived Clapana of the economic capacity to complete the contracts of sale; that Lanciana had thereby breached his implied duty of co-operation; and that the breach was of such a nature and magnitude as to amount to a repudiation of the Heads of Agreement.

35 That new argument faces difficulties at a number of levels. To begin with, as the judge remarked, no claim was made below that Lanciana breached the Heads of Agreement by causing Clapana to be unable to complete the contracts of sale for Units 15 and 16.[31] In the second place, if Lanciana's conduct in misappropriating Clapana's funds were repudiatory, the repudiation was not accepted, and Gangemi knew by the time of the trial that Lanciana had misappropriated Clapana's funds. In the third place, any rescission of the Heads of Agreement based upon acceptance of repudiatory conduct of the kind in question would have taken effect only from the point of rescission,[32] leaving intact the rights and obligations accrued up to the point of rescission, including the rights of Lanciana and Clapana to deal with the third party purchasers. We reject the argument.

36 In our view, there is also no substance in the appellants' criticisms of the judge's reasoning as to Lanciana's dealings with the Mitchell Street Unit Trust. The Heads of Agreement contemplated that the Mitchell Street development would remain with the Lanciana parties and that Gangemi should cease to have any interest in it. Other things being equal, Gangemi would have been required to transfer his units in the trust to the Lacniana parties and to pay stamp duty on the transfers. As the judge found, however, Lanciana created a fiction designed to evade duty, as follows:

Following the execution of the Heads of Agreement, and in order to avoid stamp duty being payable on the transfer by Mr Gangemi ... of his units in the Mitchell Street Unit Trust, and to avoid any capital gains tax payable by Mr Gangemi on that transfer, Mr Lanciana decided to ignore the existence of the Mitchell Street Unit Trust and to create a document designed to mislead the revenue authorities. The document is a 'Deed of Appointment'. Under it the fiction was created that Clapana was at all times the trustee of the 'Mitchell Street Development Unit Trust'. The existence of the Mitchell Street Unit Trust was simply ignored. Michie Investments was purportedly 'appointed' as the new trustee of the Mitchell Street Development Unit Trust in place of Clapana, and the document was relied upon by Mr Lanciana to avoid any stamp duty on the transfer of legal ownership of the Mitchell Street property from Clapana to Michie Investments. Neither the State Revenue Office nor the Australian Taxation Office was informed that Mr Gangemi had previously been a beneficial owner of one half of the units in the Mitchell Street Unit Trust and had transferred those units to Mr Lanciana.[33]

37 Not surprisingly, the judge regarded that conduct as reprehensible and referred it to the Attorney-General for investigation and appropriate action. But, although it was reprehensible, it was not inconsistent with the Heads of Agreement.[34] As with Lanciana's attempts to evade duty on the transfer of Gangemi's interest in 63 Buckley, Lanciana's conduct in attempting to evade duty on the transfer of units in the Mitchell Street Unit Trust may have breached the Heads of Agreement but it bespoke the existence of the Heads of Agreement. As counsel for Lanciana submitted, it is difficult to conceive of a logical explanation for the conduct other than that Lanciana regarded himself as bound by the Heads of Agreement to indemnify Gangemi against taxes, and sought to evade tax in order to escape the economic consequences of that liability.

38 We turn to the way in which the judge dealt with the argument that Lanciana's failure to procure Gangemi's release from the guarantee to Suncorp Metway was indicative of an absence of binding agreement. The relevant facts, as his Honour found, were these:

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

In this context, Mr Lanciana approached another financier, the ANZ Bank, in about November 2003 and organised to refinance the Hoddle Street project, in an amount sufficient to pay out Suncorp Metway's finance and to provide some additional funding. This refinance was on the basis that Mr Lanciana would be the sole guarantor, and a guarantee from Mr Gangemi would not be required. The refinance involved Mr Gangemi signing some documents. He refused to do so on the basis that 'the documents were wrong'. Initially, Mr Gangemi said that he understood that the ANZ refinance 'wasn't so much for the guarantee, I think it was purely to increase the amount of borrowings against Hoddle Street'. Later, Mr Gangemi said that he could not remember why he thought the documents were 'wrong', but thought that they would increase his liability under his existing guarantee. I do not accept this evidence. Although the documents which Mr Gangemi was given to sign were not produced by him, and appear to have been misplaced, it is clear from the ANZ security documents presented to the finance broker acting on behalf of Mr Lanciana and Clapana that ANZ was offering to provide finance to replace the Suncorp Metway facility on the basis of guarantees of Mr Lanciana and Pre Need. There is no evidence that any guarantee was being sought from Mr Gangemi and I find that it was not. Of course, the refinance would have had the effect of releasing Mr Gangemi from his obligations as a guarantor of the Suncorp Metway facility.[35]

39 It appears to us, as it did to his Honour, that Lanciana's attempts to procure Gangemi's release as a guarantor were consistent with a binding Heads of Agreement.

40 The judge also rejected the contention that Lanciana was guilty of repudiatory conduct in connection with the sale of Unit 5 Anchor Place, and so do we. His Honour said this:

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

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

It was submitted that this statement by Mr Blott demonstrated that Mr Lanciana did not regard himself as bound by the Heads of Agreement. I do not accept this submission. Mr Blott's statement is ambiguous and only his opinion. It was written in the context of a dispute and contains an assertion of waiver of the special condition under discussion in the correspondence.[36]

41 We agree with his Honour's reasons. Repudiation of a contract is a serious matter, not lightly to be inferred[37] and, where the terms of a contract are ambiguous, even sustained insistence on a particular erroneous interpretation of a contract may not amount to repudiation if recanted after time to consider.[38]

42 It was next contended on behalf of the appellants that the judge had erred by holding that, if Lanciana had evinced an intention to repudiate the Heads of Agreement, Gangemi had not accepted the repudiation. The judge's reasoning on that point was as follows:

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

The evidence does not establish that Mr Lanciana repudiated the Heads of Agreement. I do not accept the evidence of Mr Gangemi that Mr Lanciana expressly did so by saying to Mr Gangemi that there were 'no fucking agreements' between them. Nor do I accept that Mr Lanciana has, by his conduct, evinced an intention to no longer be bound by the terms of the Heads of Agreement. To the contrary, Mr Lanciana's conduct, when viewed as a whole, has been to rely upon the efficacy of the Heads of Agreement. Moreover, in the face of any arguable breaches of the Heads of Agreement by Mr Lanciana, Mr Gangemi continued to rely upon the Heads of Agreement and elected to affirm them as a result. This affirmatory conduct is wholly inconsistent with any acceptance by Mr Gangemi of a repudiation of the Heads of Agreement by Mr Lanciana.[39]

43 Counsel for the appellants submitted that his Honour's analysis overlooked the effect of proceedings instituted by Bloomingdale and Gangemi in July 2005, of which it was said that details had been explained to the judge in the course of opening, and that their effect was an unequivocal acceptance of Lanciana's repudiation of the Heads of Agreement.

44 We do not find that submission persuasive. Whatever was said about the specific performance proceeding in the course of opening to the judge (and we note that we were not provided with any of the details of the opening or of the specific performance proceeding), it appears that the matter was so little if at all mentioned for the remainder of the trial that the judge deemed it unnecessary even to refer to it in his reasons for judgment. Nothing was said on the appeal to persuade us that his Honour was wrong to regard the matter in that fashion.

1"> 45 Counsel for the appellants argued that the judge was guilty of specific error in relation to the parties' dealings with Lot S2 Hoddle Street.

46 Under the Heads of Agreement, Clapana in its capacity as trustee of the Hoddle Street Development Unit Trust was required to enter into a contract to sell to Gangemi or his nominee Lot 17 (also known as Lot S2) in the Hoddle Street project 'for a nominal value'. The judge found that pursuant thereto, Lanciana had arranged for a contract of sale to be drawn up for the sale of Lot S2 to Gangemi for $250,000, and that Gangemi signed the contract on or about 1 November 2003, but that for one reason or another the contract proceeded no further before Clapana was placed into administration in October 2004. It was later agreed that Rala Nominees Pty Ltd ('Rala') would be appointed to replace Clapana as trustee of the Hoddle Street Development Unit Trust, Rala being owned in half shares by Gangemi's son and Gangemi's friend, Wayne Morpeth. But then a dispute arose as to whether Rala was an appropriate trustee and Lanciana purported to remove Rala as trustee by a 'deed of appointment and removal of trustee' dated 27 December 2004. That led in turn to a meeting on 9 February 2005 at the offices of a solicitor, Mr Blott (who from time to time acted for both Lanciana and Gangemi) attended by Gangemi, Lanciana, Morphett and Mr Blott. The meeting resulted in a joint 'letter of instruction' to Mr Blott, signed by Lanciana, Gangemi and Morpeth, and the judge held that, among other things, the joint letter evidenced an agreement between Lanciana and Gangemi that, pending the registration of Rala as legal owner of the Hoddle Street property:

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

The property was later transferred to Gangemi and he was registered as proprietor in September 2006.

47 At trial, counsel for Gangemi put to Lanciana that Lot S2 was transferred to Gangemi by way of a distribution from the Hoddle Street Unit trust, without consideration, because Gangemi 'was owed a lot of money on the project'. Lanciana denied that was so and said that the transfer for nil consideration was in furtherance of the Heads of Agreement. Counsel for Gangemi tendered a loan agreement which appeared to have been made on 8 December 2004 between Rala and Gangemi and Gangemi gave evidence that the loan agreement related to funds he had advanced to Rala for the purposes of the Hoddle Street development. It provided for Rala to repay Gangemi $255,450 in respect of advances made by him for the purposes of the development and, as security for the loan, that Rala had charged its interest in Lot 17 (or S2) in the Hoddle Street development in favour of Gangemi. It was contended that the $250,000 consideration referred to in the contract was in effect the amount of that loan. But Lanciana denied that was so, albeit conceding that he recalled some discussion before signing the joint letter of instruction to Mr Blott in February 2005 to the effect that Gangemi was complaining that he had provided funds for the Hoddle Street development.

48 The judge was not persuaded that the sale was by way of repayment of the loan. As his Honour observed, the joint letter of instruction made no reference to a loan agreement as the source of obligation for the sale, and did not say anything of a set-off between Gangemi's obligations to pay $250,000 under the contract of sale and Rala's obligations to pay Gangemi under the loan agreement. As such, the letter was consistent with the parties reaffirming Gangemi's entitlement under the Heads of Agreement to receive Lot S2 for nominal consideration:

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

49 That left a question as to why a price of $250,000 was specified in the contract of sale, although it was not explored in the evidence. But as the judge observed, the Heads of Agreement did cast an obligation upon Gangemi to pay the stamp duty in respect of the transfer of Lot S2, and his Honour considered that the sum of $250,000 might have been stated in the contract in an endeavour to provide a basis for the assessment of stamp duty; although whether it was a genuine estimate or otherwise his Honour could not say.

50 Counsel for the appellants attacked the judge's reasoning. In counsel's submission, it flew in the face of the manner in which the joint letter of instruction singled out the transfer of Lot S2 as to be made by way of distribution without consideration from the Trust as opposed to by way of completion of the Contracts, and in his submission there was simply no basis from which to infer that the sum of $250,000 was included in the contract of sale as a means of pegging stamp duty as opposed to more or less reflecting the amount of the loan outstanding.

51 There is some force in those submissions. It does seem odd that, if the intention were to transfer the Lot S2 to Gangemi by way of distribution from the trust, the parties should structure the transaction or, perhaps more accurately, pretend that the transaction was one of sale for $250,000. The relatively close correspondence between the outstanding loan of $255,450 and the specified sale price of $250,000, coupled with Lanciana's concession that he recalled some discussion about the loan shortly before the joint letter of instruction was signed, also suggest that the sale may have more to do with repayment of the loan than with a distribution in specie.

52 On the other hand, if the consideration were truly the outstanding loan of $255,450, why specify a sale price of only $250,000, and where was the evidence, in accounts or otherwise, that the loan of $250,000 was ever treated as repaid? In circumstances where Rala was under the control of Gangemi at the time at which the loan agreement was created; there was no other documentary or other evidence of the existence of the loan or its repayment; and Lanciana gave evidence that he had never seen the loan agreement, it is not surprising that the judge was not satisfied by what Gangemi had to say about it. And, in a case where a lot depended upon the assessment of credit, we accord particular importance to the judge's point of view. At all events, we see no error in his Honour's conclusion.

53 Complaint was also made about the judge's conclusion concerning the Mitchell Street property, that:

Mr Lanciana simply took Coadys advice on board and took unilateral steps to ensure that any revenue obligations were avoided. Of particular relevance is Mr Lanciana's exploitation of the fact that the intended Buckley Street Unit Trust deed had not been executed and Mr Lanciana's rewriting of past events regarding the Mitchell Street Unit Trust, thus ensuring that he, Mr Gangemi and Bloomingdale did not have to pay any stamp duty or capital gains tax.[40]

54 Counsel for the appellants contended that his Honour's reasoning was erroneous because Bloomingdale and Gangemi had no liability for stamp duty in respect of the Mitchell Street property - the stamp duty liability fell on the transferee - and that, although it was true that Gangemi and Bloomingdale were liable to pay capital gains tax, Lanciana's actions had not avoided tax. Rather, they were an attempt to evade tax which was inimical to Lanciana's obligation under the Heads of Agreement to indemnify Bloomingdale and possibly productive of penalties which Gangemi would have to bear.

55 We do not think that argument to be persuasive. In the context in which this series of transactions occurred, the judge's description of events as 'tax avoidance' was not inapposite and, whether or not they amounted to tax 'evasion', they were not inconsistent with the binding nature of the Heads of Agreement. No doubt, for a tax lawyer, the conceptions of 'tax avoidance' and 'tax evasion' are two different things. The oft-asserted, albeit sometimes doubtful, validity of that dichotomy[41] has sustained a tax avoidance industry for more than seventy years. But the subtlety of the distinction is unlikely to have loomed large in the minds of the property developers who were here involved. Upon the evidence, it is plain that Lanciana took the view that what the revenue did not know would not hurt him, or Gangemi or Bloomingdale and, to that extent, that his obligations as indemnifier would be reduced. We agree with the judge that Lanciana's conduct bespoke a recognition of the binding force of the Heads of Agreement.

Error as to negotiations between Gangemi and Lanciana from April 2004

56 Counsel for the appellants contended that the judge was in error in holding that negotiations between the parties which began in April 2004 were an attempt to re-negotiate the binding agreement constituted of the Heads of Agreement, as opposed to negotiating to reach a concluded agreement for the first time.

57 That submission is not persuasive either. In substance, it repeats the contention which we earlier rejected that it was not open to the judge to conclude that the negotiations which followed execution of the Heads of Agreement were not inconsistent with an intention that the Heads of Agreement be a binding bi-partite agreement.

The informality which attended the appointment of Lanciana as a director of 63 Buckley Street and the issue of 10 shares to Lanciana

58 It was then said that the judge had erred in concluding that the steps taken to transfer full ownership and control of 63 Buckley to Lanciana, and subsequently to Jafari, were valid or capable of being rendered valid by declarations of validity under s 1322(4)(c) of the Corporations Act 2001 (Cth) ('the Corporations Act). Counsel for the appellants submitted that it could not be so, given that:

a. The only share ever issued in 63 Buckley was one 'A' class share, recorded in the register in the name of Gangemi;

b. Gangemi's evidence was that he signed a blank transfer, no stamp duty was ever paid on it, it was not submitted for approval or recorded in the register, and Article 42 of the company's constitution provided that a transferor is deemed to be the holder of a share until the transferee's name is entered in the register;

c. Although Gangemi signed the blank transfer, it was never used - instead Lanciana simply acted as if the one 'A' class share did not exist and pretended to issue 10 new shares to himself;

d. There was no transfer of those 10 new shares to Jafari, although Jafari claimed to be the owner of them;

e. Gangemi did not cease to be a director of 63 Buckley and Lanciana was never appointed as a director of 63 Buckley, because he was disqualified from acting as a director by reason of previous criminal convictions;

f. Lanciana was, therefore, unable to cause the issue of the 10 further shares in the company which he purported to sell to Jafari and, in any event, the purported transfer of those shares was ineffective because it was never registered in accordance with the company's constitution;

g. These failings, it was said, were not simply 'procedural irregularities', as the judge concluded, but indicative of the fact that transfers of ownership which the judge found to have occurred simply did not take place.

59 In our view, his Honour's reasoning on the points mentioned was not erroneous. Beginning with the efficacy of Gangemi's resignation as a director of 63 Buckley, the judge said this:

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

I ANTONIO GANGEMI GIVE NOTICE THAT I AM

RESIGNING FROM MY POSITION AS DIRECTOR SECRETARY

IN 63 BUCKLEY STREET PTY LTD EFFECTIVE 9/9/03

(ACN 099 836 361)

(SIGNED)

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

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

If there was some technical invalidity in this process of resignation, it does not affect the validity of Mr Gangemi's resignation. There are two reasons for this. First, even an oral agreement to resign will be valid if tendered to the company and accepted. This is so even where the company's constitution contains a requirement, like here, that a resignation must be by notice in writing to the company.[42] Second, the Court has power to declare that Mr Gangemi's resignation as a director is not invalid by reason of any failure to comply with rule 90(d) of the constitution of 63 Buckley.[43] If it were necessary to resort to this power, I would have no hesitation in doing so.[44]

60 We agree with his Honour. In our view, Gangemi's resignation as a director was effective and, if it were not, it was appropriate to declare that it was not invalid by reason of failure to comply with rule 90(d).

61 Section 1322(4)(a) of the Corporations Act enables the Court to declare that 'any act, matter or thing purporting to have been done, ... under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation', provided the contravention is essentially procedural; or that the persons concerned acted honestly; or that it is just and equitable that an order be made,[45] and provided that no substantial injustice has been or is likely to be caused to any person.[46]

62 In this context, 'injustice' means real and not merely insubstantial or theoretical prejudice, and in order to determine whether there has been or would be real injustice the Court is required to weigh any alleged prejudice against the prejudice which would be suffered by other members and creditors of the company if an order were not made.[47]

63 If, as Gangemi contended, his resignation was invalid for failure to comply with rule 90(d) of the company's constitution, the non-compliance was a 'contravention' of the constitution.[48] It was also 'essentially of a procedural nature',[49] whether or not it arose from inadvertence or accidental non-compliance.[50] And we are satisfied that no substantial injustice has been or is likely to be caused to any person by reason of the contravention.[51]

64 Next, as to the efficacy of the transfer of Gangemi's one 'A' class share in the company to Lanciana, the judge said this:

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

...

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

Further, the making of a validating order will not, on the view I take of the facts of the case, occasion injustice to Mr Gangemi. This is because he was contractually bound under the Heads of Agreement to bring about the result that Mr Lanciana obtained full ownership and control of 63 Buckley.[52]

65 Again, we agree with his Honour. Given the circumstances as found, it was just and equitable to exercise the broad discretionary power conferred on the court by s 1322(4) to validate the transfer of the one 'A' class share from Gangemi to Lanciana.

66 As to the efficacy of Lanciana's acts as director of 63 Buckley and, in particular, his acts in causing the issue of the 10 further shares to himself and then selling those shares to Jafari, his Honour reasoned that, notwithstanding the deficiencies in Lanciana's appointment as a director, his acts as director were rendered effective by s 201M(1) of the Corporations Act,[53] or alternatively could be validated under s 1322(4).

67 Strictly speaking, that is not altogether correct. Section 201M is limited to cases in which a director has been purportedly appointed as such but the appointment is defective. Like its predecessor sections,[54] it 'is not framed so as to render valid a resolution passed by any persons who without a shadow of title assume to act as directors of a company'.[55] Arguably, it has no application either to cases in which the purported appointment of the director was made by a person or body not authorized to make the appointment.[56] It also has no application to the invalid acts of a person who never claimed to be a director.[57]

68 Furthermore, in contradistinction to its predecessor sections, s 201M(1) does not deal with the question of whether an effective act by a director binds the company in its dealing with other people or makes the company liable to another

68 person.[58] Consequently, even if s 201M(1) were otherwise applicable in this case, s 201M(2) would exclude its validating effect in relation to the issue of the ten further shares in 63 Buckley.

69 That said, however, we think that it would be open to the court to make an order validating the terms of issue of the ten further shares pursuant to s 254E of the Corporations Act.[59] One problem about that is that Lanciana was never a validly appointed director, with the result that the purported issue of the shares was not the act of the company. In that sense, the shares are void and there is some authority which suggests that a predecessor section to s 254E did not apply to void issues of shares as such.[60] The better view, however, is that 'invalid' in s 254E includes 'void', and thus that the section can apply.[61]

70 Of course, the power under s 254E is discretionary. Relevant considerations include possible prejudice to a party the result of validating the issue; legitimate expectations of innocent parties; and public interest.[62] On one view of the matter, the cavalier manner in which Lanciana went about issuing and transferring the 10 further shares without the slightest regard to his disqualification as a director tends to suggest that it would be contrary to the public interest to validate the issue.[63] But as against that, Jafari was not involved in any way in the short cuts taken by Lanciana or in Lanciana's attempts to defeat the revenue. As the judge found, he was a bona fide purchaser for value without notice of any impropriety or invalidity. There are also to be considered the rights and interests of the third party creditors and other persons who dealt in good faith with Jafari in the belief that he was the holder of the shares in the company. In our view, the importance of giving effect to his legitimate expectations, and those of the persons with whom he dealt, far outweighs any competing considerations which might otherwise militate against a positive exercise of the discretion in a case of this kind.[64] Equally, as the judge observed, there would be no prejudice to Gangemi if the issue were validated, because he was bound under the Heads of Agreement to bring about the result that Lanciana obtained full ownership of 63 Buckley, and Lanciana bound himself to transfer full ownership of 63 Buckley to Jafari.

71 The judge did not deal as such with the one 'A' class share and whether it was effectively transferred to Jafari (other than to note the apparent tax evasion consequences of what had been done and to refer them to the Attorney-General for consideration). But we do not consider that the formal validity of the transfer of the 'A' class share is a matter of much moment. It is plain that, by the Heads of Agreement, Lanciana agreed with Jafari to sell him complete ownership of the company. Subject to payment, therefore, the one 'A' class share was from that point held on constructive trust for Jafari.[65] The purpose of not transferring the share to Jafari may have been to avoid or evade paying stamp duty on the transfer. But the attempt to avoid or evade duty would not have prevented the beneficial interest in the share from passing to Jafari.[66] There was nothing illegal about the contract as such.

Whether dealings in the shares in 63 Buckley Street Pty Ltd could affect the constructive trust

72 Counsel for the appellants next contended that, assuming the transfer of the shares in 63 Buckley to Jafari was effective, it was incapable of transferring the beneficial interest in so much of 63 Buckley's property as was held on constructive trust for Gangemi, and thus that the judge was in error in concluding that:

Since he invested, Mr Jafari has ... acquired full ownership and control of 63 Buckley, and thus the Buckley Street properties, from Mr Lanciana for the sum of $175,000.

73 We do not accept that submission either. Such constructive trust as existed before the execution of the Heads of Agreement was of the kind which results from equity giving effect to its principles of conversion and performance, according to the maxim that 'equity regards as done that which ought to be done'.[67] More precisely, the existence of the original agreement between Gangemi and Lanciana[68] gave rise to an equitable obligation on the company's part to deal with the property in accordance with that agreement, and so, as constructive trustee of the property for the benefit of Gangemi and Lanciana. That changed, however, with Heads of Agreement, which replaced the original agreement with new contractually binding arrangements calculated to deliver full ownership and control of 63 Buckley to Lanciana. From that point, there was no longer a legal obligation for the property to be dealt with for the benefit of Gangemi. Consequently, there was no longer any reason why 63 Buckley could not in good conscience hold the property freed and discharged of the equitable obligation which had until then inured in favour of Gangemi.[69] Eo instanti, the constructive trust ceased to exist.

The finding that Gangemi was estopped from denying that Jafari had obtained control of 63 Buckley Street Pty Ltd

74 Counsel for the appellants criticised the judge's conclusion that, if it were necessary so to find, his Honour would have found that Gangemi was estopped from denying that Jafari acquired full ownership and control of 63 Buckley by reason of Gangemi's conduct in the period leading to the Heads of Agreement and thereafter. In counsel's submission, that aspect of the judge's reasoning was erroneous because: (1) it was said that Gangemi did nothing before execution of the Heads of Agreement which could found an estoppel; (2) although the judge found that Jafari was shown the Heads of Agreement, the Heads of Agreement provided that Lanciana would pay Jafari $350,000, not that he would transfer ownership and control of 63 Buckley to him; (3) although the judge found that Jafari agreed in September 2003 to purchase an apartment in Hoddle Street from Lanciana at a discounted price in full settlement of his claims with the Buckley Street properties and the Buckley Street project, and so changed his position to his detriment, Jafari did not so act in reliance on any representation by Gangemi; (4) in December 2004 Jafari agreed to accept the rescission of the contract with Clapana for purchase of an apartment in Hoddle Street, believing until then that he had settled his claim, and so nothing done by Gangemi up to that point, it was said, could have caused Jafari so to act to his detriment; and (5) statements which Gangemi were found to have made to Jafari could not have caused Jafari to pay anything to Lanciana for control.

75 We see no error of the kind alleged or otherwise in relation to his Honour's findings on estoppel.

76 Taking each of counsel's points in turn, the complaint concerning the effect of what Gangemi did before signing the Heads of Agreement is in our view misconceived. The judge did not say that Gangemi's conduct before the Heads of Agreement was sufficient to found an estoppel but rather that, when one considered the whole of his conduct, both before and after signing the Heads of Agreement, it could be seen that it induced Jafari to believe that Gangemi had departed from the 63 Buckley project. As his Honour put it:

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

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

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

Although it is unnecessary to decide it, I find that, in these circumstances, it would be wholly unconscionable for Mr Gangemi to now assert against Mr Jafari that Mr Lanciana had no capacity to transfer ownership and control of 63 Buckley to Mr Jafari because ownership and control of 63 Buckley remained with Mr Gangemi.[70]

77 The second point, about the Heads of Agreement providing for a payout of $350,000 as opposed to the transfer of ownership and control which was later agreed upon, is in our view also misconceived. The importance of Gangemi showing Jafari the Heads of Agreement was not that it led Jafari to understand the precise terms on which Gangemi agreed to depart 63 Buckley but that, in combination with the remainder of Gangemi's conduct to which the judge referred, it led Jafari to believe that Gangemi had departed the project, thus leaving Jafari free to deal with Lanciana alone.

78 We think the third point to be equally unimpressive. The judge expressly found that Jafari entered into an agreement with Lanciana to purchase an apartment in the Hoddle Street development in full settlement of his claims over the Buckley Street property only after Gangemi had told Jafari that he had parted ways with Lanciana. As the judge explained:

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

In or about early September 2003 I saw Gangemi again. He told me that he and Lanciana had signed the document. Gangemi told me 'I've transferred the Buckley Street company to Percy.'

I was angry. I said 'How could you do that without talking to me about it. I am a director and shareholder of that company. Don't I have a say in it?'

Gangemi said. 'I'm sorry. I've got nothing more to do with that company. You will have to deal with Percy.'

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

I spoke to Lanciana. I was angry. I said 'You've done a deal with Tony behind my back.'

Lanciana said 'Don't worry about that. You are interested in the apartment. Let's deal with that.'

By this stage as Lanciana knew through my discussions with him, I was very interested in apartment 5/129 Hoddle Street.

Following this conversation, an agreement was reached that Mr Jafari would purchase an apartment in the Hoddle Street development at a discounted price in full settlement of his claims over the Buckley Street properties and the Buckley Street project. Mr Gangemi said that Mr Lanciana agreed to pay Clapana for this apartment. This agreement by Mr Lanciana is consistent with Mr Lanciana assuming responsibility under the Heads of Agreement for Mr Jafari's investment in the Buckley Street project.[71]

79 Further, contrary to the assumption implicit in the fourth point, concerning the rescission of the contract for the purchase of the Hoddle Street unit, the judge did not regard Jafari's entry into that agreement as comprising the detriment which founded the estoppel. As was earlier noticed, his Honour found that the contract was later rescinded because there was insufficient equity to enable Clapana to complete the contract.[72] The point of the dealing in relation to the Hoddle Street unit, as the judge viewed the matter, was that it represented just one more of a number of instances in which Gangemi represented to Jafari that he had reached agreement with Lanciana to get out of the Buckley Street project and thus encouraged Jafari to deal with Lanciana on the basis that Gangemi no longer had any interest in the project.

80 The fifth point goes with the fourth. It does not follow from the rescission of the contract for the purchase of the Hoddle Street unit that Gangemi's conduct up to that point was not causative of Jafari dealing with Lanciana as he finally did in relation to the 63 Buckley property. Despite the rescission of the Hoddle Street unit contract, it remained that Gangemi had by his conduct up to that point encouraged Jafari to take the view that Jafari could safely deal with Lanciana alone; and nothing which Gangemi did thereafter discouraged Jafari from that view.

81 Turning then to the sixth point, the judge said this:

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

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

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

82 Counsel for the appellants submitted that the statements: 'I'm sorry but I can't do anything about it', and: 'If you ask me, I think you should take over the company without paying anything', could not have induced Jafari to believe that 63 Buckley was entitled to the beneficial interest in the Buckley Street land, and could not have induced Jafari to agree to pay Lanciana anything for control of the company.

83 We disagree. In our view, it was well open to the judge to conclude, as we do, that the totality of communications between Gangemi and Jafari, of which the two impugned statements were only part, led Jafari to believe that he could safely deal with Lanciana alone.

84 In the course of oral argument, counsel for the appellants advanced an additional point, that it was not open to the judge to find that Jafari relied on Gangemi's representations because Jafari subsequently continued to demand that Gangemi repay him the money invested by Jafari, and was at all times aware that all parties remained in dispute.

85 We reject that argument too. The demand for payment was not inconsistent with the fact that Jafari believed that Gangemi had reached agreement with Lanciana to settle. It accorded with the legal reality that, whatever had been agreed between Gangemi and Lanciana as to the satisfaction of their liability to Jafari, it could not bind Jafari until he agreed to it. Until then, Jafari was perfectly entitled, and it was perfectly logical for him, to treat Gangemi as indebted to him and to demand repayment. Nor was it inconsistent with Jafari's belief that Gangemi had ceased to have any interest in the 63 Buckley property.

86 Not to be deterred, on the second day of the appeal, counsel for the appellants produced a further written submission on the question of estoppel which, in addition to the arguments already mentioned, advanced a range of further contentions.

87 The first was that Jafari had not in fact suffered any detriment by acquiring the 63 Buckley property because he had been able to increase the mortgage over the property from $504,000 to $800,000 and use the proceeds to repay his home mortgage to the Commonwealth Bank.

88 We were not pointed to any evidence in support of that contention and we have not been able to find any. It also appears that the contention was not advanced below. That is enough reason in itself to reject it. But even if it were not enough, it appears to us that it is erroneous in at least two important respects. First, as the judge found, Jafari combined his own property at 59 Buckley Street with 63 Buckley Street, refinanced the aggregate with a combined loan of $840,000, and became the sole guarantor for the whole of the loan. He then proceeded with the development but was delayed in its completion by caveats lodged by Gangemi for which the judge held Jafari was entitled to damages. So far, therefore, from benefiting from the development, on the evidence before the judge it appeared that Jafari had suffered considerable loss and damage.[73]

89 Secondly, if contrary to our understanding of the evidence the project had been profitable, it would still be unconscionable for Gangemi now to depart from the assumption which he created in Jafari that he had ceased to have any interest in the project. For the detriment which founds the estoppel is not such, if any, as may have been suffered by Jafari by reason of taking over the project in reliance upon Gangemi's representations that he no longer had an interest in the project. It is rather the detriment which Jafari would suffer if Gangemi were permitted now to depart from the assumption (or, more accurately, the assumed conventional basis of dealing between him and Jafari) that Lanciana no longer had any interest in the project.[74]

90 The second further estoppel contention was that it was established on the evidence below that, in June or July 2006, after Jafari agreed with Lanciana to purchase 63 Buckley, but before he had paid Lanciana the $175,000 purchase price, Gangemi lodged a caveat on title claiming an interest as beneficiary under a constructive trust and alleged that Lanciana had no right to transfer the shares in 63 Buckley to Jafari. It followed, it was said, that when Jafari later paid the purchase price to Lanciana, he did so with knowledge that Gangemi was claiming an interest in the project and thus there could be no estoppel.

91 We reject that contention too. The judge found that, after agreeing with Lanciana to buy 63 Buckley, from 1 July 2005 Jafari took over complete control of the 63 Buckley project. Consequently, by the time Gangemi asserted in July 2006 that he had an interest in the project, Jafari had combined the project with his property at 59 Buckley Street; re-financed the whole project; as part of that, subjected himself to liability as the sole guarantor; and devoted more than a year's work (and no doubt a large amount of money) to the completion of the project. Consequently, even as at July 2006 it would have been wholly unconscionable for Gangemi to seek to depart from the stance that he had ceased to be involved in the project.

92 The final further estoppel contention was that Jafari only ever paid $26,000 to Lanciana pursuant to the sale of share agreement and borrowed $300,000 on the security of the project which he had used for other purposes. On that basis, it was submitted, the minimum equity required to do justice was something considerably less than holding Gangemi to his assurance that he had no interest in the project.[75]

93 We reject that submission. It was not advanced below and, as far as we can see, it is not supported by the evidence below. And regardless of how much Jafari may not yet have paid to Lanciana, there is nothing to suggest that he is not bound to pay the balance, still less to say that he has received or ever will receive sufficient out of the project to repay the loans with which he funded the development. To the contrary, given that the judge was satisfied Jafari suffered significant damages as a result of the caveats lodged on title by Gangemi, it is distinctly possible that he did not receive enough to repay his loans.

Jafari's claim for damages (Appeal Ground 50)

94 Under the heading of Ground 50, the appellants contended that the judge erred in finding that the caveat lodged by Bloomingdale on title to the 63 Buckley property was unsupportable. That submission rested on the argument earlier dealt with that the Heads of Agreement was not binding and, therefore, that the property was still held on constructive trust for the appellants. For the reasons earlier given, we agree with the judge that the Heads of Agreement was binding and thus that upon execution of the Heads of Agreement the property ceased to be held upon trust for the appellants. It follows that the caveat was untenable.

95 In the appellants' written submissions in support of Ground 50, it was further contended that the judge erred in finding that, before Jafari first invested in the project, Gangemi represented to him that the Buckley Street land would be purchased unencumbered and that Jafari relied on that representation to his detriment. Although the submission was not developed in oral argument, it appears to have been based on the idea that, because Jafari reached agreement with Lanciana in September 2004 to settle his claim for repayment of his investment, any damage thereafter suffered by Jafari was the result of his own folly in entering into that agreement rather than his reliance on what Gangemi earlier told him about the project being unencumbered.

96 We reject the argument. In our view, it was well open to the judge to hold, as we would hold, that Jafari acted in reliance upon Gangemi's assurance that the project was unencumbered and so acted to his detriment. The question of how much of the damage ultimately suffered by Jafari was caused by his so acting is another matter. It involves issues of causation, and possibly mitigation, in which the effects of the agreement of September 2004 may well prove significant. But the judge was not required and did not purport to determine those issues. They are a problem of assessment for another day. There was no error in the way in which his Honour approached the determination of liability.

Appeal Grounds 29 and 30 - Lanciana's lack of credit as a witness

97 Under the heading of Grounds 29 and 30, counsel for the appellants contended that the judge erred in his assessment of Lanciana's credibility as a witness and submitted that Lanciana was so plainly an untruthful and unreliable witness and that the judge ought not to have acted on any of his evidence unless it was corroborated by an independent source.

98 We reject the submission. In this case, the judge paid remarkably close attention to the assessment of each witness's creditability and gave unusually detailed reasons in support of his conclusions as to the extent to which each of them could be relied upon.[76] Counsel for the appellants did not identify any specific error in that part of his Honour's analysis and we are unable to detect such ourselves.

99 In any event, most of the judge's findings on critical issues were either primarily based upon or substantially supported by objective evidence. In the end, very few if any turned solely upon his Honour's preference for the testimony of Lanciana over that of Gangemi. Nowhere is that better demonstrated than in the case of the judge's conclusion that the Heads of Agreement were intended to be a binding agreement. Apart from what Lanciana and Gangemi said about what occurred before and at the time of signing the Heads of Agreement, the objective circumstances before signing and the conduct of each of the parties after signing the Heads of Agreement were, in our view, sufficient in themselves to sustain the conclusion that the Heads of Agreement were intended to be and regarded as binding.

100 A good deal of the appellants' submissions appeared to be based upon a misconception that, if it were accepted that what Gangemi said about the signing of the Heads of Agreement were true, it had to follow that the Heads of Agreement were not binding. In truth, apart from Gangemi's evidence of having signed the Heads of Agreement as a result of duress, which the judge rejected and which was not sought to be supported on appeal, one could accept most of Gangemi's evidence about the signing of the Heads of Agreement and a lot of his evidence about what happened in the period thereafter, and also reject much of what Lanciana said about those events, and yet still be driven to conclude on the basis of the objective evidence that the Heads of Agreement were binding.

Grounds 31-34 - Date of execution of contracts for the sale of apartments 15 and 16 Hoddle Street development

101 Under cover of grounds 31 to 34, it was submitted that the judge erred in accepting that the contracts for the sale of apartments 15 and 16 in the Hoddle Street development were entered into pursuant to the Heads of Agreement and backdated in an attempt to avoid duty, rather than being executed on or about the date which they bore, which was well before the Heads of Agreement were signed.

102 We earlier referred to the judge's consideration of the effect of those contracts when dealing with the question of whether the Heads of Agreement were intended to be binding. The submission made here, however, was that the judge was wrong to prefer Lanciana's evidence that the contracts were signed pursuant to the Heads of Agreement, and backdated for revenue reasons, to Gangemi's evidence that they were entered into in 2001 long before the Heads of Agreement were even contemplated. In effect the submission repeated one put to the judge, and rejected by his Honour, as to why he should accept that the contracts were executed at the earlier time.

103 The judge gave the following detailed reasons in support of his conclusion that it was more probable than not that the contracts were executed at the later date:

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

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

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

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

As with the contract of sale for Lot S2, the question remains as to why the sale price in the Lot 16 contract is stated as $450,000 and is not a nominal consideration, as provided for in the Heads of Agreement. Once again, I infer that the answer lies in the desire of the parties to fix a sale price to enable the assessment of stamp duty payable by Mr Gangemi on any transfer. In this context, it is consistent with Mr Gangemi and Mr Lanciana intending to honour the Heads of Agreement, and to transfer Lot S2 and Lot 16 to Mr Gangemi for nominal consideration if the finances of the Hoddle Street development permitted. I note that the stated price of $450,000 for Lot 16 is the same as that stated in the contract of sale for Lot 15, which also relates to a 'penthouse shell' to be sold for that amount under the Heads of Agreement. I infer that the parties have simply endeavoured to link the Lot 15 sale price to that of Lot 16, and thus create evidence of value in respect of Mr Gangemi's obligation to pay stamp duty on the intended sale of Lot 16 for nominal consideration. Given that Clapana was unable to convey Lot 15 for $450,000 and repay Suncorp Metway in full, thus necessitating an arms-length sale to another purchaser, I infer that $450,000 was not a genuine estimate of the value of the penthouse shells.[77]

104 We see no error in that section of the judge's reasoning or his Honour's conclusion. Given his Honour's assessment of Gangemi's credibility as a witness, and the considerations on which his Honour based that assessment, the rejection of Gangemi's testimony as to the time and circumstances of execution of the contracts is anything but surprising.

105 In fact, Gangemi's evidence on the date of execution of the contract was especially suspect. He started out saying that he had never signed any contracts for the purchase of Lots 15 and 16 and he claimed that Lanciana's failure to procure production of such contracts was indicative that the Heads of Agreement was not considered to be a binding agreement. It was only later, when the signed contracts were produced, that he was forced to accept that he had signed them and then came up with the claim that he had signed them in 2001. If the contracts had been signed in 2001, however, why was it that Gangemi was unable to produce his counterpart of what he signed in 2001[78] and, as counsel for Lanciana submitted, why was it that nothing was ever said about the contracts supposedly signed in 2001 until more than two years after they were signed; or, in other words, until after the date on which Lanciana said they were signed in 2003?

106 Consistently with our earlier observations as to the importance of the objective evidence in this case, his Honour's conclusion as to the date of execution of the contracts was also strongly supported by the objective evidence to which his Honour referred.

107 Counsel for the appellants made a further submission in the course of argument to the effect that the judge's reference to a transfer of Lot S2 for nominal considerations 'if the finances of the Hoddle Street development permitted' amounted to reading into the Heads of Agreement a term which was not there, namely, that the transfer of Lot S2 was to be conditional upon the finances of the Hoddle Street development permitting.

108 We do not accept that submission. As we see it, the judge was simply noting the undoubted fact that, unless Clapana had or obtained sufficient finance to discharge the mortgage to which Lot S2 was subject, it would be unable to complete the transfer of Lot S2 to Gangemi for nominal consideration. It may be that its failure to do so would have been a breach of its contract to sell Lot S2 to Gangemi. But, as the judge elsewhere observed in relation to the contracts for the sale of Lots 15 and 16, 'no claim is made ... that Mr Lanciana breached the Heads of Agreement because Clapana was unable to complete the contracts' and 'no obligation was cast upon him to ensure that those contracts were completed.[79]

Appeal No 3812 of 2008 - the Osborne proceeding

109 As was earlier noted, the judge gave judgment in favour of Osborne against Gangemi for $250,000 and interest pursuant to statute. In so holding, his Honour accepted Osborne's evidence that he invested in the Buckley Street project on the basis of discussion with Gangemi as follows:

I said that I would contribute the amount of $200,000, which ended up being $199,000 because there was a $1,000 first month's interest that was taken out, on certain provisos, that being that I would be given a charge over Mitchell Street, that I would be paid my monthly interest that was being accrued from the bank for the $200,000 that if a permit was obtained within 18 months of me giving the money to Mr Gangemi, I would obtain a 12.5 per cent interest in the development and if the permit was not obtained within 18 months, I would be given my $200,000 back, and interest sum of $50,000 and also interest paid of about $1,000, between rate at the time, and also legal into fees and any other fees associated with putting the charge on Mitchell Street, and also the property at Buckley Street would be purchased unencumbered.[80]

110 Among the evidence which the judge took into account in reaching that conclusion was a document, which the judge called the 'Thrifty Note', in which Gangemi wrote down the terms of Osborne's investment. His Honour explained the circumstances of its creation, and its terms and significance, as follows:

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

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

The Thrifty note is in the following terms:

DEED IS MADE THE _________ DATE 4/3/02

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

AND

CLAPANA PTY LTD ACN 080 253 050

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

ADVANCED THE AMOUNT OF $200,000. TO BE APPLIED

TOWARDS PURCHASE OF PROPERTIES.

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

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

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

VOL.10063 FOLIO 911. (THE PROPERTY)

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

CONDITIONS

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

* INTEREST PAYED (sic) BY PRE NEED SERVICES AUSTRALIA

* YOU WOULD RETAIN 12½% IF PERMIT WITHIN 18 MONTHS

* IF PERMIT NOT ISSUE WITHIN 18 MONTHS MONEY REPAYED (sic) BACK WITH 25% NET RETURN $250,000

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

* CHARGE OVER 86 MITCHELL ST. & 63 BUCKLEY ST.

*

B. Blott $30,000 + $120,000.[81]

111 Counsel for the appellants contended that the judge erred in holding that the Thrifty Note was an acknowledgment of an earlier agreement between Gangemi and Osborne.[82] In counsel's submission it was not open to the judge so to hold, given that the Thrifty Note did not purport to be an acknowledgment of an earlier agreement; that it was incomplete, undated and unsigned; that there was no evidence that Osborne requested or that any other party agreed that he would be given a charge over 63 Buckley; and that the matters referred to in the Thrifty note could not have been the subject of an agreement reached in 2002, because the property at 61 Buckley Street had not then been acquired.

112 The judge dealt with most of those arguments, however, and gave substantial reasons for their rejection. Beginning with the contention that the document did not purport to be an acknowledgment of an earlier agreement, his Honour explained that, in his view, it did, because:

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

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

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

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

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

* YOU WOULD RETAIN 12½% IF PERMIT WITHIN 18 MONTHS

* IF PERMIT NOT ISSUE WITHIN 18 MONTHS MONEY REPAYED

[sic] BACK WITH 25% NET RETURN $250,000' (emphasis added)

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

113 The judge did not refer as such to the contention that the document was incomplete. But he gave extensive consideration to the date of the document and, apart from that, it appears to record the essential terms of the agreement of which it purported to be a memorandum.

114 The judge did not consider that it was an impediment to the efficacy of the document that it was not signed. Nor do we. We agree with his Honour's reasons for concluding that Gangemi wrote most of the document and intended it to be a record of agreement.[83]

115 The judge dealt specifically with the charge over 63 Buckley, as follows:

Mr Osborne was cross-examined about the charge. He said that it was part of the original arrangement which he reached with Mr Gangemi that he would be given a charge over 63-67 Buckley Street. At the time of the first Osborne cheque, Mr Osborne knew that the purchase of 63-67 Buckley Street had not then been settled. Accordingly, he asked Mr Gangemi for security. He knew that security was not provided before he paid the cheque. He said that he paid the cheque in the absence of security being first obtained because he was giving his money to his best friend and he 'trusted him wholeheartedly'. Subsequently, in circumstances which Mr Osborne cannot recall, the executed charge was provided to him for signature. At this time, Mr Osborne learnt from Mr Gangemi that the Mitchell Street property was owned by Clapana on behalf of Mr Gangemi and Mr Lanciana.[84]

We see no error in that section of his Honour's reasoning, and none was identified.

116 His Honour also dealt specifically with the idea that the Thrifty Note could not have been an acknowledgment of a past agreement, because it referred to 61 Buckley Street. His Honour said that:

It was submitted that the Thrifty note could not have been intended to record the terms of the agreement reached between Mr Osborne and Mr Gangemi prior to Mr Osborne making his investment, because the Thrifty note refers to the property at 61 Buckley Street. 61 Buckley Street was not purchased until after Mr Osborne had made the whole of his investment. There is no merit in this submission. By the time the Thrifty note was prepared, 61 Buckley Street had been included in the Buckley Street project. Mr Osborne's interest in that project, conditional or otherwise, had been agreed at 12.5%. There is no dispute about that. In these circumstances, it is natural that, in seeking to record the terms of Mr Osborne's investment, 61 Buckley Street would be included in the description of the property to be developed. The Thrifty note is an informal document written by two businessmen. They are likely to have included a reference to the proposed development, in which Mr Osborne admittedly had an interest, as that development stood at the time.[85]

We see no error in that part of his Honour's reasoning either, and we note that none was identified.

117 Counsel for the appellants argued that it was significant that Osborne had not kept a copy of the Thrifty Note and apparently had no recollection of it until he was contacted by someone at the Thrifty company and told that they had found the note in one of their vehicles. That strongly implied, counsel submitted, that the document was at best a draft of an agreement which had never come to fruition or more likely, as Gangemi claimed, just some ideas for negotiation between Osborne and Lanciana.

118 The judge dealt with that argument too. His Honour gave detailed reasons for concluding that, notwithstanding some indications the other way, the Thrifty Note was intended to record the terms upon which Osborne had invested in the Buckley Street project. His Honour's reasons on this aspect of the matter are too extensive to reproduce or to do justice by way of summary.[86] Suffice it to say, that we think them to be compelling and, apart from the matters to which we have already referred, nothing which was submitted was opposed to their rigour.

119 Under the heading of the third party claim, the appellants contended that the judge was wrong to hold that the appellants were not entitled to contribution from Lanciana towards Gangemi's obligation to pay $250,000 and interest to Osborne.

120 In effect, however, that went no further than to repeat the submission already rejected that the judge was in error in holding that the Heads of Agreement took effect. Accordingly, we reject it.

121 Counsel added a further submission that the Heads of Agreement provided that Gangemi was to pay Osborne $200,000, not $250,000. But there is nothing in that point either. As the judge found, the obligation was to pay $200,000 plus interest, and it appears that interest stood at $50,000 at the time of the Heads of Agreement.

122 Finally, on this aspect of the matter, it was said that Lanciana had admitted in cross-examination that he received some $90,000 to $100,000 of the moneys invested by Osborne and applied them to his own purposes, and it was submitted that, in those circumstances, the judge should have made Lanciana contribute to the Osborne claim at least to that extent.

123 We do not accept that proposition either. There was no claim ever made before his Honour for contribution or recovery on the basis that Lanciana had appropriated $100,000 of the Osborne investment moneys to his own use. It is too late now for the appellants to advance such a claim for the first time on appeal.

124 During the course of argument counsel for the appellants applied for leave to add a new ground of appeal to the effect that the appellants were denied a fair trial because the judge, having informed the parties during the trial that he would not 'determine whether or not the problem with [the Hoddle Street] project was due to the fact that [Lanciana] was taking money so that it could not be used to pay creditors, or whether the problem was whether [Gangemi] was not fulfilling his responsibilities as supervisor, and that he could not resolve those questions in the proceeding', the judge then made the following findings:

1. Lanciana had not threatened to delay payment to contractors and creditors of the Hoddle Street project.

2. Gangemi did not believe that Lanciana would deliberately take steps to delay payment to contractors engaged on the project.

3. It could be inferred that delays in making payments to creditors of the project were most likely the result of a tight budget and timing issues.

4. Lanciana did not breach the Heads of Agreement by reason of the fact that Clapana was unable to complete the contracts for the sale of Units 15 and 16.

125 The application for leave to add the new ground of appeal was opposed and we ruled that we would reserve our decision on the application and give it as part of our reasons in the appeal. Having now considered the point, we think it bound to fail. Accordingly, the application for leave to amend should be refused. The judge did not determine any points that were not clearly in issue.

126 His Honour's determination that Lanciana had not threatened to delay payment to contractors and creditors of the Hoddle Street project was made as an essential part of determining Gangemi's claim that he had been coerced by economic duress to sign the Heads of Agreement. As is recorded in [215] and [220] of his Honour's reasons for judgment, Gangemi gave evidence in support of his economic duress claim that Lanciana threatened to continue to delay payment to contractors after June or July 2003 when the new drawdown procedures were implemented by Suncorp Metway. For the reasons which his Honour expressed at [220], he did not accept that was so.

127 The same is true of his Honour's determination that Gangemi did not believe that Lanciana would deliberately take steps to delay payment to contractors of the Hoddle Street project. Gangemi gave evidence in support of his duress claim that it was his belief and the judge was required to determine whether that was true.[87]

128 The same also applies to his Honour's determination that the delay in payment of creditors following the new drawdown procedures was probably the result of tight project budget and timing issues. Gangegmi's duress claim was that it was the result of Lanciana deliberately delaying payment. The judge had to make a determination as to the legitimacy of that contention.

129 None of those determinations entered into the question, which the judge said he would not decide, of whether Lanciana was taking money so that it could not be used to pay creditors, or whether the problem was whether Gangemi was or was not fulfilling his responsibilities as supervisor.

130 The determination that Lanciana did not breach the Heads of Agreement by reason of the fact that Clapana was unable to complete the contracts for the sale of Units 15 and 16 is in a different category. It has nothing to do with whether the problems with the project were due to Lanciana taking money or Gangemi's incompetence as manager of the project. It was made upon the expressly limited basis that:

Mr Lanciana's obligation under the Heads of Agreement was to procure that Clapana entered into the contracts of sale. No obligation was cast upon him to ensure that those contracts were completed.[88]

As the judge took care to note, it was not claimed below that Lanciana had breached the agreement by misappropriating or otherwise diverting Clapana's funds so as to deprive it of capacity to complete the agreements.

131 Shortly before the hearing of the appeal began, the appellants filed a

131 summons[89] supported by affidavit seeking an order for a new trial of the proceeding on the grounds that Lanciana had failed to make discovery below of documents which put a different complexion on the matters in issue and had misled the court about the existence of certain documents.

132 The principles which govern an application of this kind were stated by the High Court in Commonwealth Bank of Australia v Quade[90] as follows:

In cases where all that is involved is the discovery by the unsuccessful party of fresh evidence ... the reconciliation of 'the demands of justice' and the 'policy' that there be an end to litigation at least prima facie (or 'generally'[91]) dictate that the successful party should be deprived of the verdict in his favour only if the unsuccessful party persuades the appellate court that there was no lack of reasonable diligence on his part and that it is reasonably clear that the fresh evidence would have produced an opposite verdict...

The position is, however, different in a case such as the present where the unavailability of the evidence at the trial resulted from a significant failure by the successful party to comply with an order for the discovery of relevant documents in his possession or under his control. The application to that category of case of the general rule that a new trial should only be ordered on the ground of fresh evidence if it is 'almost certain'[92] or 'reasonably clear'[93] that the opposite result would have been produced if the evidence had been available at the first trial would, particularly where the failure was deliberate or remains unexplained, serve neither the demands of justice in the individual case nor the public interest in the administration of justice generally ...

It is neither practicable nor desirable to seek to enunciate a general rule which can be mechanically applied by an appellate court to determine whether a new trial should be ordered in a case where misconduct on the part of the successful party has had the result that relevant evidence in his possession has remained undisclosed until after the verdict. The most that can be said is that the answer to that question in such a case must depend upon the appellate court's assessment of what will best serve the interests of justice, 'either particularly in relation to the parties or generally in relation to the administration of justice'.[94] In determining whether the matter should be tried afresh, it will be necessary for the appellate court to take account of a variety of possibly competing factors, including, in addition to general considerations relating to the administration of justice, the degree of culpability of the successful party,[95] any lack of diligence on the part of the unsuccessful party and the extent of any likelihood that the result would have been different if the order had been complied with and the non-disclosed material had been made available. While it is not necessary that the appellate court be persuaded in such a case that it is 'almost certain' or 'reasonably clear' that an opposite result would have been produced, the question whether the verdict should be set aside will almost inevitably be answered in the negative if it does not appear that there is at least a real possibility that that would have been so.[96]

133 In essence, the application was based on non-disclosure and non-discovery of four classes of documents. The first was the executed original 87 Stevedore Street Development Unit Trust deed which was ultimately produced to the court on 19 October 2009 pursuant to subpoena in another proceeding by a solicitor, Mr Blott, who at various relevant times acted for both Lanciana and Gangemi. Lanciana did not discover the deed in the proceeding below and gave evidence that at the time when the Heads of Agreement were signed, he did not believe that the 87 Stevedore Street Unit Trust existed and that the documents for its establishment were never signed.

134 In his affidavit in support of the application, Gangemi deposed that he believed that Lanciana had failed to make discovery of the executed trust deed and falsely denied the existence of the trust in order to 'avoid his obligations under the Heads of Agreement if they are otherwise valid and enforceable', and that, if the executed deed had been available at trial, it would have been open to Gangemi's counsel to cross-examine Lanciana on the deed to establish that was so.

135 It is not clear why Lanciana did not discover the executed trust deed. It seems unlikely that he did not know that Mr Blott had the deed in his possession. On the other hand, it is notable that Mr Blott was at one time also Gangemi's solicitor, and that Gangemi did not discover the deed.

136 Even assuming, however, that Lanciana deliberately failed to discover the deed, and did so in order to maintain that the deed was never signed, we do not think that the availability of the deed would have made any difference. Despite his denial of the existence of an executed deed, Lanciana's evidence at trial was unequivocally that Gangemi had a half interest as joint venturer.[97] In those circumstances, we fail to see how the availability of the deed could have assisted in establishing that Lanciana attempted to 'avoid his obligations under the Heads of Agreement if they are otherwise valid and enforceable'.

137 Conceivably, the deed could have facilitated the attack on Lanciana's credit generally. Perhaps it might be said that, if the judge had known that the deed was executed, his Honour would have been less inclined to accept Lanciana's evidence on issues relevant to the assessment of whether the Heads of Agreement were intended to be binding. But, as we have already observed, his Honour's conclusion that the Heads of Agreement were intended to be binding was as much supported by the objective evidence as by anything which Lanciana had to say about it. In effect the subsequent conduct of the parties, particularly Gangemi's subsequent conduct towards both Lanciana and Jafari, made it an irresistible conclusion. For the same reasons, we think it unrealistic to suppose that the availability of the deed at trial could have led to the judge rejecting the conclusion that Gangemi was estopped as against Jafari from denying the efficacy of the Heads of Agreement.

138 The second class of documents relied upon was comprised of share transfers of Gangemi's one share in 87 Stevedore Street Pty Ltd and one share in 63 Buckley.

139 The transfer of the share in 87 Stevedore Street Pty Ltd was not discovered until after the trial in another proceeding. Perhaps it should have been discovered in this proceeding. But counsel for the appellants did not suggest that it would have made any difference and, although it might have had some effect on the assessment of credit, it would have been peripheral. We do not think it to be significant.

140 A photocopy of the transfer of the one share in 63 Buckley was produced at trial and, when Gangemi was shown it in the course of cross-examination, he admitted that it was his signature which appears on the document. But he maintained that, when he signed the document, it was otherwise blank, implying that all of the other details had been inserted by Lanciana; and, therefore, that Gangemi had not executed it pursuant to the Heads of Agreement. After the trial, Lanciana's solicitors discovered the original transfer in another proceeding in which Lanicana and Gangemi are involved and on 26 September 2008 Gangemi inspected the document for the first time.

141 Subsequent examination by an expert document examiner is said to reveal indentations which appear to have been created when a transfer of Gangemi's one share in 63 Buckley was completed, and so to show that the transfer of the one share in 63 Buckley had not been completed when it was signed. Counsel for the appellants submitted on that basis that, if the original transfer of the share in 87 Stevedore Street Pty Ltd had been available at trial, it would have assisted him to establish that the purported share transfer of the one share in 63 Buckley was signed in blank and not with the name '63 Buckley Street Pty Ltd' inserted as Lanciana maintained. In counsel's submission, that meant there is a real possibility the judge would have come to a different conclusion as to whether the Heads of Agreement were intended to be binding.

142 There is some evidence as to why the document was not discovered. Lanciana swore an affidavit in opposition to the application in which he deposed that he had never deliberately withheld any documents from Gangemi and that he discovered the original transfer as soon as he found it. If it matters, we do not think that to be a satisfactory explanation of why the document was 'overlooked'. But we have real difficulty in seeing why having the document at trial would have assisted Gangemi to establish that the Heads of Agreement were not intended to be binding.

143 As the judge noted in his reasons, Lanciana's evidence at trial went no further as to the execution of the form of transfer than that:

He also had Mr Gangemi sign the resignation of directorship and a blank share transfer form, which may have had the company name 63 Buckley Street Pty Ltd written on it, but he is not sure. He later completed some details on the blank share transfer form.[98]

On that basis, his Honour found that 'with the exception of the name 63 Buckley being completed in handwriting, none of the other details were completed at the time Mr Gangemi signed', but that:

The clear intention was to enable Mr Lanciana to then become the sole director and shareholder in 63 Buckley, in place of Mr Gangemi.

144 As it appears to us, therefore, it was immaterial whether the transfer form had the name of the company completed at the time of signing or was wholly blank. What mattered to the judge was that he found that Gangemi signed the transfer form with the intention of transferring the share to Lanciana in accordance with the Heads of Agreement. It was for that reason that his Honour resolved to validate the transfer pursuant to s 1322(4) of the Corporations Act.

145 In the result, even assuming in Gangemi's favour that having the original share transfer form for the share in 63 Buckley would have enabled Gangemi to prove that the transfer form was wholly blank at the time of signature, we do not accept that it may have led the judge to any different conclusion.

146 The third class of documents relied upon was comprised of banking documents which were said to show that a bank cheque for $218,018.50 was deposited in the account of Pre Need without Gangemi's consent with the aid of an ANZ bank card in the name of Lanciana.

147 We do not accept that the availability of those documents at trial could have led the judge to a different conclusion.

148 The matter was the subject of extensive cross-examination. Lanciana accepted in the course of the cross-examination that the cheque had been paid into the account of Pre Need. It was put to him that he had used the money for his own purposes, and he denied it. He said it was used for Mitchell Street and that Gangemi knew that it had been. He added that he believed that Gangemi must have known of it because the cheque was an ING bank cheque and he did not see how it could have been paid into the Pre Need account unless Gangemi indorsed it. Whatever view the judge might have taken about that evidence, however, there is no reason to think that it could have been affected either way by the availability of a bank card showing that the cheque was paid into the Pre Need account at the instance of Lanciana.

149 It is also significant to note that, in his affidavit in opposition to the application for a new trial, Lanciana reiterated his denial of having misappropriated the cheque and he exhibited an affidavit sworn by Mr Blott on 16 February 2006 in another proceeding. In that affidavit Mr Blott deposed, and his deposition does not appear to have been contradicted, that he acted as solicitor for Bloomingdale on its re-financing of a property called Rae Street, from which it received the $218,081.50; that a cheque in the sum of $218,081.50 was handed to Gangemi at the settlement; and that he had no knowledge of what Gangemi had done with the cheque after that.

150 The fourth class of documents relied on was comprised of bank statements which, according to Gangemi, showed the diversion of funds from the Anchor Place development, the sale of Walter Street Williamstown and the Hoddle Street project. The submissions made about those documents were particularly complex but, reduced to essentials, seemed in the end to come down to a general complaint about the contumacious inadequacy of Lanciana's discovery and to four matters of specific concern.

151 The first was that Lanciana was said to have failed to discover statements relating to ANZ Bank account no 013-456 3525-00666 ('the 666 account') and that, if he had done so, it could have been demonstrated at trial that on 7 August 1998 a cheque for $35,000 drawn by Bloomingdale and, according to Gangemi, advanced to Pre Need Services by way of loan, was deposited into the 666 account in the name of Lanciana and his wife.

152 The second point was that Lanciana was said to have failed to discover statements relating to ANZ Bank account no 1981-71728 ('the 728 account') and that, if he had done so, Gangemi could have traced transfers made between the 666 account and the 728 account so as to show that almost $500,000 of moneys advanced by ANZ Bank to Clapana for development of Anchor Place was diverted to Lanciana's own interests.

153 The third point was that, with the aid of the 666 account documents and the 728 account documents, account documents for another account no 013-456-3504-46869 called 'the secret account', and account documents for a further account no 1981-71728 styled 'the Lanciana Percy Cash Management' accounts, Gangemi could have demonstrated that some $253,540.55 proceeds of sale of the Walter Street property were used to pay the deposit on a house in Cecil Street for Lanciana's wife.

154 The fourth point was that Lanciana was said to have failed to discover documents which related to a sum of approximately $86,040.00 made available out of the sums invested by Osborne; which were used to pay commissions to finance brokers Mahmood and Mehmood to arrange a financing transaction; and which, when the financing transaction did not proceed, were later refunded and unbeknownst to Gangemi kept by Lanciana for himself.

156 The first point is readily disposed of. Lanciana was cross-examined about the issue at trial and gave evidence then that the payment of the $35,000 to Pre Need was not a misappropriation of joint venture funds by Pre Need from Bloomingdale but the repayment by Bloomingdale to Pre Need of a loan made to Bloomingdale. Lanciana reiterated the substance of that evidence in his affidavit of 12 November 2009 in opposition to the application for new trial, after production of the 666 account statements. We see no reason to suppose that the availability of the 666 account documents at trial could have led the judge to a different conclusion in his assessment of that evidence.

157 The second point is more complex. Lanciana's answer[99] to the allegation that he misappropriated approximately $500,000 of moneys advanced by ANZ Bank to Clapana for development of Anchor Place is that Gangemi never had an interest in the Anchor Street project, and presumably, therefore, that Lanciana was free to do with Anchor Street moneys as he wished. That may or may not be so. The question of whether Gangemi had any interest in the Anchor Place project is and was at the time of the trial in issue in another proceeding and, until it has been determined, it is impossible to say whether the movement of funds was a misappropriation.

158 It is most unlikely, however, that knowledge of the facts revealed in the 666 and 728 account documents would have made a difference to the judge's perception of the issues. As his Honour said, prior dealings between Lanciana and Gangemi in respect of projects other than the Buckley Street project, and concerning Gangemi's claim that he was entitled to one half of the issued shares in Pre Need and Clapana, gave rise to collateral issues but it had to be kept firmly in mind that the proceeding concerned only claims made by the parties in connection with the Buckley Street project.[100]

159 Arguably, a demonstration of the flow of funds between accounts 666 and 728 would have had an effect on the judge's assessment of Lanciana's credit. The judge said that, although it was unnecessary to resolve collateral issues, he took them into account in assessing Lanciana's 'general credibility as a witness'.[101] But we think it unlikely that it would have had a significant effect. Counsel for Gangemi submitted that it would have shown that Lanciana moved moneys through various accounts in order to disguise the fact that he was using money for his own purposes. It is apparent from the judge's reasons, however, that his Honour was well aware that Lanciana moved funds between accounts without proper separation or accounting and that Lanciana had misappropriated funds. His Honour found that:

Mr Lanciana and Mr Gangemi pursued an aggressive property investment and development strategy. The profits of projects were 'rolled into' one another and projects overlapped. There was a constant need for funds, with Mr Lanciana juggling funds between different projects and entities and mixing the funds from his own projects, or those of his wife, with projects jointly undertaken by Mr Gangemi. No attention was given to the proper separation of funds and the keeping of separate accounts for different projects. Until they fell out in early 2003, Mr Gangemi showed no interest in the way in which Mr Lanciana managed the finances. I infer that he believed that all was going well, and that profits would eventually begin to flow from the various projects. Further, during this time, Mr Gangemi was acquiring assets from the projects, for example, an apartment in the Anchor Place project on terms that Pre Need paid Mr Gangemi's interest payments for some time. In addition, Pre Need paid for some renovations to one of Mr Gangemi's properties.[102]

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

Taking the evidence as a whole on this issue, I find that Mr Lanciana did utilise some of the Suncorp Metway loan funds which were advanced to Pre Need before the meeting in June or July 2003 for purposes other than the Hoddle Street project, and that this diversion caused some contractors at Hoddle Street to be paid late...

On the available evidence, the Court cannot determine which projects Mr Lanciana diverted funding intended for the Hoddle Street project to, whether those projects were joint projects with Mr Gangemi or were personal projects of Mr Lanciana or his wife, or whether Mr Lanciana later ensured that the diverted funds were 'reimbursed' from Pre Need to the Hoddle Street project.[103]

160 Counsel for Gangemi contended that it was a question of emphasis and degree and that, if the judge had been aware of the full scope and nature of matters disclosed by accounts 666 and 728, there was a real possibility that his Honour would have come to a different conclusion as to the validity of the Heads of Agreement and as to whether or not Lanciana repudiated them by acting inconsistently with them.

161 We think that to be unlikely. As we earlier observed, most of the judge's findings on critical issues were either primarily based on or substantially supported by objective evidence and, in the case of the judge's conclusion that the Heads of Agreement were intended to be a binding agreement, his Honour's reasons rightly imply that the objective circumstances before signing and the conduct of each of the parties after signing the Heads of Agreement were sufficient in themselves to sustain the conclusion that the Heads of Agreement were intended to be binding.

162 Admittedly, the same cannot be said of the question of repudiation. But the difficulty for Gangemi about that is that the only case of repudiation which he pleaded below was confined to specified conduct of Lanciana which had nothing to do with the movement of funds or the misappropriation of moneys.[104]

163 Counsel for Gangemi submitted that, if the documents relating to accounts 666 and 728 had been available at or before trial, they would have shown or tended to show that, even before entry into the Heads of Agreement, Lanciana misappropriated funds which were earmarked for the 63 Buckley project or other projects in which Gangemi had an interest, and that Gangemi entered into the Heads of Agreement in ignorance of the misappropriation. It followed in counsel's submission that, if Gangemi had known at the time of trial of the facts which he now knows, he would have known that he had been induced by fraud to enter into the Heads of Agreement and he could have sought an order for rescission ab initio for fraud. So, in counsel's submission, it was only fair that there be a retrial in order to afford Gangemi the opportunity to amend his pleadings and contend for rescission ab initio on that basis.

164 In our view, that submission breaks down at several levels. To start with, the question of whether or not there was any misappropriation depends to a considerable extent on whether Gangemi had an interest in Kororoit Creek Road, Walter Street and Anchor Place properties. That question has not yet been determined and would not be determined in any new trial of this proceeding. It is in issue in other proceedings and, as we were told in the course of argument, it was Gangemi's choice to have this proceeding decided before the other proceedings were heard and determined.

165 Secondly, assuming that fraud were established, it is too late now (just as it was too late at the time of the trial) for rescission ab initio, either at law or in equity. For it is no longer possible now (just as it was no longer possible at the time of trial) to achieve restitutio in specie[105] or in integrum.[106] Any right to rescission at law or in equity was lost at latest when Jafari acquired 63 Buckley bona fide and for value.[107]

166 Thirdly, while there might be greater scope for relief against Lanciana under ss 158 and 159 of the Fair Trading Act 1999, subject to temporal limitations,[108] there is no more reason to think that a claim of that kind would result in rescission ab intio as against Jafari than would a claim for rescission at law or in equity.

167 Fourthly, despite the fact that the 666 account documents were available to the appellants for more than a month before the hearing of the appeal, the way in which the documents would be used and the sort of relief which might be sought was but barely formulated even by the time of oral argument in the appeal. Notwithstanding repeated questioning over several days, counsel for Gangemi was unable to say precisely how the fraud claim would be put, still less to present proposed amended pleadings, or even to offer a precise articulation of the principles which it was said would apply.

168 As it was, the argument started out as one which appeared to assume, erroneously, that failure to disclose the alleged misappropriation amounted to fraud which would necessarily result in an entitlement to rescission ab intio as against both Lanciana and Jafari. When the error of that was pointed out, it was said that at least Lanciana's conduct would be viewed as so unconscionable as to disentitle him from relying upon the Heads of Agreement. Quite why that was so, however, was never really made clear and, when the specifics of it were pursued, counsel segued into a complaint that, by failing to discover documents or by producing them late, Lanciana had so deprived Gangemi and his advisers of the ability to approach the trial with a full knowledge of the facts and the time to reflect upon them which they would have preferred as to be unfair. When it was pointed out that such if any relief as against Lanciana as might be obtained in a retrial could be obtained in a new action (assuming that the allegations of misappropriation and unconscionable conduct were made good), it was claimed that it would be unjust to put the burden of proof on Gangemi, rather than leaving him in a position where he might employ the evidence of misappropriation in defence of Lanciana's claims. Since, however, the only issue in a retrial of this proceeding would be whether Gangemi is entitled to rescission of the Heads of Agreement, the burden of proof in each case would be the same.

169 Counsel for Gangemi submitted that, unless a retrial were ordered, Gangemi was likely to be met in any new proceeding by pleas of issue estoppel and Anshun[109] estoppel. But that makes no sense either. A claim for rescission for fraud would not be inconsistent with the judge's determination that the Heads of Agreement were binding and, if it is true that there was fraud of which Gangemi has only now become aware, there would be no Anshun estoppel either.

170 Later in these reasons we shall return to the possibility of seeking relief in another action.

The $253,540.55 proceeds of sale from the Walter Street property which were used to pay the deposit on a house in Cecil Street for Lanciana's wife

171 We can deal more briefly with the claim that $253,540.55 was used to pay the deposit on Cecil Street. In effect, its significance is governed by the same considerations as apply to the claim that $500,000 moved between accounts 666 and 728. If anything, however, we think that the availability of the accounts to demonstrate the payment of the deposit on Cecil Street would have been even less likely to affect the judge's decision than the other sums. As has already been observed, the judge expressly noted that Lanciana 'frankly acknowledged that he did use deposits received from pre-sales of Hoddle Street apartments to assist him to settle a property at Cecil Street, Williamstown which was purchased in his wife's name'. Additionally, there is now some evidence, which apparently was not available to the judge, that Gangemi was aware of and consented to the payment. In an affidavit sworn by Gangemi in the 87 Stevedore Street proceeding on 6 July 2005, Gangemi deposed that:

The Kororoit Creek Road development was successfully completed at a profit in excess of $1 million. I was entitled to one half of the profit. In fact, I did not receive my share of the profit. It was applied by Lanciana with my consent in the payment of a house site in Cecil Street, Williamstown. This property was registered in the name of Michelle Lanciana (nee Ridford).[110]

Paradoxically, it is upon that basis that Gangemi claims in another proceeding to which we were told Ms Ridford is party, to be beneficially interested in the Cecil Street house.

172 Counsel for Gangemi sought leave to file an affidavit sworn by Gangemi during the hearing of the appeal in which Gangemi sought to qualify and explain the admission set out above. We refused him leave to do so. It seemed to us that such an affidavit sworn so late and so long after the event would be of so little reliability as to be inutile and, even if there were some qualification properly to be made to the admission, its effect for present purposes would only be marginal.

Refund of $86,040.00 used to pay commissions to finance brokers Mahmood and Mehmood

173 We can also deal briefly with $86,040 commissions paid to Mahmood and Mehmood and later refunded. Lanciana was cross-examined on the point at trial. He agreed that the $86,040 had been refunded but he swore that Gangemi knew at the time that it had been refunded. It was not sought to contradict that evidence.

Lanciana did not tell me that part or all of the said sum of $86,000.00 [sic] been refunded. If I had known about the said refund (which Lanciana acknowledged in his evidence) I would not have agreed to be responsible to repay the sum of $200,000.00 to Osborne as is provided for in the Heads of Agreement...

175 In our view the claim is hopeless. Gangemi had his chance at trial to make something of the point. He could have amended then and alleged that he would not have agreed to the Heads of Agreement as signed if he had known of the refund. Instead of that, he stayed silent about it. The fact that he chose not to impugn Lanciana's evidence on the point, and that he did not seek to amend at trial to allege that he would not have signed if he had known of the refund, not only means that it is now too late to do so but casts real doubt on the verity of the allegation.

176 We earlier referred to the principles which apply to an application for a new trial based upon an inadequacy of discovery. According to Quade, whether or not to order a new trial in this proceeding depends in the end upon our assessment of what will best serve the interests of justice, 'either particularly in relation to the parties or generally in relation to the administration of justice' after taking into account the degree of Lanciana's culpability for failing to make documents available, any lack of diligence on Gangemi's part and the extent of any likelihood that the result would have been different if Lanciana had complied with his obligations to make discovery and the material which he did not discover had been made available.

177 Counsel for Gangemi also urged upon us a number of decisions including the decision of the Full Federal Court in Londish v Gulf Pacific Pty Ltd,[112] in which it was observed that the stringent rules which ordinarily apply to the grant of a new trial may be relaxed where the reason for the non-production of evidence at trial is the failure of the successful party to comply with discovery obligations; and the decision of Lander J in Brookfield v Yevad Products Pty Ltd,[113] where his Honour remarked upon the importance to the discovery process in ensuring that the parties are accorded a fair trial and that litigants may lose confidence in the court's processes and decisions if they think that a party might avoid giving proper discovery and not later be held to account.

178 We start with the degree of Lanciana's culpability for failing to make documents available. As at present advised, we judge it to be high. Due to the fact that the issue arose late and had to be dealt with quickly, the affidavit material filed on both sides was not all that it might have been. That means that there are a number of aspects of the facts which remain unclear, and we have not had the benefit of hearing the deponents cross-examined. But our impression based upon the limited material with which we have been provided is that Lanciana did far less by way of discovery than was required of him.

179 We turn next to whether there has been any lack of diligence on Gangemi's part. In our view, there has been. Much of the material on which Gangemi relies in order to support the application for new trial was available to him at the time or at least from a time a few months after the trial, more than a year ago. It is also to be observed that a good deal of the inadequacy in discovery which is now complained about would have been, or at least should have been, obvious before trial and should have been pursued to completion before the matter was heard. There is also no explanation as to why the processes recently undertaken to obtain documents now relied upon to support allegations which were made in the trial could not have been undertaken before trial and would not have been successful if so then undertaken. Significantly, the documents relating to accounts 666 and 728, which are at the heart of the application for new trial, were obtained by early return subpoena in another proceeding and, so far as we can see, could just as well have been obtained by early return subpoena in this proceeding.

180 We turn then to our assessment of whether there is a realistic possibility that the documents not discovered would have made a difference to the outcome if they had been available at trial. For the reasons already given, we do not think that they would have made any difference to the judge's determination that the Heads of Agreement was a binding legal agreement. The objective evidence as to the existence of a concluded contract, including in particular the parties' conduct in pursuance of and in accordance with the contract, was so powerfully demonstrative of its binding nature as on that question to make credit issues based upon past dishonest or dishonourable conduct in effect de minimis.

181 As we have explained, that is not necessarily so in relation to the question of whether Gangemi was induced by fraudulent or otherwise unconscionable conduct to enter into the Heads of Agreement, or whether as a consequence of fraudulent, unconscionable or other breach of the Heads of Agreement, Gangemi would be entitled to rescind the Heads of Agreement or otherwise treat Lanciana as disentitled from relying upon the Heads of Agreement. But for the reasons already given, it is too late now for Gangemi to seek rescission ab initio, either at law or in equity. If there is to be a rescission it could only be prospective. And although there may be greater scope for relief under the Fair Trading Act 1999, there is no prospect of such relief being awarded against Jafari. The new material does nothing to affect the judge's conclusion that Jafari was a bona fide purchaser for value as against whom Gangemi is estopped from denying the validity of Jafari's title.

182 What remains, therefore, is the possibility of a new trial limited to a claim by Gangemi that he is in one way or another entitled to rescind the Heads of Agreement or otherwise treat them as not binding in the way described. As has been explained, however, the precise nature of that claim is yet to be identified, let alone pleaded. As matters stand, therefore, it is impossible to assess how likely it is that it would succeed. Nor can it be said whether such a claim based on the newly discovered documents would be any more likely to succeed than one of the same kind based on the material which was available at the time of trial. In the end, it may be that Gangemi is no better positioned now than he was before to advance that sort of claim. All that can be said is that, because of some of the ways in which the claim might be put, there is a possibility that the newly discovered documents could make a difference.

183 Finally, it is important to recall that such a claim could just as well be advanced in a fresh proceeding after the claim has been formulated and pleaded and that, if Gangemi makes good his assertion that he was unable to advance it at trial because of inadequacy of discovery, there is no reason why he could not succeed for the same relief in the new proceeding as he could in any retrial. We do not overlook Lander J's observations as to the importance of the discovery process in ensuring that parties are accorded a fair trial or that litigants may lose confidence in the court's processes and decisions if they think that a party might avoid giving proper discovery and not later be held to account. But in this case, if Gangemi's claim is sound, Lanciana can be held to account without a retrial.

184 In all the circumstances, we consider that the interests of justice in relation to each of the parties and the administration of justice generally will be best served by

leaving Gangemi to bringing such fresh proceeding for rescission or other relief as he may be advised.

185 I have had the benefit of reading in draft the reasons for judgment of Nettle and Harper JJA. Subject to what appears below in relation to the issues raised by the appellants under the Corporations Act, I agree with their Honours' reasons.

186 Clause 6 of the Heads of Agreement provided that Mr Gangemi and Bloomingdale would sign and deliver to Mr Lanciana documents prepared by Mr Lanciana to cause Mr Gangemi's resignation as a director of various companies including 63 Buckley Street Pty Ltd and to transfer his shares in respect of a number of companies including 63 Buckley Street Pty Ltd.

• Mr Gangemi signed a handwritten document prepared by Mr Lanciana resigning as a director of 63 Buckley Street Pty Ltd and that he also signed a blank share transfer in respect of that company, which was later completed in favour of Mr Lanciana.[114] His Honour found that these documents, among others, were signed by Mr Gangemi in performance of his obligations under the Heads of Agreement.[115]

• In or about February 2005, Mr Jafari purchased from Mr Lanciana all of the then supposedly issued shares in 63 Buckley Street Pty Ltd.[116]

• In June 2005 Mr Jafari and Mr Lanciana agreed that Mr Lanciana would transfer the 10 issued shares in 63 Buckley Street Pty Ltd to Mr Jafari and that a 'Change to company details' form was filed with ASIC on

3 August 2005 recording that Mr Jafari had become the sole shareholder in and the sole director of 63 Buckley Street Pty Ltd in place of Mr Lanciana from 1 July 2005 but the documents effecting those transactions were not in evidence.[117]

• Once Mr Jafari had assumed control of 63 Buckley Street Pty Ltd, Mr Jafari refinanced the existing mortgage loan over the Buckley Street properties and increased that loan from $504,000 to $840,000 and provided security to the financier over the Buckley Street properties (and also a property at 59 Buckley Street owned by him).[118] His Honour noted that Mr Jafari and 63 Buckley Street Pty Ltd were incurring substantial interest costs as a result.

188 His Honour held (in my view, correctly and justifiably upon the evidence before him) that Mr Gangemi was estopped from denying that Mr Jafari had acquired full ownership and control of 63 Buckley Street Pty Ltd, to the exclusion of any interest of Mr Gangemi.[119] This conclusion was based upon findings that, inter alia, Mr Gangemi had told Mr Jafari that he and Mr Lanciana had resolved their dispute and that Mr Gangemi had transferred 63 Buckley Street Pty Ltd to Mr Lanciana and that Mr Jafari was repeatedly told by Mr Gangemi that he was 'out of the Buckley Street project' and that Mr Jafari had dealt with Mr Lanciana in reliance on these representations.[120] Although he said that it was unnecessary to decide it, his Honour added (and again I would agree with this conclusion) that he found that in those circumstances it would be wholly unconscionable for Mr Gangemi to assert against Mr Jafari that Mr Lanciana had no capacity to transfer ownership and control of 63 Buckley Street Pty Ltd to Mr Jafari.[121]

189 Mr Gangemi signed a handwritten note stating that he gave notice that he was resigning from this position as director/secretary in 63 Buckley Street Pty Ltd effective 9 September 2003.[122] It was submitted on behalf of Mr Gangemi at trial that this notice was defective because it did not comply with rule 90(d) of the Constitution of 63 Buckley Street Pty Ltd which provided that the office of a director becomes vacant if the director 'resigns his office by notice in writing to the Company'.[123] His Honour held that there was no invalidity involved in the circumstances where Mr Gangemi was the sole director and shareholder and had agreed in the Heads of Agreement to resign.[124] His Honour further stated that, if there was some technical invalidity in the process, it did not effect the validity of Mr Gangemi's resignation because even an oral agreement to resign would be valid if tendered to the Company and accepted. Further, his Honour said that the Court had power to declare, pursuant to s 1322(4) of the Corporations Act, that Mr Gangemi's resignation was not invalid by reason of any failure to comply with rule 90(d) of the constitution of 63 Buckley Street Pty Ltd and that, if it were necessary to resort to this power, he would have no hesitation in doing so.

190 His Honour found that soon after the Heads of Agreement were signed Mr Gangemi signed a standard form of share transfer and, with the exception of the name of 63 Buckley Street Pty Ltd being completed in handwriting, none of the other details were completed at the time Mr Gangemi signed. His Honour found that, subsequently, Mr Lanciana completed parts of the form by writing in Mr Gangemi's name as the seller and his (Lanciana's) name and address as the buyer - however, the form remained blank as to the quantity of shares and the consideration for their transfer.[125]

191 His Honour noted[126] that it was submitted on behalf of Mr Gangemi that the share transfer was invalid and ineffective because it did not comply with the procedures specified in rules 42 to 48 of the constitution of 63 Buckley Street Pty Ltd because the share transfer was incomplete and thus not 'in the usual form',[127] had not been duly stamped,[128] had not been submitted to Mr Gangemi as the sole director of 63 Buckley Street Pty Ltd for registration[129] and was not registered.[130]

192 His Honour accepted that the share transfer did not comply with the constitution of 63 Buckley Street Pty Ltd and was not registered in accordance with its requirements.[131]

However, the share transfer must be viewed in its context. Notwithstanding the procedural irregularities attendant upon it, the fact remains that it was signed by Mr Gangemi in performance of his obligations under the Heads of Agreement to resign as the sole director of 63 Buckley and to transfer the sole issued share in 63 Buckley to Mr Lanciana. In other words, the share transfer formed part of an agreement to transfer complete ownership and control of 63 Buckley from Mr Gangemi to Mr Lanciana. The clear intention was to enable Mr Lanciana to then become the sole director and shareholder in 63 Buckley, in place of Mr Gangemi. In these circumstances, it is appropriate that the Court exercise its undoubted power to validate the share transfer. That power is contained in s 1322(4)(a) of the Corporations Act 2001, which provides that the Court may:

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

The power to make an order under s 1322(4)(a) is constrained by s 1322(6) of the Corporations Act. Relevantly, that sub-section provides that no order shall be made under s 1322(4)(a) unless it relates to a matter which is essentially procedural in nature, the person or persons concerned in the contravention or failure acted honestly or it is just and equitable that the order be made.[133] It is enough if any one of these three requirements is satisfied, provided that the Court is also satisfied that no substantial injustice has been or is likely to be caused to any person by reason of the order.[134]

Section 1322(4) of the Corporations Act gives the Court a broad discretionary power. It is 'a remedial provision to be applied with liberality'.[135] Apart from the mandatory matters about which the Court must be satisfied, the discretion is unfettered and exists to prevent injustice.[136]

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

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

194 His Honour then dealt with other aspects of invalidity relied upon by Mr Gangemi and stated as follows:[137]

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

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

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

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

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

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

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

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

195 Finally, his Honour stated as one of his conclusions:[138]

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

196 In accordance with the reasons stated, his Honour made, inter alia, the following declarations:

1. In September 2003, Antonio Gangemi transferred the only issued share in 63 Buckley Street Pty Ltd to Pasquale Lanciana. That share transfer is not invalid by reason of any contravention of the provisions of the constitution of 63 Buckley.
2. In September 2003, Antonio Gangemi resigned as the sole director of 63 Buckley Street Pty Ltd.
3. The appointment of Pasquale Lanciana as a director of 63 Buckley Street Pty Ltd in September 2003 is not invalid by reason of any contravention of the constitution of 63 Buckley Street Pty Ltd.
4. On 1 July 2005, Pasquale Lanciana transferred all of the issued shares in 63 Buckley Street Pty Ltd to Kourosh Jafari and appointed him as the sole director of 63 Buckley Street Pty Ltd. The transfer and appointment are not invalid by reason of any contravention of the constitution of 63 Buckley Street Pty Ltd.

197 The appellants contended that the judge erred in finding that:

• Gangemi's one 'A-class' share in 63 Buckley Street Pty Ltd was transferred to Lanciana;
• Lanciana was validly appointed as a director of 63 Buckley Street Pty Ltd;
• Lanciana was able to and did issue 10 ordinary shares in 63 Buckley Street Pty Ltd to himself;
• Lanciana was able to and did transfer those 10 ordinary shares to Jafari;
• Lanciana was able to and did appoint Jafari a director of 63 Buckley Street Pty Ltd.

• The only share that was ever issued in 63 Buckley Street Pty Ltd remained was one 'A-class' share registered in the name of Gangemi. The company register of 63 Buckley Street Pty Ltd was produced at the trial by Gangemi and in the absence of evidence to the contrary, is proof of the matters shown in it (Section 176 Corporations Act).
• Gangemi gave evidence that the transfer he signed was blank. The transfer did not state the number of shares or the consideration for the transfer, and no stamp duty was paid on the transfer. It was not submitted for approval or recorded in the company register of 63 Buckley Street Pty Ltd. Article 42 of 63 Buckley Street Pty Ltd's constitution provides that a transferor is deemed to be the holder of the share until the transferee's name is entered in the register.
• Although Lanciana procured Gangemi to sign the blank transfer form, Lanciana subsequently acted as if Gangemi's 'A-class' share never existed and did not deal with it at all. Lanciana ignored the existence of the share, in order to evade stamp duty on the transfer. The Court referred this matter to the Attorney General. Lanciana did not notify ASIC that Gangemi had transferred Gangemi's 'A-class' share to Lanciana but advised ASIC that he had issued 10 ordinary shares to himself.

• On 29 September 2003, Lanciana lodged an annual return with ASIC advising that he had been issued 10 new 'ordinary' shares in 63 Buckley Street Pty Ltd and it was these 10 'ordinary' shares (not Gangemi's original 'A-class' share) which Lanciana purported to sell to Jafari by the agreement dated 4 February 2005. The one 'A-class' share held by Gangemi was not referred to at all in the agreement between Lanciana and Jafari dated 4 February 2005. Jafari did not assert that the 'A-class' share had been transferred to Lanciana and then to him.
• There was no documentation produced by Jafari or Lanciana at trial regarding the transfer of the 10 'ordinary' shares to Jafari and no transfer was effected in accordance with the constitution of 63 Buckley Street Pty Ltd. Jafari would have been liable to pay stamp duty on the transfer. He did not do so.
• Although Jafari claimed to be the owner of 10 ordinary shares because he bought them from Lanciana, Jafari did not claim to have purchased Gangemi's one 'A-class' share. As a copy of the blank transfer was in Jafari's possession, Jafari could not have believed that Gangemi's share was transferred to Lanciana. Jafari never registered the transfer. Jafari produced the transfer at trial. It was still incomplete and was unstamped. Further, the 10 ordinary shares were never issued by 63 Buckley Street Pty Ltd, never paid for by Lanciana or Jafari and never processed in accordance with the constitution of 63 Buckley Street Pty Ltd.
• The Judge's findings that the purported dealings in the shares were undertaken 'honestly' by Lanciana are inconsistent with the finding that Lanciana had acted dishonestly by attempting to avoid stamp duty, a matter which he referred to the Attorney General for investigation.
• The Court held that it would validate the transfer under s 1322(4)(a) of the Corporations Act. However it is submitted the situation was not one involving 'procedural irregularities' as the learned Judge found. The share transfers simply did not take place. Lanciana did not register any transfer of Gangemi's share. No shares were issued to Lanciana. Lanciana could not transfer non-existent shares to Jafari.
• Despite the illegality attached to the dealings the learned Judge made orders validating the purported transfers thereby perfecting the fraud on the revenue.
• Further, Lanciana was not appointed a director of 63 Buckley Street Pty Ltd. The execution of a letter of resignation by Gangemi could not amount to appointing Lanciana as a director as found by the Judge. Lanciana was disqualified from being involved in the management of a corporation or a director of by reason of his criminal convictions. Jafari could not have been appointed a director by Lanciana and Gangemi did not appoint Jafari as a director.

200 On appeal, it was submitted but, I thought, not strongly pressed by the appellants that Mr Gangemi's resignation as a director of 63 Buckley Street Pty Ltd was ineffective. In any event I think that the judge's reasons as to the validity of the notice of resignation were correct. The appellants concentrated their attack on the validity of the share transfer. The appellants said that, since the judgment appealed from, they had obtained access to the original share transfer (of which a copy only had been available at trial) and that they had expert evidence that suggested that the name of the company had not been on the share transfer when it was signed by Mr Gangemi.[139] Counsel for Mr Lanciana submitted that, in all the circumstances that had been found by the judge at trial, the signing of a completely blank transfer by Mr Gangemi in any event constituted authority to Mr Lanciana to complete the share transfer so as to create the transfer of Mr Gangemi's one share in 63 Buckley Street Pty Ltd as intended by Mr Gangemi and as required by the Heads of Agreement. I think that submission is correct.

201 Counsel for Mr Lanciana also pointed out that the share transfer could not be entered in the share register of 63 Buckley Street Pty Ltd because Mr Gangemi had retained possession of the share register.

202 I think that, revenue matters aside, the failure to register what would otherwise have been a validly completed share transfer was a defect 'essentially procedural in nature' within the meaning of s 1322(6)(a)(i) of the Corporations Act. Alternatively, I think that the judge was entitled to conclude that it was 'just and equitable'[140] to validate the share transfer, given the findings concerning the Heads of Agreement and the estoppel vis-à-vis Mr Jafari. For the same reason, the judge was entitled to be satisfied that 'no substantial injustice'[141] had been caused to Mr Lanciana (or any other person).

203 It does not appear to me that the consequences and relevance of any failure by Mr Lanciana to pay duty on the share transfer pursuant to the Duties Act 2000 (Vic) were fully ventilated at trial and they were certainly not ventilated on appeal. Reference might have been made to ss 270 and 272 of the Duties Act and, in particular, s 272(1) which provides that an instrument that effects a dutiable transaction or is chargeable with duty is not available for use in law or in equity for any purpose unless it is duly stamped. Even on the assumption, however, that the judge either could not or should not have validated the share transfer, having regard to such considerations, I think that the estoppel found by the Court below against Mr Gangemi vis-à-vis Mr Jafari is sufficient to prevent Mr Gangemi from asserting any entitlement as a shareholder in 63 Buckley Street Pty Ltd and that the validation of the share transfer was therefore unnecessary.

204 I think that the other submissions on this topic on behalf of Mr Gangemi (and Bloomingdale) fall by the wayside because, Mr Gangemi, having resigned as a director and being estopped from contending that he is a shareholder in 63 Buckley Street Pty Ltd, had no standing or interest to challenge the subsequent transactions between Mr Lanciana and Mr Jafari.

[1] The judge's reasons extend to over 150 pages.

[3] These demands and proposals were repeated in a letter from Lanciana's solicitors to Gangemi's solicitors dated 6 July 2004 (AB Vol 4 P.D416-417), to which the judge did not refer in his reasons.

[4] Bloomingdale Holdings Pty & Anor v 63 Buckley Street Pty Ltd & Ors [2008] VSC 168, [411].

[5] Above, [10].

[11] Ibid [318] (emphasis added by the judge).

[15] Ibid [339] (emphasis added by the judge).

[17] Ibid [341] (emphasis in the original).

[19] L. Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235, 252; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 348; FAI Traders Insurance Company Ltd v Savoy Plaza Pty Ltd [1993] VicRp 76; [1993] 2 VR 343, 346-350; _Magill v National Australia Ba_nk [2001] NSWCA 221, [50]-[53].

[20] Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68, 77-78; Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88; (1908) 5 CLR 647, 662 and 669; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153, 163-164 [25].

[23] Cf Turner v Labafox International Pty Ltd [1974] HCA 41; (1974) 131 CLR 660, 670 (Mason J).

1. [24] Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850, 878-9; Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634, 642-645 (Stephen J), 655-658 (Mason J); Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] VicRp 70; [1994] 2 VR 463, 494 (Hedigan J).

[25] Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418, 438; Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1, 7-8; Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 200 ALR 447, 461 [51]; Geelong Building Society (in liq) v Encel [1996] VicRp 44; [1996] 1 VR 594, 608.

[30] Mackay v Dick (1881) 6 App Cas 251, 263; Butt v McDonald (1896) 7 QLJ 68, 70-71; Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 607.

[32] McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457, 469-70, 476-7; Victorian Economic Development Corporation v Cloverdale Pty Ltd [1992] VicRp 40; [1992] 1 VR 596, 603.

[36] Ibid [365]-[366] (emphasis in the original).

[37] Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620, 633-4.

[38] DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 432-3; L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235, 251; Sopov v Kane Constructions Pty Ltd (2007) 20 VR 127, 130-1, [9]-[15].

[40] Reasons, [361] (Emphasis added).

[41] See, for example, Gorton v Federal Commissioner of Taxation [1965] HCA 1; (1965) 113 CLR 604, 627 (Windeyer J).

[42] Knight & Ors v Bulic & Ors (1984) 13 ACSR 553, 561.

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

[45] Corporations Act 2001 (Cth), s 1322(6)(a).

[46] Corporations Act 2001 (Cth), s 1322(6)(c).

[47] Re Compaction Systems Pty Ltd & The Companies Act [1976] 2 NSWLR 477, 493 (Bowen CJ in Eq).

[48] Re Centennial Coal Co Ltd [2006] NSWSC 62; (2006) 56 ACSR 698, 703 [14]-[15].

[49] Deputy Commissioner of Taxation v Portinex Ltd [2000] NSWSC 99; (2000) 34 ACSR 391, 402 [45] (Austin J).

[50] Re Pembury Pty Ltd [1993] 1 Qd R 125, 126-7; Whitehouse v Capital Radio Newtwork Pty Ltd [2004] TASSC 12; (2004) 13 Tas R 27, 36-37, [14]; cf Re P W Saddington & Sons Pty Ltd (1990) 19 NSWLR 674.

[51] Re Pembury Pty Ltd [1993] 1 Qd R 125, 126-7.

[53] Ibid [467]. Section 201M provides that:

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

[54] Or the sorts of articles of association on which its predecessor sections were based.

[55] Dawson v African Consolidated Land and Trading Co [1898] 1 Ch 6, 14 (Chitty LJ); Morris v Kanssen [1946] AC 459, 472 (Lord Simonds_); Grant v John Grant & Sons Pty Ltd_ [1950] HCA 54; (1950) 82 CLR 1, 52-53 (Kitto J); Official Trustee in Bankruptcy v Buffier [2005] NSWSC 839; (2005) 54 ACSR 767, 775-776 [27]-[28]; Ford, Austin, Ramsay, Ford's Principles of Corporations Law (13th ed, 2007) [15.020]-[15.070].

[56] Wood v Inglis [2008] NSWSC 1147; (2008) 68 ACSR 420, 433-4.

[57] Permanent Trustee Co Ltd v Bernera Holdings Pty Ltd [2004] NSWSC 56; (2004) 182 FLR 431, 435 [39].

Sub-section (1) does not deal with the question whether an effective act by a director:

(a) binds the company in its dealings with other people; or

[59] Section 254E provides that:

1. On application by a company, a shareholder, a creditor or any other person whose interests have been or may be affected, the Court may make an order validating, or confirming the terms of, a purported issue of shares if:

(a) the issue is or may be invalid for any reason; or

(b) the terms of the issue are inconsistent with or not authorised by:

(i) this Act; or

(ii) another law of a State or Territory; or

(iii) the company's constitution (if any).

(2) On lodgement of a copy of the order with ASIC, the order has effect from the time of the purported issue.

[60] Millheim v Barewa Oil & Mining NL [1971] WAR 65, 67 (Burt CJ).

[61] Re Swan Brewery (No 2) (1976) 3 ACLR 168, 171-172 (Gillard J); see also Re Monitronix Ltd (1987) 12 ACLR 161, 174-5 (Kennedy J).

[62] The cases are collected in _Ford's Principles of Corporations La_w, above n 55, [17.450].

[63] Re Monitronix Ltd (1987) 12 ACLR 161; Moran v Moranco Enterprises Pty Ltd (1996) 22 ACSR 65, 68.

[64] See and compare Alpha Resources Ltd v CAC (1987) 5 ACLC 844, 846-7; Ford's Principles of Corporations Law, above n 55, [17.450].

[65] Lysaght v Edwards (1876) 2 Ch D 499; Rayner v Preston (1881) 18 Ch D 1; Chang v Registrar of Titles [1976] HCA 1; (1976) 137 CLR 177, 184 (Mason, J), Heydon and Leeming, Jacobs Law of Trusts (7th ed, 2006) [1306].

[66] Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, 561-568 (Deane and Gummow JJ); 577-580 (Dawson J); Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; (1978) 139 CLR 410, 417, 426-7.

[67] Heydon and Leeming, Jacobs Law of Trusts in Australia, (7th ed 2006), [1302].

[68] Of which it may be taken 63 Buckley Street was aware.

[69] Cf Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 108; Heydon and Leeming, Jacobs Law of Trusts in Australia, (7th ed 2006), [1301].

[70] Reasons, [439]-[443] (emphasis added).

[74] Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, 674-5; Commonwealth v Verwayen (1990) 170 CLR 394, 413.

[75] Commonwealth v Verwayen (1990) 170 CLR 394, 411; Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101, 125 [49]-[50]; Donis v Donis [2007] VSCA 89; (2007) 19 VR 577, 582-588 [18]-[20].

[77] Reasons, [327]-[331] (emphasis added).

[78] As Mandie JA observed in the course of argument.

[86] Ibid. See, in particular, [124]-[148].

[89] As to the propriety of applying for a new trial by summons, rather than instituting a fresh proceeding by writ to have the judgment set aside, see Young v Symons [1972] VR 612, 614; cf Hip Foong Hong v H Neoka & Co [1918] AC 888, 894.

[91] McDonald v McDonald [1965] HCA 45; (1965) 113 CLR 529, 532-533.

[92] See Orr v Holmes [1948] HCA 16; (1948) 76 CLR 632,640.

[93] See Greater Wollongong Corporation v Cowan [1955] HCA 16; (1955) 93 CLR 435, 444.

[94] cf, eg, McDonald v McDonald [1965] HCA 45; (1965) 113 CLR 529, 533, 542.

[95] Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 2 NSWLR 340, 357.

[97] Until the Heads of Agreement were signed.

[98] Reasons, [300] (emphasis added).

[99] Given in paragraphs 52(v) and (vi) of his affidavit of 12 November 2009.

[104] See Reply to the Defence of the Third Defendant, [52] and [39]-[47].

[105] Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218, 1278; Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216, 223.

[106] Vadasz v Pioneer Concrete (SA) Pty Ltd [1995] HCA 14; (1995) 184 CLR 102, 111.

[107] McKenzie v McDonald [1927] VicLawRp 19; [1927] VLR 134; N C Seddon and M P Ellinghaus, Cheshire and Fifoot's Law of Contract, (2008, 9th Aust ed) [11.58].

[108] See Fair Trading Act 1999, s 159(3).

[109] Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589.

[111] In his affidavit of 11 November 2009, [11].

[112] [1993] FCA 470; (1993) 45 FCR 128.

[113] [2004] FCA 1164.

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

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

[139] It was common ground that the share transfer was otherwise blank when signed by him.

[140] See s 1322(6)(a)(iii) of the Corporations Act.

[141] See s 1322(6)(c) of the Corporations Act.