Ignacio and Leticia De Castro v New Ridge Property Group Pty Ltd

Judgment

1. The plaintiffs sue for recovery of debt said to be due to them pursuant to a loan agreement made on 11 September 2006 between them as lenders and the 1st defendant corporation as borrower. The plaintiffs proceed against the other defendants as guarantors of the loan.
2. In final submissions on the tenth day of the hearing the First Cross Claim (by the 7th defendant) was discontinued. Albeit the 2nd Cross Claim (by the 6th defendant) entitled simply "Cross Claim Statement of Claim" named the plaintiffs as 1st and 2nd cross defendants, the cross claimant proceeds only for contribution from the 4th to 7th cross defendants, being the 2nd to 5th defendants.
3. I propose to deal with the principal claim by the plaintiffs against the defendants before coming to the cross claim. Neither of the 6th defendant/cross claimant nor the 7th defendant gave evidence.
4. At the commencement of the hearing I was informed that the 1st defendant is de-registered, the 2nd defendant is an undischarged bankrupt, and default Judgments were entered on 31 March 2015 for the plaintiffs against both the 1st defendant and the 2nd defendant for the whole of the sum claimed herein. In consequence of the bankruptcy, judgment against the 2nd defendant (who is the 4th cross-defendant) on the cross-claim is not available in these proceedings: s 58(3) Bankruptcy Act 1966.

ISSUES CONFINED

1. At the commencement of the hearing I required each of the 3rd to 7th defendants to comply with the Usual Direction for hearing by completing and handing up a Statement of Issues. At about the same time the defendants were required to give responses to Notices to Admit Facts and Authenticity of Documents served by the plaintiffs. These two processes caused to be identified the real question for determination between the plaintiffs and the 3rd to 7th defendants. That issue at number 2 of the Statement of Issues (a single document) handed up by the 3rd, 4th and 5th defendants, was stated as follows: "Whether the loan agreement dated 11 September 2006 relied upon by the plaintiffs [was] the actual loan agreement executed by the defendants?" 5. Counsel for the 6th and 7th defendants confirmed this to be the central issue and the issue to which paragraphs 2 and 5 of the Statement of Issues by those defendants referred.
2. This was the factual issue primarily contested by the parties during eight days of evidence at the hearing. The contract of loan agreement upon which the plaintiffs relied is a five page document being Exhibit C. The 3rd, 4th and 5th defendants concede that their signatures appear on page 5 of the loan agreement, Exhibit C.
3. The 6th defendant by his Statement of Issues concedes that the signature on page 5 above his name "resembles his usual signature" but then inconsistently states; "The 6th and 7th Defendants categorically state that they have not signed the guarantee". In closing oral submissions counsel for the 6th defendant took me to signatures on a letter dated 8 July 2010, Exhibit E, being a document which the 6th defendant says he signed, and on the loan agreement Exhibit C; but then conceded that there was no apparent difference between those signatures. I understand the 6th and 7th defendants' case to be that they do not recall signing a document providing for their guarantee of the subject loan. Their signatures appear on page 5 of the Exhibit C. They having not given evidence and there being no evidence to the contrary, I find that the 6th and 7th defendants signed the loan agreement. Indeed, I understand from submissions made by their counsel on the first day of the hearing and in closing submissions on the ninth day that, ultimately, the denial of their execution on page 5 was not pressed.
4. The substance of the denial by the 3rd to 5th defendants is that after they signed a document of loan agreement between the plaintiffs and the 1st defendant on about 11 September 2006, being a document which included page 5 of the loan contract Exhibit C; the 2nd defendant or some other unidentified person tampered with the document. They do not contest the loan from the plaintiffs to the 1st defendant. Their case is that the first four pages of loan contract Exhibit C, which contain terms of guarantee and warranties for the performance of the 1st defendant, were not in the contract they signed. In the event that this defence in regard to which only the 3rd to 5th defendants gave evidence is successful; then it will follow that the plaintiffs also fail to prove the document of loan contract, containing guarantees and warranties entered by the 6th and 7th defendants also. That is the case put by the 6th and 7th defendants.
5. In these reasons the parties will be identified in short form as follows: First Plaintiff: Ignacio de Castro will be referred to as "Ignacio" Second Plaintiff: Leticia de Castro will be referred to as "Leticia" First Defendant: New Ridge Property Group Pty Limited will be referred to as "New Ridge" Second Defendant: Kulwant Singh will be referred to as "Kulwant" Third Defendant: Harjit Singh (also known as Harjit Singh Sindhu) will be referred to as "Harjit" Fourth Defendant: Mandhir Singh Sandha (also known as Mr Singh and Mr Sandha) will be referred to as "Mandhir" Fifth Defendant: Moninderjit Singh (also known as Moninder) will be referred to as "Moninderjit" Sixth Defendant/Cross Claimant: Sukhdev Singh Dhaliwal will be referred to as "Sukhdev" Seventh Defendant: Gurmeet Singh Brar will be referred to as "Gurmeet"
6. It was apparent during the hearing that use of first name for each of the defendants was not only convenient but appropriate as a regular style of reference used between them, for each other and by their Counsel in relation to them. Mr Vassili, Solicitor, appeared for Moninderjit, and for much of the hearing also for Harjit. For convenience and meaning no discourtesy, where I refer to Counsel in these reasons, I include Mr Vassili.

BACKGROUND FACTS

1. At the relevant time Ignacio was employed as an analyst/programmer working with mainframe computer systems in the information technology department of Zurich Australia Financial Services Limited. Leticia worked as a customer services officer for MLC Australia.
2. From 25 February 2003, each of the third to seventh defendants (Harjit, Mandhir, Moninderjit, Sukhdev and Gurmeet) was a director of New Ridge. Their directorships of New Ridge ceased as follows: Harjit and Mandhir on 22 September 2014, Moninderjit on 1 August 2013, Sukhdev on 8 July 2010 and Gurmeet on 7 July 2010.
3. The third to fifth defendants (Harjit, Mandhir and Moninderjit) were directors of Shah MS Property Group Pty Limited during the material period of 2004 to 2006. For convenience that company is referred to as "Shah" in these reasons.
4. The business of both New Ridge and Shah was property development. Kulwant was a director and the principal managing executive in the enterprise of property development undertaken by Shah and New Ridge. Each of Harjit, Mandhir and Moninderjit worked in the office of United Real Estate Agency at Castle Hill ("United Real Estate") with Kulwant in that enterprise. Shah and New Ridge borrowed from private lenders externally and from the directors albeit there is no direct evidence in the proceedings of a loan from Sukhdev. The directors did not enter into documented loan agreements. The external lenders did. The agreements for loan promised high interest rates of return. Loan agreements with Shah made in 2005 and 2006, which are in evidence, provided for interest payments of 20% per annum and loan agreements with New Ridge made in 2006, which are in evidence, promised interest return of 12% per annum. In all agreements which are in evidence, including the subject document Loan agreement, Exhibit C, interest was to be paid monthly. At item 7 of the Schedule on page 4 of Exhibit C, interest of 12% per annum is provided for. Exhibit J is a hand-written document created by Kulwant, acknowledged in the oral evidence of the defendants and not otherwise contested, dated 25 August 2006. Exhibit J listed thirty-one private loans totalling $4,317,121.00 plus total interest payments then due of $378,613.00 making a total debt owed to lenders by Shah at that date, of $4,695,734.00. Plainly the enterprise was commercial in nature. Contracts entered into by the parties are to be construed as made between persons for commercial purposes.
5. In 2005 Ignacio and Leticia decided to sell their residence at Quakers Hill and search for a new property to purchase. At that time they also owned a property in Plumpton. In their search for a new property they became interested in a block of land at Kellyville Ridge which was advertised for sale by United Real Estate. On their attendance at United Real Estate they were greeted by Kulwant who introduced them to a vacant block of land in Castle Hill in regard to which there was already an approval for the construction of a house. They purchased the Castle Hill land. Kulwant introduced them to a builder who subsequently constructed a new house on the block for Ignacio and Leticia.
6. One of the vendors of the Castle Hill property was Moninderjit. Ignacio and Leticia retained United Real Estate to sell their Quakers Hill property. Kulwant acted as real estate agent in those sale and purchase transactions.
7. Purchase of the Castle Hill property and construction of the new house upon it were funded by way of mortgage with the National Australia Bank secured in the total sum of $820,000.00. Ignacio and Leticia also obtained approval for a line of credit of $50,000.00 from their bank at that time. Sale of their Quakers Hill residence in the sum of $383,500.00 was completed on 7 February 2006.
8. In the course of the above sale and purchase transactions in early 2005, Kulwant introduced Ignacio and Leticia to the purchase of an investment apartment in Cairns, which purchase they completed in about March or April 2005 for the sum of $280,000.00. The Cairns property was part of Shah's development enterprise. Kulwant invited Ignacio and Leticia to the United Real Estate offices at which time they shared a conversation to the following effect: Kulwant: "It would help you with your loan repayments if you invested in our property group, Shah MS Property Group" Kulwant pulled out a notebook full of names and said words to the following effect: Kulwant: "This book is full of names of people who have made money through my investments - they are all lawyers and doctors. Invest with me and I will give you a return of 20% on your principal sum". Ignacio: "How can we invest? We don't have any money to give you?" Kulwant: "I have a good investment opportunity that I'd like you to be involved in. If you invest in it, it will help you pay off your mortgages much more quickly. This is a property investment and I am willing to give you 20% interest. At the moment the bank loan is only 13%. On a $300,000.00 investment will earn you $5,000 a month". Kulwant: "I can help you secure a loan for $300,000, with Community First Credit Union and we will use your block of land in Plumpton".
9. Ignacio and Leticia decided to invest and negatively gear their investment property. They obtained from Community First Credit Union two loans, one for the sum of $300,000.00 and the other for $140,000.00 following approval advised by letter from Community First dated 7 April 2005 for a total loan of $440,000.00 secured by first registered mortgage over the Plumpton and Cairns properties.
10. On 23 June 2005 they signed a loan agreement with Shah, lending Shah $140,000.00. The fact of a loan agreement between Shah and Ignacio and Leticia for the principal sum of $140,000.00, promising interest at 20% per annum, recorded in a document of five pages which document was signed on the fifth page by Ignacio and Leticia, Harjit, Mandhir, Moninderjit and Kulwant is not disputed. Further, it is not disputed that page five of the document of loan agreement bearing date 23 June 2005, being Exhibit A in the proceedings, is the page numbered five signed by Ignacio, Leticia, Harjit, Mandhir, Moninderjit and Kulwant. As with all of the documents of loan contracts being Exhibits A, B, C, K and L, Harjit, Mandhir and Moninderjit concede that the page numbered five is the page of a loan agreement signed by them but claim that the Exhibited contract is not the loan agreement which they entered because the first four pages of the document are not the pages of the contract they signed.
11. Shah made regular monthly interest payments pursuant to the loan agreement made 23 June 2005.
12. On about 31 January 2006 Ignacio and Leticia entered into another loan agreement with Shah. The loan was in the sum of $150,000.00. On the plaintiffs' case that agreement for loan is contained within the document of contract which is Exhibit B. As in relation to the loan made 23 June 2005, Harjit, Mandhir, and Moninderjit do not dispute the fact of the loan between Shah and the plaintiffs, the interest rate of 20% or that they signed page 5 of Exhibit B for that loan; but they dispute that the first four pages of Exhibit B were part of the agreement signed by them.
13. From 31 January 2006 Ignacio and Leticia received regular monthly payments of interest in relation to each of the 23 June 2005 and 31 January 2006 loan agreements.
14. In about mid 2006 a change of Kulwant's design occurred in the defendants'' enterprise. As described by Mandhir in his affidavit made 9 October 2015 at paragraph 14: "On or about mid-2006 I recall Kulwant called Harjit Singh, Moninder Singh and myself into his office and said words to the effect, 'we are going to pay off the Shah Ms Loan. We are then going to diversify into two different companies. Shah Ms will look after the education side of the business and a new company, namely New Ridge Property Group Pty Ltd will look after the development side." Shah thereafter became Australian Academy of Management and Science Pty Limited, operating at Quakers Hill. New Ridge was not, as Mandhir says Kulwant stated, a new company. In fact the defendants had been directors of it since at least 2003.
15. In about August 2006 Ignacio and Leticia met with Kulwant in his office at United Real Estate when he informed them that New Ridge was going to invest in property development and that his investment group was going to buy a school. At that time Shah owed $300,000.00 to Ignacio and Leticia being the total of the two loans plus two months of interest. At the urging of Kulwant, Ignacio and Leticia agreed to receive repayment of the $300,000.00 and to re-invest it by loan to New Ridge at 12% interest. By this time Ignacio and Leticia trusted Kulwant.
16. Counsel for Harjit and Moninderjit in a submission supported by counsel for the other defendants, referred to the meeting between Kulwant and Ignacio and Leticia prior to entering into the subject loan contract and to what Kulwant said to Harjit, Mandhir Moninderjit, as evidence of surrounding circumstances to which the Court is required to look in order to determine what the parties knew at the time of the making of the contract of loan and with regard to their intention in the making of the contract. I understood his submission to be that consideration of what was said by Kulwant supported the defendant case of fact that Ignacio and Leticia on the one hand, and the defendants on the other, did not enter a contract of personal guarantee and that, if I determine against the defendants on the fundamental issue of whether Exhibit C was that contract; then, what Kulwant said at the meeting was relevant to a correct approach to construction of that contract.
17. In my opinion, as reasoned below, to use neutral terms - the contract Exhibit C speaks for itself as to the contractual intentions of the parties including of the defendants in relation to guarantees given. It is for completeness that I consider the versions of the discussion between Kulwant, Ignacio and Leticia some days before the entering of the subject loan agreement as deposed to in each of the affidavits of Ignacio and Leticia. Counsel for the 3rd and 5th defendants referred mainly to the version of the conversation set out in the affidavit of Leticia: Affidavit of Ignacio made 29 June 2015 at paragraph 26: Kulwant: "We are going to close Shah Ms Property Group. We have set up a new investment company named New Ridge Property Group. This company is going to invest in building units. We will build some units in Northmead. We'll also buy a restaurant and a school. When we sell it, the company will be worth more than $1,000,000.00. We want you to invest $300,000.00 with us. It will be a good return like the last times. Whilst we have been repaying you interest, we still owe you about $300,000.00 principal from the last two loans. You could just transfer your investment from Shah Ms to our new company". Ignacio: "What kind of a return will we receive? Still 20%?" Kulwant: "There are plenty of investors and we have plenty of money so the interest that we can offer is 12%. This is still better than the current housing loan rate." Ignacio: "It's a large amount but we really need to have help in our repayments. How much notice do you need if we decide to withdraw our investment?" Kulwant: "Well we've paid back the other loans to you, haven't we? And anyway, it is only $300,000.00. My house is worth more than a couple of million dollars. I'm not going to ruin my name for just $300,000.00. All I need is two weeks' notice and I will give your money back". Affidavit of Leticia made 29 June 2015, paragraph 25: Kulwant: "Shah Ms Property Group is closing down. I am setting up a new company called New Ridge Property Group and it will be investing in units. The money you invested in Shah Ms Property Group is a good amount to invest in this new company". Ignacio: "How much will we get in interest?" Kulwant: "The New Ridge Property Group will pay 12% interest". Leticia: "$300,000.00 is too much". Kulwant: "Come on - it is only $300,000.00. I have a house worth millions of dollars. I wouldn't ruin my reputation by doing something wrong by you. If you want to get your money, all I need is two weeks' notice and I will give your money back."
18. More precisely, the defendant submission is that when making the contract the plaintiffs were entering into an agreement on the understanding that Kulwant alone was guaranteeing that they would be repaid. The defendants' following submission is that Kulwant's substitution of the first four pages found in Exhibit C after they signed page 5, is not implausible in context that he tampered with the document in order to contract a personal liability of guarantee not contained in the document of loan agreement signed by the defendants, which personal liability of his own he had in fact orally promised. Later in these reasons, I reject that submission.
19. On about 11 September 2006 Ignacio and Leticia entered into a loan agreement with New Ridge for the principal sum of $300,000.00, with the promise of an interest rate of 12% per annum payable monthly. On the plaintiffs' case Exhibit C is that loan agreement. As for Exhibits A and B, there is no contest of fact of the loan or of the interest rate, nor is there dispute that page 5 of Exhibit C is page five of the loan agreement signed by Kulwant, Harjit, Mandhir and Moninderjit. On this occasion page 5 also bears the signatures of Sukhdev and Gurmeet. This is the loan agreement the subject of the dispute in these proceedings.
20. In relation to the loans made between Ignacio and Leticia as lenders and Shah as borrower on 23 June 2005 and on 31 January 2006 each of Harjit, Mandhir and Moninderjit signed a written agreement of loan on its page five whilst in the offices of United Real Estate and as requested by Kulwant to do. In relation to the subject agreement of loan made 11 September 2006, again Harjit, Mandhir and Moninderjit signed a written agreement in the offices of United Real Estate when requested to do so by Kulwant. The evidence is inconsistent as to whether Sukhdev and Gurmeet signed the 11 September 2006 agreement whilst at that office of elsewhere.
21. Ignacio and Leticia received monthly interest payments between 11 September 2006 and 18 May 2009. I was taken to evidence showing that in 2010 some monthly payments were missed. By around September 2011 payments had stopped.
22. Since April 1994 Ignacio had suffered from kidney disease and undergone dialysis. On around 4 September 2011, at a meeting between Kulwant, Ignacio and Leticia at the home of Ignacio and Leticia, Ignacio informed Kulwant that Ignacio and Leticia wanted to terminate the loan and receive repayment of the principal and interest then due to them. Kulwant responded that he had a transaction in play which would soon permit him to pay $100,000.00. Ignacio repeated his requirement for the balance to be paid.
23. On around 18 March 2012 Ignacio and Leticia received a payment by direct credit in the sum of $20,000.00, not the $100,000.00 promised by Kulwant. The payment was made not by New Ridge but by Mandhir. No further payments were received by Ignacio and Leticia.
24. Ignacio gave oral evidence that he trusted Kulwant implicitly. In relation to attempts to recover repayment his evidence was that he would telephone Kulwant, sometimes leave a voice message and other times he would be able to speak to him. Kulwant's response was that he was doing business and once the transaction in which he was involved went through he would be able to pay the money back. At some time in 2012 Kulwant's promises elevated to informing Ignacio that he was selling his house, and that once it sold, he would make repayment. Ignacio found Kulwant's home for sale on www.realestate.com.au for a price of approximately $6,000,000.00. On 1 July 2013 Kulwant sold his home for $2,410,000.00 but the loan was not repaid.
25. In my opinion it was not inconsistent with Ignacio's and Leticia's understanding of there being guarantees by each of the 2nd to 7th defendants, that Ignacio initially pursued only Kulwant for payment. Firstly, Kulwant was the only person with whom Ignacio and Leticia had dealt and secondly, they were expecting payment according to his post contractual promises. Ultimately that evidence is irrelevant to construction of the contract. Upon the failure of those promises of payment they attended solicitors and claimed against all seven defendants.
26. An event which, in my opinion and for the reasons given below, is significant in the determination of this dispute occurred on 30 June 2013. On that date, Ignacio and Leticia attended the office of Moninderjit where they were met by Harjit and Moninderjit. At that stage the office of Moninderjit was at Australian Academy of Management and Science Pty Limited, Quakers Hill. Its controlling director at all relevant times and to the present was and is Moninderjit. Harjit was a director of the company between 2003 and 24 August 2012, Mandhir was a director between 25 August 2009 and 10 July 2013 and Kulwant was a director and the secretary between 2003 and 24 August 2012. Sukhdev and Gurmeet were not directors of Australian Academy of Management Pty Limited. If it is relevant, Kulwant, Harjit, Mandhir and Moninderjit were shareholders in the company.
27. The common evidence concerning the meeting on 30 June 2013 is that Harjit and Moninderjit presented to Ignacio and Leticia a two page document entitled "Loan Agreement", signed by Kulwant, Harjit, Mandhir and Moninderjit on the second page and initialled by Harjit only on the first page. It is also common evidence the Ignacio and Leticia declined from entering the "Loan Agreement". That document is Exhibit D.

DOCUMENT ENTITLED "LOAN AGREEMENT 30 JUNE 2013" (EXHIBIT D)

1. There is no document tendered in the case of the defendants of a different first four pages of the subject loan agreement being that entered on 11 September 2006, nor of the first four pages of loan agreements with Shah made 23 June 2005 and 31 January 2006.
2. Extensive cross examination of Harjit, Mandhir and Moninderjit revealed their inability to give positive evidence of the different four pages of the loan agreements other than for Mandhir to have stated the general proposition that within those four pages of loan agreement which they signed in the offices of United Real Estate were terms of the effect that each of the directors signed as directors only and without personal liability. Harjit relied on Moninderjit to read and to explain the contract to him. His reading in English was very slow and he required "hard" words to be explained to him in Punjabi by Moninderjit. Harjit, Mandhir and Moninderjit gave evidence that they understood the meaning of the words "guarantor", "guarantee" and "warranties". They each gave evidence that it was their practice, consequent of their training as real estate agents, not only to sign the last page of contracts but to initial every page. The loan agreements evidenced as Exhibits A, B and C are not initialled on any of the four pages preceding the fifth page bearing signatures.
3. A large part of the time of the hearing was taken by cross examination contesting the existence of a document containing a different four pages than those of the 11 September 2006 dated contract, Exhibit C.
4. Harjit, Mandhir and Moninderjit gave evidence of the negative proposition that the documents which they signed in relation to each of the loans dated 23 June 2005, 31 January 2006 and the subject loan of 11 September 2006 did not contain the words "guarantor", "guarantee" or "warranties".
5. I deal with the questions of credit in detail below; but in the circumstances of the defendants having not presented better evidence of the subject loan agreement of content of terms different to Exhibit C, the written evidence of Exhibit D, in my view, takes on significance in determining whether Exhibit C is in fact the loan agreement entered on 11 September 2006.
6. Exhibit D names Ignacio and Leticia as lenders and Harjit as borrower. It is signed by Kulwant, Mandhir and Moninderjit as parties. The provisions of the document are: "NOW THIS AGREEMENT WITNESS: ● New Ridge Property Group Pty Limited was engaged in property development projects and has borrowed money from Lenders for property development projects at Northmead NSW. New Ridge Property Group Pty Limited suffered losses in the property development and is not in position to repay the loan of the Lenders. ● Harjit Singh being Guarantor of the loan of New Ridge Property Group Pty Limited is making agreement to repay the principal amount of the loan by taking repayment responsibility on his personal name of the Lenders namely: Leticia Decastro and Ignacio De Castro r/o [address], Castle Hill, NSW, 2154 - $210,000.00 (principal amount) ● By signing this loan agreement Harjit Singh being Guarantor of the loan of New Ridge Property Group Pty Limited and Lenders namely Leticia Decastro and Ignacio De Castro (r/o [address] Castle Hill, NSW, 2154) agrees to indemnify and release other three Guarantors namely Kulwant Singh, Moninderjit Singh and Mandhir Singh Sandha from any liability as Guarantor from these Lenders of the loan for New Ridge Property Group Pty Limited. ● Other two Guarantors of New Ridge Property Group Pty Limited namely Sukhdev Singh Dhaliwal and Gurmeet Singh Brar are not party to this agreement. So they remain liable repay as Guarantor of the loan for New Ridge Property Group and Lenders namely Leticia Decastro and Ignacio De Castro (r/o [address], Castle Hill, NSW, 2154) and these lenders are free to take any action against them if they fail to meet their obligation."
7. In my opinion the "Loan Agreement 30 June 2013", Exhibit D, is evidence which makes the plaintiff case in chief that Exhibit C is the contract of loan entered into by Harjit, Mandhir, Mandhir, Sukhdev and Gurmeet readily acceptable, for the following reasons: 1. By its terms it sufficiently describes the subject loan agreement and guarantees entered into by each of those defendants such that it identifies Exhibit C as the contract of loan because it refers to a loan agreement made by Ignacio and Leticia with New Ridge, of which Exhibit C is the only such contract in evidence and because it refers to guarantees given by each of those defendants of the performance of New Ridge under that loan and again Exhibit C is the only document in evidence of such a transaction; 2. In the circumstances of default of repayment of the subject loan as at June 2013, the offer contained within it plainly was designed to benefit each of Kulwant, Mandhir and Moninderjit by obtaining their release from guarantee and Harjit by release from the obligation of payment of interest and from the balance of the principal debt then owed. (There was evidence to the effect that Kulwant, Harjit, Mandhir and Moninderjit were sharing the cost of the deals to be done with lenders); and 3. Whilst the document "Loan Agreement 30 June 2013", Exhibit D, is not a document of the transaction of loan made 11 September 2006, it is a document created by Kulwant and signed by him, Harjit, Mandhir and Moninderjit, they being real estate trained, commercial people. It is strong corroborative evidence of that earlier contract, favouring acceptance of Exhibit C as the document of contract, even though it is not a document within a single commercial transaction referencing an earlier document of the transaction; see Toyota Finance Australia Limited v Gardner [2016] NSWCA 162 per McColl JA at [11]; Harvey v Edwards Dunlop & Co Limited (1927) 39 CLR 305 per Knox CJ, Gavan Duffy and Starke JJ at 307; Ballantine v Harold (1893) 19 VLR 465 at 468 per Madden CJ.
8. As referred to earlier in these reasons, it was submitted, particularly in oral closing submissions for Harjit and Moninderjit and the submission was supported by counsel for Mandhir, Sukhdev and Gurmeet; that, because Kulwant during the meeting between him, Ignacio and Leticia introducing the loan made 11 September 2006, spoke of a promise to repay Ignacio and Leticia, it is not implausible to accept that he tampered with the document to add provision for guarantee. In the context of the "Loan Agreement 30 June 2013", Exhibit D, including the evidence that it was a document drawn and encouraged by Kulwant and signed by him, Harjit, Mandhir and Moninderjit, the defendant proposition is, in my opinion, implausible. It is also implausible because at the time of the making of the subject loan agreement on 30 September 2006, Shah was able to repay the loans. The giving of guarantees is consistent with each of the defendants recognising the ability of New Ridge from the enterprises in which they were investors, to meet commitments to lenders. Indeed, there was nothing in the proposition put by the defendants which explains why Kulwant, even if he did accept a guarantee obligation in himself, would have not included it in the original document to be signed by the other defendants and further why, if tampering with the document so as to correct it to include his personal promise to repay, he would have included guarantees for each of the other defendants.
9. In my opinion Exhibit C is prima facie proof of the terms of the contract of loan and of guarantees made on 11 September 2006. Further, given the objective evidence of Exhibit D and of the surrounding circumstances to which I have just referred, the inherent commercial probabilities favour acceptance that the directors gave the guarantees and warranties over the contrary and commercially improbable proposition that in the absence of any evidence of the need to do so, after having obtained the signatures on page 5, Kulwant by tampering with the document added the personal guarantees and warranties: see Effem v Lake Cumbeline (1999) 161 ALR 599; [1999] HCA 15 at [15] at [16].
10. The onus then falls upon the defendants to satisfy me that upon the evidence the document of agreement which they signed on or about 11 September 2006 was of a different four pages, not containing the provisions of guarantee and warranty. That is, to satisfy me that they did not contract in the terms of Exhibit C: Insurance Commissioner v Joyce [1948] 77 CLR 39 per Dixon J at 54.

DEFENDANT EVIDENCE TO PROVE A DIFFERENT CONTRACT

1. In the top left hand corner of Exhibit C, being the document tendered by the plaintiffs as the original counterpart of the subject loan contract retained by them, appear approximately four pairs of staple holes in addition to the staple holding the document together and the staple affixing the exhibit slip. Leading the case for all defendants, the 3rd and 5th defendants tested closely the evidence of when and how those staple holes were made. The point of the defendant approach was to adduce evidence consistent with the loan contract having been reconstituted before delivery to Ignacio and Leticia such as would have happened had it been tampered with by substitution of four pages after the defendants had signed page 5. Indeed this challenge to Exhibit C went so far as to require affidavit evidence from Ms Shakespear of the plaintiffs' solicitor's office as to the removal of staples for photocopying and scanning purposes and reconstitution of the document during her handling of it. There was ample evidence including that Leticia separated the original document to copy it and by both Ignacio and Leticia that sometimes a document was stapled twice because of failure of the staple or for some other reason, as alone to make this evidence of no significant utility to me. It must be remembered that the document had been retained for ten years over which time nobody could have an accurate recollection as to when staple holes were made in it, in my opinion. It was plain that the making of staple holes was inconsequential and not something of which those handling the document would have fixed in their memory. In my view, it was appropriate that in closing submissions, the defendants did not appear to place reliance on a count of staple holes in Exhibit C as of significance.
2. In the cross examination of Ignacio and Leticia the defendants challenged their evidence that Harjit delivered to them the contract Exhibit C on 11 September 2006.
3. The loan agreement was delivered in counterparts, each of which was signed by the defendants on the fifth page. Regardless of the core point of the defence concerning tampering with the first four pages of the document; there is no contest that Exhibit C is the document of loan agreement received by Ignacio and Leticia on about 11 September 2006. Ignacio by affidavit evidence and without waver, despite extensive cross examination directed to his recollection of events, gave evidence that Harjit delivered the loan agreement Exhibit C. At paragraph 28 of her affidavit made 29 June 2015 Leticia, on the other hand, said that Kulwant delivered the loan agreement. At paragraph 32 of his affidavit made 23 June 2015 and in his oral evidence Harjit denied that he delivered the loan agreement.
4. That Ignacio's affidavit, of the same date as Leticia's, at paragraph 27 described Harjit delivering the document is inconsistent with paragraph 28 of Leticia's affidavit displays that the affidavits were created independently. In her affidavit of 13 May 2016, paragraph 3, Leticia corrected paragraph 28 of her earlier affidavit stating that it was not Kulwant but rather that it was Harjit who delivered the loan agreement. Further, as was the consistent evidence given by Ignacio and Leticia during cross examination, a meeting with Harjit occurred of approximately 15 to 20 minutes during which Ignacio and Leticia signed the loan agreement on 11 September 2006.
5. In other evidence Ignacio and Leticia explained that they signed their names to the original counterpart (Exhibit C) retained by them in about September 2015. Leticia in evidence explained that she copied the original document so that then she held in her file the original and the copy before they delivered that copy to solicitors they instructed and signed the original counterpart which she retained. I accept that is how the counterpart came to be signed by all the parties.
6. For reasons more fully exposed below I am concerned as to truthfulness and reliability of the evidence given by Harjit, Mandhir and Moninderjit. I accept the evidence of Ignacio and Leticia, preferring their evidence to the evidence of Harjit. I am satisfied that it was Harjit who delivered the loan, which is Exhibit C, to Ignacio and Leticia on 11 September 2006. In arriving at this determination I have considered carefully the cross examination of Ignacio and Leticia and the delivery of evidence by Harjit.
7. That the document was delivered by Harjit rather than Kulwant, infers that it was the document Harjit recognised as having been recently signed by him in the offices of United Real Estate at the same time as it was signed by Kulwant, Mandhir and Moninderjit.
8. For completeness, I have taken into account in my consideration that Ignacio was shown to be inaccurate and faulty in his recollection, stating as he did at paragraphs 27 and 28 of his affidavit of 29 June 2015, that when Harjit came to the house on 11 September 2006 he brought with him not only the loan agreement but also a cheque for $300,000.00 from Shah, which Ignacio endorsed on the back and made payable to New Ridge Property Group. Banking records showed that two cheques totalling the sum of $304,405.28 in repayment of the Shah loans, had been deposited into the account of Ignacio and Leticia at the end of August 2006. Cheque butts and banking records showed that two cheques drawn on the accounts of Ignacio and Leticia totalling $300,000.00 directed to New Ridge were drawn down on 11 and 12 September 2006.
9. Ignacio made appropriate concessions when shown the records of cheques and drawdowns and indeed in other matters of recollection. I was satisfied with the truthfulness of his evidence such that I do not find that his error in relation to the endorsement of a cheque in paragraph 27 of his affidavit 29 June 2015 to cause me not to accept the reliability of his evidence that Harjit delivered the loan agreement.
10. Affidavits were read in the defence case by each of Harjit, Mandhir and Moninderjit. They gave oral evidence in the order of Mandhir, Moninderjit and finally Harjit. Each of them was present in court during the whole of the case. I repeat Sukhdev and Gurmeet did not go into evidence.
11. The whole of the defendant affidavit and oral evidence was consistent in describing Kulwant as the leader in their entrepreneurial enterprise conducted from the offices of United Real Estate where Harjit, Mandhir and Moninderjit signed a loan agreement for the subject loan on about 11 September 2006 and agreements made between Ignacio and Leticia on one hand and Shah on the other hand, on or about 23 June 2005 and 31 January 2006.
12. The focus of the evidence of each of Harjit, Mandhir and Moninderjit was to distinguish the document of contract of loan of 11 September 2006, Exhibit C (and likewise Exhibits A and B, being the documents relied upon in the plaintiffs case as the contracts of the earlier loan agreements), from the document of contract which they alleged they signed on two points of distinction, being, (as identified in written submissions for the 3rd and 5th defendants at page 3, paragraph 17): "The loan agreement which was signed by The Defendants was initialled on the bottom of each page of that agreement"; and "The loan agreement which was signed by The defendants did not contain a guarantee and did not have the word guarantee within in it,"
13. That they did not initial or sign every page of every document is evidenced by Exhibit D. That document entitled "Loan Agreement" and dated 30 June 2013 is signed by each of them on the second page but only initialled by Harjit on the first page. It is a document said to have been created by Kulwant and signed by them, just as are the other documents of loan contract under consideration. Only Mandhir gave an explanation for a physical or mechanical interruption to the opportunity to initial the first page. He said that he was working in Cairns at the time he received it by email from Kulwant and that he signed it when he dropped into the office of United Real Estate to do so on his journey from the airport to home. He says that Kulwant presented him with only the second page at that time.
14. Harjit, Mandhir and Moninderjit, as each of them explained, signed documents in what impressed me as being hurried circumstances when directed to do so by Kulwant in the offices of United Real Estate and they complied with his direction to sign. The influence of Kulwant, their apparent reliance upon him and the hurried environment in which documents were signed within that office was not interrupted by such things as Mandhir demanding the first page of Exhibit D.
15. Each of Mandhir and Moninderjit gave oral evidence that the first page of the loan contract they signed, the title page, did contain the names of the directors including Harjit but that under those names the descriptive was "Directors" rather than "Guarantors" as appears on Exhibit C. Indeed, their evidence was commonly that they initialled the first four pages of each of the loan agreements and entered their full signature on the final fifth page; and that the words "guarantee", "guarantor" and "warranties" did not appear in the written contracts which they signed. The content of terms appearing Exhibits A, B and C are for the purpose of consideration of this evidence, alike.
16. In none of Exhibits A, B or C are the first four pages initialled. Each of Exhibits A, B and C commonly express terms providing personal guarantees of the loan to the corporate borrower, Shah or New Ridge respectively. This is save the obvious mistake in the Schedule to Exhibit C (considered below) which identified Ignacio and Leticia as borrowers.
17. The oral evidence in the defendant case directed to proof of some other documents of loan contracts was given in the following circumstances: 1. A decade after the signing of documents of the loan contracts, which contracts were immediately stored by Kulwant and had not been seen by the defendants in the interim; 2. The inability or failure of Harjit, Mandhir or Moninderjit to give positive evidence of the content of terms or otherwise as to the alleged different first four pages, except for the absence of their initials and the negative assertion that the document that they signed did not contain the words "guarantor", "guarantee" or "warranty" and that they would not have signed a document promising their personal guarantee; and 3. Failure by the defendants to produce the allegedly different four pages.
18. I considered the evidence of their practice of initialling each page of every contract to be given in an attempt to advance a corroborative element in the defendant evidence. Taking that evidence as a whole, it impressed me as evidence only of a practice not as of an actually held recollection of initialling the bottom of every page of the loan agreement made on or about 11 September 2006 or indeed of the earlier agreements. The impression I gained from observing them give evidence in the presence of each other in the courtroom was that they volunteered, repeatedly, having witnessed each other initial every page, even when the question did not require it.
19. I gained the impression that they were prepared to deny entering any document which contained reference to "guarantor" or "guarantee" to the point where their evidence was unconvincing. Indeed they even denied the clear meaning of the expression "guarantees" given in Exhibit D, the authenticity of which document they conceded.
20. For the purposes of considering the defendant evidence it is necessary to first set out some significant features of Exhibit C, as follows: The first and title page clearly identifies Ignacio and Leticia as "Lender" and New Ridge as "Borrower". It sets out the full name of each of Kulwant, Harjit, Mandhir, Moninderjit, Sukhdev and Gurmeet above the title "Guarantors". On page 2 the agreement reads to be made between the Borrower identified in Item 2 of the Schedule where, mistakenly, the names of Ignacio and Leticia appear instead of New Ridge. Again, there was no dispute of the fact of the loan made between Ignacio and Leticia as lenders and New Ridge as borrower. None of Harjit, Mandhir or Moninderjit gave evidence that Ignacio and Leticia were not identified as 'the Lender' on the first page, being the title page of the document which they signed. The parties whose names appear in capitals in Item 4 of the Schedule ("the Guarantors") are Kulwant, Harjit, Mandhir, Moninderjit Sukhdev and Gurmeet. On page 3 the guarantee provisions appear. I quote the whole of those provisions because the very length of the passage, such that if occupies most of a page, has significance in that it illustrates the fallacy of the defendant proposition that without it, the document would still be of five pages: "1.34 In consideration of the covenants herein contained the Lender having advanced the loan to the borrower at their request, the Guarantors hereby jointly and severally guarantee to the lender the due and prompt performance by the borrower of all the covenants and obligations on its part contained herein and shall jointly and severally indemnify and keep indemnified the lender against all losses, damages, costs and expenses which may be incurred or suffered by the lender by reason of any breach or default on the part of the Borrower or in performing or failing to perform any of the covenants and obligations contained in this agreement. 1.35 In respect of the guarantee contained in clause 5.1 of this agreement, the guarantors undertake to the Lender and the parties agree that: The guarantee is a continuing guarantee. The guarantee shall not be considered as wholly or partly discharged by any arrangement made between the Lender and the Borrower by the granting of any time or other indulgence or concession by the Lender to the Borrower or by any release, abandonment, forbearance or relinquishment of any of the rights of the lender against the borrower or by the neglect or omission of the lender to enforce such rights whether such rights relate to payment, time, performance or otherwise. The guarantee is in addition to and not in substitution for any other rights which the lender may have under or by virtue hereof or otherwise and may be enforced against the guarantors without the lender first having recourse to any such right and without the Lender taking any steps or proceedings against the borrower. 1.8 ……. 21.9.1 ……… 22. The parties hereto covenant with each other to sign and execute all documents and perform all such acts as may be necessary or desirable to effectuate, complete or assist in the completion of the intentions of this agreement. 23. It is agreed that none of the provisions of this agreement nor the warranties or covenants herein contained shall continue thereafter to subsist for as long as may be necessary for their purpose of giving effect to each and every one of them in accordance with the terms of this agreement."
21. Consideration of the evidence of Harjit on the question of whether Exhibit C is the document signed or that the defendants signed a loan contract including a different first four pages, necessarily involves consideration of his recollection of the alleged other document. The simple point is that he does not have such a recollection because he relied on Moninderjit to explain the terms of the loan contracts to him in the circumstances of he being a very slow reader of the English language and in the time available for signing of documents under the direction of Kulwant. Because he did not study the documents at the time of executing them, he could not be composed of a recollection of content of terms. Whilst he was assisted by an interpreter, most of the discussion between them was in the English language, including much of what was said by the interpreter to Harjit. At transcript 442 from line 15 his evidence was: "KNACKSTREDT Q. You understand that you're saying that the document that is in the evidence is different to the one you signed. You understand that, don't you? A. WITNESS: Yep, because when I got document here .. (not transcribable) .. never read it. Moninder read it to me and he explain to me. And when I sign, Mandhir, Moninder, Kulwant and myself. I was the last one who sign that one."
22. At transcript 473, line 30 to page 474 line 12, in his heavily accented and difficult to understand speech, his evidence was: "KNACKSTREDT Q. So it's been ten years since someone read out to you the contents of this document that you say you signed. Is that right? A. WITNESS: Yes, Moninder .. (not transcribable) .. that's true, sir. Q. And you say you've got a recollection about what was in the document, do you? A. WITNESS: Yes .. (not transcribable).. Q. And you remember ten years later what he told you about what was in the document, do you? A. WITNESS: What you ask, I'm sorry? Q. You remember ten years later about what he told you was in the document. Is that what you say? A. WITNESS: Yes, what he say..(not transcribable)..I remember. Q. Right, what did he say? A. WITNESS: He say they've got no personal guarantee. Q. What else did he say? A. WITNESS: That's all that he said. Q. That's all he said? A. WITNESS: Yes, personal guarantee, that's all going through the company, that's he explain me. HIS HONOUR Q. He said, "We have no personal guarantee"? A. WITNESS: Yes, sir. Q. And that's all he said? A. WITNESS: Yes."
23. Indeed in his affidavit made 23 June 2016 Harjit's evidence was (in relation to the 23 June 2005 contract) that: "The primary reason why I say the document is different" was because his initials do not appear on the first four pages. His evidence to the same effect in relation to Exhibit C appears at paragraph 33.
24. My observation is that Harjit had no recollection by which the contract of the subject loan made 11 September 2006, Exhibit C in the plaintiffs' case, was identifiable by him as different to the document which he signed. In the absence of his initials appearing on the first four pages he refused to concede them as part of the contract which he signed. Generally his evidence was motivated by a want to deny having agreed to guarantee the performance of New Ridge under the loan.
25. By his affidavit made 9 October 2015 Mandhir also stated that Exhibits A, B and C were not the documents he signed because of the absence at the bottom of the first four pages of his initials. Specifically in relation to the subject loan agreement Exhibit C, at paragraph 17 of his affidavit, his evidence was: "I received the document and after reviewing the document I recall I initialled the first four pages at the bottom of the page, and signed the last page of this document where my name is printed."
26. My observation of Mandhir giving his evidence and my consideration of the content of that evidence leads me to conclude that he does not in fact recollect a different document signed by him for the subject loan made 11 September 2006, nor indeed, for any of those earlier loans. Indeed, at paragraph 11 of his affidavit his recollection was such that he was only able in relation to page 5 of Exhibit C to make the qualified acknowledgement; "The last page of which resembles page 5" of the document he signed when it was placed on the table by Kulwant.
27. His evidence of initialling every page of contracts was evidence of a practice only. During examination in chief he referred to that practice occurring "most of the time" in the passage. At transcript 229 line 19: "Q. Can you point out to his Honour anything in particular that looks different, that is not the same? A. Yeah, the practice I used to have that - I used to initial each and every page at the bottom, so there is no initials on these pages. Q. Anything else? A. And a - most of the time because I used to initial with Harjit and Moninder, so we used to have the initial always. Each and every bottom page."
28. His inability to recall different contracts signed a decade before in relation to each of the loan agreements was readily exposed when in evidence in chief, on being shown Exhibits A, B and C all he could say of provisions providing for guarantee on page 3 of the five page loan agreements he signed was that those clauses did not exist. The clauses occupy most of page 3 on each of the five page documents (including a page 1 title page and a page 5 signature page leaving approximately only three pages of terms).
29. Mandhir's evidence, unsatisfactory as it was, was the most complete attempt by any of the defendants to respond to cross examination enquiring of what was in the alleged different document signed by them if it was not terms of guarantee as in the loan agreements tendered in the plaintiffs' case. I select the following extract from the transcript of that evidence which reveals that Mandhir had no actual recollection of a different document. In cross examination as to Exhibit A, guarantee clauses 5.1 and 5.2 (transcript page 257 line 30 to 275 line 50): "Q. So, is your evidence that this document that you signed was five pages, with a whole lot of blank space on each page? Was that your evidence? A. What I am suggesting is, I'm not saying that there was a blank page, but these clauses were not in those ones. Q. So what was there instead of those clauses? A. There was a number 5, as far as my memory. There was not a 5.1 and a 5.2. Q. What was there? A. It was just - there was not a word "guarantee" or "guarantor" (sic). It was just the directors. Number 5 was saying, just, the responsibility - every director is signing, as..(not transcribable)..director of the company. Q. Do you understand what I'm asking you, Mr Singh? A. Yes. Q. You'll see, on page 3 of this document, that clauses 5.1 and 5.2 take up at least half a page. Do you see that? A. Yep." At transcript page 261 lines 5 to11: "Q. What was there instead? A. I think I explained already, in the previous document, that - it was explained, directors' responsibilities. There was not a single word mentioned anywhere as "the guarantors" (sic), or personal liability, or "guarantees" (sic) anywhere. Q. You said it explained the directors' responsibilities. What responsibilities were there? A. Just that the directors are signing these documents, because these loans are unsecured loans. That's the reason the company is paying high interest rate - these sort of things." In cross examination on Exhibit B "warranties" in Clause 9 transcript page 265, line 31: "Q. And you have a crystal clear recollection in relation to clause 9 on page 4, that the word "warranties" wasn't there? A. Yes. Q. What was there instead of the word "warranties"? A. I have no idea. No recollection." As to Exhibit C, the subject loan agreement - guarantee clauses, transcript 276 line 34: "Q. Then, on page 3, you said clauses 1.34 and 1.35 weren't there? A. Right. Q. Also, on page 3, at clause 23, you said the word "warranties" wasn't there? A. Right. Q. Now, is it the case that with this document, like the others, you can't tell us what was there, instead of clauses 1.34 and 1.35? A. Yeah, they said it was - again, in that document, it was clearly indicated that each and every individual is signing as a director, in the capacity as a director, and there is no personal liability of anyone." Ultimately Mandhir conceded his inability to recall terms of the alleged different agreement. Transcript page 280 line 39: "Q. My question was, you would agree with me, I take it, that it is difficult to remember details of documents that you might have seen ten years ago. A. Of course each and every line will be hard to remember. Yes, I agree." This concession was compounded by Mandhir's acknowledgement at transcript page 280, line 45 to 281 line 30 that because Kulwant prepared the contracts of loan they used to be similar and that in the intervening period, in practice as a real estate agent, he had signed thousands of documents and could not remember the detail of content of the contract signed by him.
30. Mandhir did not suffer any difficulty with the English language, spoken or written, albeit he spoke with a strong accent and a degree of grammatical imprecision. He holds a Master's Degree in plant breeding and genetics achieved in a course conducted in the English language at university in India, as well as a diploma in real estate practice achieved in a six month course conducted in the English language in Sydney. He had conducted a real estate agency business in Sydney over a significant period of time.
31. My observation of him in the witness box and consideration of the content of his evidence brought me to the view that not only did he not have any actual recollection of a contract made on or about 11 September 2006 of terms different to those in Exhibit C but that he proffered the invention of the existence of a clause in each of the loan contracts to the effect that the directors entered the agreement only as directors of the company and not as parties accepting a personal obligation. Indeed, the express attribution above the signatures that the defendants were signing as "parties hereto" on page 5 of each of Exhibits A, B and C would be superfluous unless they were signing their acceptance of the personal obligation expressed therein. Likewise would the listing of their names on the front first, title page of each of the loan agreements.
32. A further reason for my concern as to the evidence given by Mandhir was that between days three and four of the hearing he changed his evidence in that on the latter day he identified in greater detail, differences between the Exhibits A, B and C and the contracts of loan agreement which he alleged he signed and he misinformed the Court of the cause of his awakening to that greater detail.
33. When cross examined on this point at transcript page 253 to 254, Mandhir claimed that the greater detail of differences came to him on day 4 as he had time to go through the documents whilst sitting in the witness box. He denied having discussed the subject of those differences with the other defendants; having a conversation in relation to the documents with his legal representatives; and that he took the loan agreements home overnight. Because he was not in cross examination overnight, he could easily, as an honest witness, have conceded discussion with persons and access to the loan agreements overnight. At the end of day 3, I said to him (transcript 230, lines 33 to 35): HIS HONOUR: Sir, you are not under cross-examination, so the warning you've heard me give other witnesses does not apply to you, you are free to talk to people overnight.
34. In re-examination on day 5, Mandhir admitted the falsity of those day 4 answers. At transcript page 367 to 368 his evidence was that following his evidence in chief on day 3 his barrister provided him with copies of Exhibits A, B and C and asked him to examine them overnight in order to consider any differences between them and the documents which in his case he alleges he signed. Whilst it was submitted to me in closing that there are differences between speaking English and familiarity with one's mother tongue permitting room for misunderstanding the distinction between "solicitor" and "barrister" when answering questions asking of "legal representative"; to my observation Mandhir was not confused of the questions which had been asked of him on day 4 or as to the inaccuracy of the answers which he gave. I am concerned that his evidence in re-examination on the issue might have been less than completely truthful.
35. Moninderjit was also unable to give any positive evidence of the content of the allegedly different four pages of the documents of loan agreement which he entered. He was unable to describe the expression of the terms of those alleged documents, maintaining simply a denial of having signed any document which included the word "guarantee" or "guarantor" or terms of that effect. Nothing given in the oral evidence of Moninderjit, like that of Mandhir, attracted in me any doubt that the signatures below the reference to signing as parties on page 5 in association with their names on the first, title page of the contracts, are consistent with their having entered into the obligations of contract. I extract the following questions and answers from transcript pages 562 lines 05 to 20: "Q. Yes, you have told us in relation to that page about two differences. Firstly, you have said that your initial was on the page? A. Yep. Q. Secondly, you have said that the word "guarantors" wasn't on the page? A. Yep. Q. Was your name on the front page? A. Yes. Q. What did it say? Were the names of the other directors on the front page? A. Yes. Q. Did it say anything underneath that? A. No, nothing." …………..
36. When cross examined about the loan agreement made on or about 11 September 2006 and taken to Exhibit C, he conceded that he had "no idea" of the content of the document which he alleges he signed which was different to Exhibit C and yet he maintained that Exhibit C was not the document that he signed. He pointed only to the absence of his initials on the first four pages of the document and his denial that the document which he signed included the words "guarantor" and "guarantee".
37. In relation to page 2 the recital B which contained "The Guarantors have agreed to guarantee the repayment of the loan and the obligations of the Borrower pursuant to this Agreement to the lender" he answered at transcript page 562, lines 35 to 50: "Q. And the word "guarantee" wasn't there? A. Yep. Q. What was there instead of the words "guarantors" and "guarantee"? HIS HONOUR: It's on page 3 of the document you are at. KNACKSTREDT: Page 2 of the document, your Honour. Page 307 of the court book. WITNESS: I can't remember, but certainly this word was not there. KNACKSTREDT Q. You can't remember? A. No. And in relation to the guarantee clauses on page 3 in Exhibit C, at transcript page 564 lines 10 to 29: "KNACKSTREDT Q. Then on the next page, page 59? A. Yep. Q. You said the words "guarantee" was not there? A. Yes, please. Q. You'll see that the guarantee clauses 1.34 and 1.35‑‑ A. Yeah. Q. ‑‑take up more than half the page, don't they? A. Yeah, yeah. Yes, please. Q. Tell us about what was there instead of those clauses? A. I have no idea, brother. Q. No idea? A. No."
38. From my observation of Moninderjit, I formed the view that like Harjit and Mandhir he had no actual recollection of a different document of loan contract. As for Harjit and Mandhir, I consider his evidence to be unreliable.
39. There was overwhelming evidence, in my view, that Kulwant was contactable and locatable by Harjit, Mandhir and Moninderjit. I do not propose to go into all of that evidence in these reasons but each of Harjit, Mandhir and Moninderjit were aware that Kulwant was locatable through the business Starr Partners at Castle Hill, he was locatable by search on realestate.com.au where contact details were given for him as a director of sales operating in their industry. Each of them and indeed the 6th and 7th defendants when required to produce their mobile phones in Court, were found to have Kulwant's telephone number within their Contacts file. Moninderjit conceded that he recalled Kulwant's mobile telephone number from memory. There was no evidence of Kulwant refusing contact with Harjit, Mandhir or Moninderjit. Whilst Harjit said that Kulwant had threatened him with legal process if Harjit persisted in visiting him at his place of business, Harjit gave evidence that he would see Kulwant at social functions and there was photographic evidence of Moninderjit sharing lunch with Kulwant and a mutual associate. There was evidence of Harjit, Mandhir and Moninderjit remaining in telephone communication and sharing lunch during the course of the proceedings and of one or other of them having contacted Kulwant by telephone at about the time of the commencement of the proceedings.
40. There was no evidence to suggest that Kulwant could not have been located for the purposes of the issue of notice for compelling discovery of the alleged different documents of loan according to the usual Court process. I have found the onus falls upon the defendants to prove that other contract.
41. Further, I am informed that the plaintiffs' legal representatives issued Notices to Produce to all of the defendants as well as a subpoena to the solicitors previously acting for New Ridge and that no documentary evidence was provided supportive of the existence of the alleged "different" contracts of loan.
42. Application of principle requires the following approach to that evidence: 1. Description of the legal effect of documents by Kulwant in conversations with Harjit, Mandhir and Moninderjit is inadmissible as double hearsay incurable by application of s 60 Evidence Act; Ho v. Powell (2001) 52 NSWLR 572. 2. Although s 51 Evidence Act abolished the common law principles relating to means of proving the contents of documents, it does not affect the principle that clear and convincing evidence of the contents of the "other" or "different" four pages which the defendant case asserts is necessary for them to prove; Minassian v. Minassian [2010] NSWSC 708 at [44]. 3. The evidence of Harjit, Mandhir and Moninderjit was not remembrance of actual personal observation of what was written upon, they say, four different pages of the loan agreement of 11 September 2006 from that contained in Exhibit C; Mack v Lenton (1993) 32 NSWLR 259. Their evidence that they did not sign a document containing the words "guarantor", "guarantee" or "warranties" was really not evidence of fact but only a submission of a negative proposition. I so find, and not purely as a matter of approach according to principle but also from my perception of how they gave their evidence, each of them protesting repeatedly that proposition and also that they initialled every page and saw each other do the same. In this case the approach of Ball J in Minassian and of Young J in Mack do not require application of strict prohibitive prescription of proof of content of document; but rather, exposition of the requirement of the burden of some positive proof borne by the defendants of the terms of some other agreement they allege. 4. Their evidence totally lacked what might have been considered a reasonable degree of precision upon which I might infer different terms of agreement and a different document; Commercial Union Assurance Company of Australia Limited v. Ferrcom Pty Limited (1991) 22 NSWLR 389 per Handley JA at 418E to 419. Evidence of the different agreement of loan, alleged signed by the defendants was, if such evidence exists, peculiarly in their knowledge and their failure to prove terms of such alleged different agreement makes the plaintiff's onus of proof more readily satisfied: Apollo Shower Screens v B & CILSP Corp (1985) 1 NSWLR 561 at 565. 5. Ordinarily oral evidence of terms of contract in circumstances of there being a written document, would not be admissible subject to acceptable evidence that the written document was not available; Codelfa Construction Pty Limited v State Rail Authority of NSW (1982) 149 CLR 337 at 352.
43. As a general conclusion, on the whole of the evidence, the defendant case lacks evidence arising, in my opinion, to actual persuasion of the fact that the contract of loan which they signed was not Exhibit C; see Helton v Allen (1940) 63 CLR 691 at 712.

OTHER ISSUES RAISED BY THE DEFENDANTS

1. By amended Statement of Claim at paragraph 5 Ignacio and Leticia pleaded the substance of the contract of loan made on or about 11 September 2006 between themselves, and the defendants. Paragraph 5.3 reads: In consideration of the Lenders' agreement to advance the Loan to the Borrower at the request of the Guarantors, the Guarantors agreed to guarantee the obligations of the Borrower and indemnify the Lenders against all loss arising out of any default by the Borrower (the Loan Agreement). Particulars The Loan Agreement between the Lenders, the Borrower and the Guarantors dated 11 September 2006.
2. The defendants point to what they say are irregularities in the Exhibit C loan contract which, because the relief is not sought in the amended Statement of Claim, will not be rectified by the Court. I list and consider the irregularities submitted by the defendants, principally Harjit, Mandhir and Moninderjit: 1. Irregularity: New Ridge is not a party to the contract because Ignacio and Leticia are identified at Item 2 of the Schedule as the defined "Borrower". 2. Consideration: This submission overlooks that none of the evidence challenged the identification of Ignacio and Leticia as "Lender" and of New Ridge as "Borrower" on the title, first page of the contract. Each of the parties who gave evidence, Ignacio, Leticia, Harjit, Mandhir and Moninderjit gave evidence of their awareness of the surrounding circumstances of the making of the contract being that New Ridge was the borrower and Ignacio and Leticia the lenders. Given its literal meaning the irregularity would provide, for the guarantors to be guaranteeing the repayment of the loan to Ignacio and Leticia as borrowers rather than as lenders. The contract must be read as a whole in the context of the known circumstances of the identities of the borrowers and lenders. It does not permit of ambiguity in my opinion. To read it as it is suggested in the defendants' submission is to propose an absurd literal meaning: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37 at [46] - [52]. For those reasons relief by rectification of contract is not required: National Australia Bank Limited v Clowes [2013] NSWCA 179 at [33] to [38]. In my opinion, the defendant submission raises a matter of construction of the contract and not a matter requiring rectification of the contract. 3. Irregularity: The defendants have executed the contract as "Witnesses" and as "Directors" on the face of the document at page 5 but not as guarantors. 4. Consideration: As I have already stated in these reasons, the signatures on page 5 appear above the printed names of each of the defendants and without other description specifying that those signatures pertain to any specific capacity to enter the contract. In this way, the signatures respond to the preceding recitals of attribution including that they have signed as parties and as directors: see Harris v Burrell & Family Pty Ltd [2010] SASCFC 12 per Doyle CJ with whom Bleby and Sulan JJ agreed at [15] to [22] and [27]. In my opinion, the defendants' submission proposes an absurdity. 5. Irregularity: That the guarantee clause 1.35 on page 3 refers to obligations under clause numbered 5.1 but no clause numbered 5.1 exists the contract, that the numbering on page 3 is disjointed at clauses 1.8 because it follows clause 1.35 and at clause 21.9.1 because it precedes clause 22. 6. Consideration: In my opinion nothing turns on that numbering. The "5.1" is an obvious error, the plain reading of the document being that clause 1.35 refers to the preceding clause 1.34. The entry "5.1" does not cause confusion and the typographical error is of no significance. I am also of the view that the other numbering of the paragraphs complained of, is equally of no significance as it causes no confusion or ambiguity. The paragraphs are to be read in an orderly and commercially acceptable fashion giving a plain construction of meaning. 7. Irregularity: Item 6 in the Schedule on page 4 refers to Clause 1.25, which does not exist. 8. Consideration: There was no dispute of the default of New Ridge in repayment of the loan and for that reason, this submission is not of substance in the determination of the case. That said, the words "as set out in clause 1.2" do not create uncertainty of the meaning of the term expressed in item 6. In my opinion the submission does not raise a point of substance for the determination of this case.
3. The defendants submit, on the basis of the evidence of Harjit, Mandhir and Moninderjit that I should find that they did not enter the loan contract made 11 September 2006 with an intention to be bound personally as guarantors because Kulwant, they say, told them that the document they signed did not promise personal liability in them and that they signed only as directors of New Ridge.
4. My reasons already given, in particular my findings that they affixed their signatures as 'parties' to a contract certain of meaning, are enough to dismiss this submission by application of principle. The submission amounts to not more than an argument that evidence of subjective understanding held by Harjit, Mandhir and Moninderjit is to be taken into account when construing the intent and object of the contract. The character of evidence upon which the defendants rely is, for example, that appearing at transcript 270, line 40 during the cross-examination of Mandhir: "Q. Why did you sign this document if you didn't have to? A. Look, I just signed, as I said, I just signed because Kulwant convinced us to go ahead and sign because there is no personal liability of any directors, that's why we signed the paper."
5. The defendant's submission relied also on the passages of affidavit evidence of Ignacio (affidavit 29 June 2015, paragraph 26) and of Leticia (affidavit 29 June 2015, paragraph 25), set out earlier in these reasons, to make the cumulative submission that the plaintiffs and the defendants entered into the contract without an expectation that Harjit, Mandhir, Moninderjit, Sukhdev and Gurmeet be guarantors.
6. During oral closing submissions Mr Vassili, who appeared for Harjit, Mandhir and Moninderjit, made submissions that that evidence was to be taken into account as part of the broader enquiry of surrounding circumstances known to the parties when construing the meaning of the terms of the contract in order to determine its purpose and object. In written submissions, he referred to Toll (FGCR) Pty Ltd v. Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [40]. That paragraph of the judgment of the High Court follows what was said in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [22], which passage is of the opposite effect of that for which the defendants submit. The passage reads: "What is important is not Ms Dhiri's subjective intention, or even what she might have conveyed, or attempted to convey, to NEAT about her understanding of what she was doing. The letters of indemnity were, and were intended by NEAT and BNP to be, furnished to Pacific. Pacific did not know what was going on in Ms Dhiri's mind, or what she might have communicated to NEAT as to her understanding or intention. The case provides a good example of the reason why the meaning of commercial documents is determined objectively: it was only the documents that spoke to Pacific. The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction…" (Bold added)
7. I have highlighted the passages in bold to emphasise that the passage of the High Court's judgment in Paribas, upon which the defendant submission relies, is against the proposition that what was said by Kulwant to the plaintiffs, on the one hand, and what was said by Kulwant to Harjit, Mandhir and Moninderjit on the other hand, and the subjective understandings they independently obtained from what he said; have any relevance to, or are admissible in relation to, construction of the contract. The reasonable person in the position of Ignacio and Leticia, on the one hand, and in the position of Harjit, Mandhir, Moninderjit, Sukhdev and Gurmeet (and the other defendants) on the other hand, would have determined on reading the contract that the defendants guaranteed repayment of the loan by New Ridge in accordance with the terms of the contract: see recently Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990 at [48] and [50]; Angas Securities Ltd v Small Business Consortium Lloyds Consortium No. 9056 [2016] NSWCA 182.

CROSS CLAIM

1. By cross claim filed 17 December 2014 Sukhdev pleads the agreement contained within his letter of resignation from directorship of New Ridge dated 8 July 2010 and claims indemnity or contribution from each of Kulwant, Harjit, Mandhir and Moninderjit. The letter of resignation is Exhibit E.
2. Pursuant to s 203A, Corporations Act 2001, a director may resign as a director of a private company by giving written notice of resignation. The fact of resignation is not contested. The letter of resignation Exhibit E was drawn and witnessed by Rahul Nad, solicitor for New Ridge.
3. The agreement contained within the letter of resignation is in the following terms: "Following my resignation as a director, I am released from any guarantee I have given in favour of [New Ridge] and am released from all past, present and future claims relating to the company."
4. Kulwant, Harjit, Mandhir and Moninderjit signed the letter in express acknowledgement of that agreement for release. The acknowledgment is in the following terms: "We accept Sukhdev Singh Dhaliwal's resignation as a director of [New Ridge] and accept the notation contained within the resignation."
5. The case was conducted on the basis that the words of the above quoted agreement conveyed in a promise of indemnity, in the sense that the release from guarantees was a promise to compensate for guaranteed liability, should that be required. In written and oral submissions, Harjit, Mandhir and Moninderjit did not press a limited reading of "released" such as to contest the promise of indemnity. Rather, they contested liability to indemnify by seeking to limit the promise to release and to indemnify Sukhdev in relation the subject debt as only pertaining to New Ridge's bank loans. Their evidence to this effect appears as follows: Harjit at transcript 503 line 32 to 505 line 27, 521 lines 5 to 42; Mandhir transcript 330 line 1 to 50, 363 lines 32 to 50; and Moninderjit transcript 652 line 49 to 653 line 13, 666 lines 5 to 19.
6. In my view, the words "from any guarantee I have given" are not to be read down and I considered the evidence of Harjit, Mandhir and Moninderjit as given in the cause of their general denial of having guaranteed the loan advanced by Ignacio and Leticia as well as of the loans advanced by other lenders in other contracts made with Shah and with New Ridge.
7. In my view the only reason for the express acknowledgment of the "notation" given by them could be a promise of Sukhdev being "released" in the sense of their promising protection from his obligations as a guarantor. The words "released from any guarantee I have given in favour of" New Ridge, are to be construed according to the intention implicit by reference to the guarantee in the specific circumstances known to each of them, that New Ridge was a property developer which borrowed from lenders, and which lending, in relation to the subject loan, I have found that they guaranteed. The evidence is that contracts with lenders were, so far as is relevant here, in substantially the same form and of substantially the same terms: Hortico (Aust) v Energy Equipment Co (Aust) (1985) 1 NSWLR 515 at 550F. Having rejected the submission advanced by Harjit, Mandhir and Moninderjit that the release and indemnity from guaranteed liability was limited to bank loans; I find in favour of the cross claimant on the cross claim for indemnity.

QUANTUM

1. The plaintiffs provided a calculation of quantum in the document entitled "Plaintiffs' Schedule of Damages and Issues". No alternative calculation is offered by the defendants. I accept that calculation and find the principal debt owing by Harjit, Mandhir, Moninderjit, Sukhdev and Gurmeet to the plaintiffs in the principal balance outstanding amount of $230,000.00 accordingly. I repeat that I am informed that judgment for the same debt has already been entered against Kulwant, who is presently bankrupt.
2. The loan contract, Exhibit C, provided for interest at the rate of 12% per annum. Whilst they denied the contract a guarantee, each of the defendants conceded that contracted rate of interest. Nevertheless, the defendants submit that interest should be reduced to the court rates available under s 100 of the Civil Procedure Act 2005. As I have found that the contract is enforceable according to its terms, the plaintiffs enjoy an independent entitlement to interest at the contractual rate of 12% per annum and I award interest accordingly. Again, I have adopted the plaintiffs' calculation in the absence of a challenge to the mathematics of that calculation raised by the defendants.

ORDERS 1. The first cross claim (Gurmeet Singh cross claimant) be discontinued. 2. The first cross claimant (Gurmeet Singh) pay costs of each of the defendants to the first cross claim up to and including discontinuance on 27 July 2016. 3. Judgment for the plaintiffs against each of the 3rd to 7th defendants in the total sum of $230,000.00 plus interest in the sum of $128,330.68 calculated up to 21 June 2016 and thereafter at the rate of $75.62 per day. 4. The 3rd to 7th defendants to pay the plaintiffs' costs. 5. The 5th to 7th cross defendants to the second cross claim to indemnify the cross claimant (Sukhdev Singh Dhaliwal) or contribute to the plaintiffs for such sum as is equal to all liability of the cross claimant pursuant to Orders 3 and 4 hereof. 6. The 5th to 7th cross defendants to the second cross claim to pay the cross claimant's costs of the cross claim.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 October 2016