Labracon Pty Limited v Cuturich & Anor

PLEADINGS 28The proceedings were commenced by summons. The Court has made no order that the proceedings "continue on pleadings". They remain summons proceedings. 29On 21 February 2012 the parties prevailed on the Court to make orders, by consent, for the filing of "Points of Claim" and "Points of Defence". They may have formulated those orders in the terms they did because, by the time the orders were made, all the affidavits to be relied upon (and, in fact, relied upon) by the parties on the final hearing of the proceedings had been sworn. The "pleadings" for which the orders provided were reminiscent of those informal pleadings formerly deployed to "define" issues in summons proceedings. 30On 15 March 2012 the plaintiff filed its Points of Claim, together with the Amended Summons upon which it moves the Court for final relief. 31Under the present rules of court, the status of "Points of Claim" and "Points of Defence" is not beyond dispute. UCPR Part 14 (which governs pleadings) does not, in terms, apply to them: see rule 14.1. They hark back to a practice that prevailed under provisions of the Supreme Court Rules, 1970 (NSW), since repealed. Under those Rules, in proceedings commenced by summons the court could make an order (under Part 5 rule 11) that the proceedings "continue on pleadings" or an order (under Part 5 rule 7) that "the issues be defined by pleadings". An order of the former type contemplated that the proceedings would henceforth be treated as if commenced by the filing of a statement of claim. An order of the latter type contemplated that the proceedings would continue to be treated as having been commenced by summons. 32Under that regime there were ramifications for the availability of discovery and the presentation of evidence at a trial or final hearing. Prima facie, in proceedings commenced by statement of claim, discovery was available by the service of a notice inter partes and without an order of the court, and evidence at a trial or final hearing was presented orally. Prima facie, in proceedings commenced by summons, discovery required an order and evidence was presented by affidavits. 33Under the regime governed by the Civil Procedure Act and the Uniform Civil Procedure Rules, these distinctions have been blurred. Discovery is no longer available as of right in any proceedings, and the form of presentation of evidence does not turn on the form of originating process. 34UCPR rule 6.6 reproduces the substance of SCR Part 5 rule 11, but there is no equivalent of SCR Part 5 rule 7. 35The terms of UCPR rule 6.6, and other provisions of the CPA and the UCPR, are broad enough to permit orders for "the issues to be defined by pleadings" and the filing of Points of Claim and the like. However, "pleadings" in that form do not necessarily attract the formality - and the protections - that attend a statement of claim and consequential pleadings. 36This case, perhaps, provides an illustration of that. 37At the commencement of the final hearing of the plaintiff's amended summons the Court was called on to adjudicate upon objections to evidence which, as argued, emerged, in reality, to be disputes about the scope of the "pleadings". Each party appealed to UCPR Part 14 (on the one hand) and (on the other hand) their understanding of the questions in dispute as demonstrated by the affidavits to which the "pleadings" had been directed and written Outline Submissions filed in anticipation of the final hearing. 38Those disputes were resolved, in discussions between bench and bar, by identification of the real questions in dispute and consequential directions for the filing of "Amended Points of Defence" to the plaintiff's "Points of Claim" and "Points of Reply".

QUESTIONS IN DISPUTE 39Identification of the real questions in dispute begins with identification of matters not in dispute: (a) There is no dispute that the Loan Agreement, the Supplementary Loan Agreement, the Deed of Charge and the Deed of Assignment upon which the plaintiff sues were duly executed by, or on behalf of, the parties to those instruments. (b) There is no dispute that each instrument (and, more especially, the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge) appears, on its face, to be entirely regular. (c) There is no dispute that the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge were prepared by solicitors acting on behalf of Mr Isaac and the defendants respectively (that is, by Mr Green and Ms Voulgaris) or that the terms of the Loan Agreement, in particular, were the subject of negotiations between the solicitors. (d) There is no dispute that stamp duty payable on each of the instruments was duly paid. (e) There is no dispute that, at all material times, the first defendant and entities associated with her were in financial difficulties or that Mr Isaac was, at all material times before execution of the Deed of Assignment, prepared to assist the first defendant to address those difficulties. 40The real questions in dispute comprise the following: (a) Did Mr Isaac make the payments he said he made (at the request of the first defendant, to her or at her direction) giving rise to the plaintiff's claim in debt? (b) If so, were those payments in the character of "loans" as the plaintiff contends (or did they, as the defendants contend, bear the character of payments to or at the direction of the first defendant for consultancy services rendered by her to Mr Isaac or his company, J.A. Isaac Property Group Limited)? (c) What is the legal status of the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge? In particular, are those documents unenforceable as elements of a "sham" arrangement (within the meaning of Snook v London and West Riding Investments Limited [1967] 2 QB 786 at 802 C-F, Sharrment Pty Limited v Official Trustee in Bankruptcy (1988) 18 FCR 449 at 453-454 and Equuscorp Pty Limited v HGT Investments Pty Limited (2004) 218 CLR 471 at 486 [46]) because, as the defendants allege, the common intention of the parties was that they were nothing more than a cloak to defraud creditors of the defendants by presenting to the public a false picture of the first defendant as being indebted to Mr Isaac (which, she claims, she is not) and of the respective properties of the defendants being charged with an obligation (protected by caveats) to discharge that indebtedness? (d) Are the defendants bound by any estoppel (arising from acknowledgements of the receipt of loan moneys from Mr Isaac in the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge) from denying their receipt of the moneys claimed by the plaintiff? 41These questions fall to be determined in the context of a personal relationship between Mr Isaac and the first defendant which cannot but be noticed, even if it must be set aside, as a factor informing the conduct of all parties to the transactions the subject of these proceedings. 42It is not so much that Mr Isaac and the first defendant were friends but that, on any view of the proceedings, he has exhibited great generosity in the assistance he has given to her, a woman of considerable charm who is much younger than him, a man now in his mid-70's. 43The nature and scale of Mr Isaac's generosity may have generated in the first defendant a sense of entitlement that has overreached objective facts as to four matters: first, the nature and scale of the consultancy services which she, as a property consultant, provided to Mr Isaac and his company; secondly, the lengths to which Mr Isaac was prepared to go in assisting the first defendant to respond to claims made against her, and entities associated with her, by third party creditors; thirdly, the character of the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge; and, fourthly, the capacity and willingness of Mr Isaac to refrain from enforcement of those instruments in circumstances in which external financial pressures bore down on his business interests. 44Mr Isaac's generosity towards the first defendant was, and remains, extraordinary. Despite attacks on his credit by the first defendant, he presented himself, in giving evidence, as bearing no ill will towards her. The evidence of Mr Vince - confirmed as plausible by the manner in which Mr Isaac himself gave evidence - was that, left to his own devices, Mr Isaac's tendency of mind is against enforcement of any legal entitlements he or his company may have against the first defendant or her corporate vehicle, the second defendant. 45Mr Isaac's generosity is no less extraordinary for the fact that it has manifested itself in the context of a personal relationship that blossomed from nothing more than a chance meeting with the earlier unknown first defendant at a business function in May 2005 and quickly developed thereafter at an accelerating pace until at least May 2010 or thereabouts. 46According to the business records of Mr Isaac and his company, between 7 September 2005 and 3 May 2010 or thereabouts, Mr Isaac borrowed from J.A. Isaac Property Group Pty Limited and on-lent to the first defendant (by payments to or for her benefit) a total of $1,136,746.55, of which she (on or about 1 April 2010) reimbursed $11,000, leaving a net benefit to her, at Mr Isaac's expense, of $1,125,746.55. 47The $550,000 identified in the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge is, in substance, said to be part of that sum of $1,125,746.55. 48J.A. Isaac Property Group Pty Limited also paid to the second defendant, between December 2005 and November 2007 or thereabouts, a monthly retainer fee of $5,000 for consultancy services. In or about October 2007 another of Mr Isaac's companies (Paola Pty Limited) paid $15,895 to her as commission on a sale at Tangeera (in Paola, Harvey Bay) which the first defendant was instrumental in effecting. 49A ledger account styled "J.A. Isaac (M Cuturic)" maintained by the bookkeeper of J.A. Isaac Property Group Pty Limited, Ms Kathy Hyde, in the ordinary business records of the company records entries relating to the total sum of $1,125,746.55 of net loan moneys borrowed by Mr Isaac from the company and on-lent to the first defendant between September 2005 and May 2010. It describes a broad range of payments made to or for the benefit of the first defendant. 50Mr Isaac paid legal fees incurred in relation to third party disputes in which the first defendant was involved. He paid accountancy fees incurred for work done by Mr Vince's firm. He provided a bank deposit of $50,000 to secure an overdraft for the second defendant. He provided funding of $207,630.76 for the first defendant's purchase of the Oatlands property. He funded renovation work on the second defendant's Newtown property. He provided financial assistance for the first defendant's various business interests and met her personal expenses. He paid school fees arising from enrolment of her daughter in a private school. He helped fund a visit by her to her ailing grandmother in Croatia. He paid medical expenses, credit card accounts and sundry expenses. From time to time, he also provided cash. 51The fact that, during the dates set out in the ledger account, a multitude of substantial payments were made by Mr Isaac or his company for the benefit of the first defendant was not seriously contested by her when she was cross examined on her affidavit. She maintained, however, that such payments as were made were payments for the provision of consultancy services rather than loans. 52Whether the defendants, or either of them, paid any tax on those payments was not, in terms, explored in the evidence but might be doubted. In the absence of specific submissions on the point, I leave it to one side. 53The frequency, pattern and description of the payments is consistent with the existence of a close, personal relationship between the payer and the beneficiary of the payments. 54In these proceedings the parties (including Mr Isaac) are agreed that, from mid 2005 until a date no earlier than 2010, the first defendant and Mr Isaac had a platonic friendship in which Mr Isaac regarded the first defendant as a "surrogate daughter" and the first defendant regarded him as a "surrogate father". 55I am prepared to act upon that characterisation of their relationship which, I hasten to add, has not been used in the proceedings to suggest, in favour of the first defendant, the availability of anything analogous to a "presumption of advancement" (deployed in trust law where there may be a divergence between the legal and equitable title to property acquired within a family context) or a want of an "intention to create or affect legal relations" (as may be discussed in a contract law context). Both Mr Isaac and the first defendant presented themselves to the Court as commercially savvy people who regard their financial dealings as having borne a commercial, rather than a familial, character. 56The nature of the personal relationship between Mr Isaac and the first defendant has nevertheless been used to forensic advantage by both sides of the record. The plaintiff submits that the nature of the relationship explains Mr Isaac's generosity to the first defendant, the informality attending documentation evidencing the provision of loan funds, Mr Isaac's delays in preparation of the loan instruments that secured his provision of (part only of) those funds, and his disinclination, personally, to sue the defendants. For their part, the defendants submit that the nature of the relationship is probative of their contention that the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge are a sham. 57Despite these competing contentions, the defendants have expressly disclaimed any case based upon either, first, a contention that the parties did not intend to create, or affect, legal relations by reason of their personal relationship (as to which see, generally, Balfour v Balfour [1919] 2 KB 571, Jones v Padavatton [1969] 1 WLR 328 at 331 H-332B, 332G-333A and 337E-F, and Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105-106) or, secondly, a contention that the disputed payments, if found to have been made, should be characterised as gifts. 58I proceed on the basis that the plaintiff bears the onus of proving each of the elements of the case it seeks to make, including the fact and nature of the payments said to have been made by Mr Isaac for the benefit of the first defendant and (in the teeth of the defendants' allegation of a sham arrangement) the intention of the contracting parties in their entry into the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge. Cf, Coshott v Sakic (1998) 44 NSWLR 667 at 670C-672D.

WITNESSES 59The plaintiff adduced evidence, in the form of affidavits, from Messrs Vince, Isaac and Green. The first two were cross examined. Mr Green was not. 60No evidence was adduced by the plaintiff from Mr Isaac's bookkeeper, Ms Hyde. Nor was any evidence adduced by way of explanation for the absence of any evidence from her. In formal terms, the defendants may be entitled to the benefit of an inference that her evidence would not have assisted the plaintiff's case (Jones v Dunkel (1959) 101 CLR 298 at 320-322); but the accounting records for the maintenance of which she was responsible on a day-to-day basis were plainly admissible as business records, and not in any substantial way the subject of challenge as primary records. 61The defendants adduced evidence, in the form of an affidavit, from the first defendant. She was cross examined. 62No evidence was adduced from the defendants' solicitor, Ms Voulgaris, and no explanation was offered by the defendants for their failure to adduce such evidence. A Jones v Dunkel inference is available. 63In advancement of their contention that the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge were the subject of a sham arrangement, the defendants did not suggest that either their solicitor (Ms Voulgaris) or the solicitor of Mr Isaac (Mr Green) was aware, or ought to have been aware, of the alleged sham character of that documentation or, indeed, of anything at all untoward about the documentation and transactions underlying the documentation. 64Implicit in the defendants' allegations of sham transactions is a contention that they misled their solicitor as to the true character of the loan agreements and the Deed of Charge. 65Implicit in the decision of the defendants not to cross examine Mr Green is their acceptance that he was not privy to any irregularity, by way of sham or otherwise, that may have attended that documentation or the processes leading to its execution. 66The defendants contended that an inference might be drawn against the plaintiff arising from the absence of expert evidence about the authenticity of documents adduced in their case but disputed by Mr Isaac's evidence. Whether or not such an inference might have been drawn in other circumstances, it could not really be drawn in the factual circumstances of this case. Original documentation, as opposed to photocopies, was not available. There was no evidence before the Court to suggest that, that fact notwithstanding, the disputed documentation was susceptible of expert forensic analysis. The possibility that it could be is not self evident.

THE CREDIBILITY OF WITNESSES 67The credibility of Mr Isaac, Mr Vince and the first defendant is critical to a correct determination of these proceedings. That is because, although the plaintiff's case might otherwise have been made out by reference to documentation, the defendants have placed in issue the character and efficacy of that documentation by adducing evidence extrinsic to it. In large part, that extrinsic evidence comprises accounts given by the first defendant of conversations which she says she had with Messrs Isaac and Vince but which they deny. 68The substance of those conversations, on the first defendant's evidence, was to the effect that Messrs Isaac and Vince would join with the first defendant in the preparation of fraudulent documentation (in the first instance, the Loan Agreement), ostensibly capable of supporting a caveat on the title of land owned or controlled by the first defendant (in the first instance, the Oatlands property) as a means of protecting the first defendant's equity in real property against her third party creditors. The apparent existence of a competing indebtedness "owed" to Mr Isaac, with such priority as a caveat might entail, could be relied upon to defeat or delay enforcement of such entitlements as those creditors might have. In the language of the first defendant, what was proposed by Messrs Isaac and Vince, and acquiesced in by her, was a scheme of "asset protection" measures designed to "secure" her from any adverse outcomes attending litigation in which she was, or was prospectively, engaged and any tax liabilities. 69In her affidavit the first defendant deposed to various conversations coloured by the concept of this fraudulent form of asset protection, commencing "in late 2004 and early 2005" and extending to July 2011, immediately following the plaintiff's service of notice of assignment upon her. The principal conversations are said to have occurred at two meetings between Mr Isaac, Mr Vince and the first defendant in 2005: one "in or around early to mid 2005" and the other "on or about" 23 November 2005. 70Although the terms of critical conversations are disputed, the two meetings to which the first defendant here refers appear to be those which (according to Messrs Vince and Isaac) took place on 2 August 2005 and 21 November 2005. Although it is common ground that Mr Isaac told Mr Vince, in the presence of the first defendant, that he would like Mr Vince to assist her (both in relation to litigation and to the sorting out of her affairs) both men deny discussion of any form of fraudulent "asset protection". 71There are direct conflicts in the evidence of Messrs Isaac, Vince and Green on the one hand and the first defendant on the other. 72To the extent that evidence of Mr Green and the first defendant is in conflict, I prefer the evidence of Mr Green. It is plausible. It was not the subject of cross examination. Nor was it the subject of challenge independently of evidence given by the first defendant personally. 73To the extent of conflict between the evidence of Messrs Isaac and Vince on the one hand and the first defendant on the other, I prefer the evidence of Messrs Isaac and Vince. They presented themselves as honest, reliable witnesses. Some inroads might be thought to have been made against their credit in cross examination but they remained phlegmatic, and endeavoured to respond in a reasonable manner, when confronted with allegations of impropriety. Mr Isaac was criticised for arranging his affairs in a manner designed to attract no taxation liability. He was also criticised for providing, in favour of the first defendant, business references that overstated her earnings. Mr Vince was criticised (under the rubric "conflict of interest") for his pursuit, through the agency of the plaintiff, of claims for relief made against former clients, the defendants. Whether or not such criticism might have had greater force in other contexts, I do not regard it as bearing significantly upon an assessment of the facts to be found in these proceedings. 74The first defendant gave her evidence in a plausible manner, with a charm that might have been part of the reason why Mr Isaac warmed to her. However, several factors, jointly and severally, suggest that her evidence should be treated with caution. 75First, her evidence was unreliable in certain respects. Her chronology of events was wrong. In cross examination, she conceded that she could not have had discussions with Mr Isaac in 2004, having met him only in May 2005. Her placement of her first meeting with Messrs Isaac and Vince "in or around early to mid 2005", rather than on 2 August 2005, lacked precision. So too did her attribution of the date 23 November 2005 to her second critical meeting with Messrs Isaac and Vince. Notwithstanding her tender of a diary note evidently dated 23 November 2005, other documentary evidence of Mr Vince suggests, more clearly, that the meeting took place on 21 November 2005. 76Secondly, the first defendant relied upon documents (including alleged written admissions of her lack of indebtedness to Mr Isaac which he allegedly signed in or about December 2005, early to mid 2006 and December 2006) which, ultimately, depended for their veracity on an acceptance of her evidence over that of Mr Isaac rather than the form of the documents. 77Thirdly, some of the documentation on which the first defendant relied contained statements which were, objectively, inaccurate. She relied upon a draft "Consultancy Agreement" dated "February 2005" with a purported commencement date of 15 February 2005, which predated the first meeting between her and Mr Isaac. A written acknowledgement alleged to have been signed by Mr Isaac in relation to his provision of funding for her purchase of the Oatlands property in December 2005 incorrectly suggested that those funds were "payment in lieu of works completed between 2004-2005", despite the fact that she and Mr Isaac were unknown to each other in 2004. It was also incorrect insofar as it suggested that the funds the subject of the purported acknowledgement were used for the "deposit" on the Oatlands purchase whereas, in fact, they were used for the payment of stamp duty on the purchase contract and as a contribution to the purchase price on settlement. A document headed "Notice of Cancellation", dated 21 December 2006 and allegedly signed by Mr Isaac and personally delivered by him to the first defendant misdescribed Mr Isaac's name as "Anthony J Isaac". It is, in fact, "John Anthony Isaac". 78Fourthly, the proposition that Mr Isaac (with or without the participation of Mr Vince or Mr Green) would create, as the first defendant suggests he did create, a paper trail (by the disputed admissions upon which the defendants rely as indicative of entry into a sham arrangement to defraud creditors of the defendants) attributes to Mr Isaac a naivety, let alone a lack of bona fides, that is inconsistent with ordinary concepts of commonsense. The defendants would have the Court accept that Mr Isaac, not only joined with the first defendant in the manufacture of fraudulent documentation, but that he also armed her with documentation designed to expose his fraud. 79Fifthly, although the defendants put in issue the fact of substantial payments made by Mr Isaac to or for the benefit of the first defendant, no substantial challenge was made by the defendants to the evidence adduced by the plaintiff as to the fact that such payments were made. 80Sixthly, although the first defendant asserted that all those payments should be characterised as payments for consultancy services rendered by her, the nature, frequency and general pattern of the payments does not lend itself to such a characterisation, particularly when viewed in context of payment of a regular monthly consultancy retainer fee and a specific payment of commission referable to an identified transaction.

EVIDENCE OF PAYMENTS TO OR FOR THE FIRST DEFENDANT 81I accept as a fact that payments were made by Mr Isaac, at the request of the first defendant to her or otherwise for her benefit, on or about the dates in the sums and as described in the General Ledger Account styled "J.A. Isaac (M Cuturic)" in the records of J.A. Isaac Property Group Pty Limited referable to the period between 7 September 2005 and 3 May 2010 or thereabouts. The printout of the account adduced in evidence is an extract from the ordinary business records of the company. It has been verified as such by Messrs Isaac and Vince. It appears to be regular on its face. The defendants have adduced no evidence casting doubt on its authenticity or accuracy. The fact that it records, in books of the company, moneys lent by the company to Mr Isaac for the purpose of being on-lent by him to the first defendant, as he maintains occurred, does not detract from its value as evidence probative of loan moneys advanced by him to the first defendant. 82Entries in the ledger account are verified by a multitude of cheque butts, reinforcing the probative value of the ledger account printout. 83As it may have a bearing on the plaintiff's contention that it is entitled to the benefit of an estoppel by deed (or upon such, if any, ongoing rights and obligations that Mr Isaac and the first defendant might have, as between themselves, independently of Mr Isaac's assignment of rights in favour of the plaintiff), I make the following additional findings of fact based upon the entries recorded in the ledger account printout: (a) As at the date of the Loan Agreement, 11 July 2006, Mr Isaac had advanced to the first defendant a total sum of $359,146.96 by means of 21 payments made between 7 September 2005 and 7 July 2006 or thereabouts. (b) As at the date of the Supplementary Loan Agreement and the Deed of Charge, 20 December 2006, the total amount of advances made by Mr Isaac to the first defendant (by means of the 21 payments referable to the balance as at 11 July 2006 and a further 23 payments made between 18 July 2006 and 29 November 2006 or thereabouts) stood at $457,653.95. (c) The total amount of the advances made by Mr Isaac to the first defendant did not equal or exceed the sum of $550,000 (the amount of the principal sum of the first defendant's indebtedness to Mr Isaac as recorded in the Loan Agreement as varied by the Supplementary Loan Agreement, and as recorded in the Deed of Charge) until 5 February 2007, on or about which date Mr Isaac made a payment of legal fees on behalf of the first defendant so as to increase to $564,202.41 the total amount of the advances in fact made by Mr Isaac. (d) The payments made between 20 December 2006 and 5 February 2007 so as to increase the total amount advanced from $457,653.95 to $564,202.41 were 15 in number. 84After 5 February 2007 Mr Isaac made 94 additional payments by way of loan to the first defendant (and received one payment from the first defendant by way of partial reimbursement) bringing to a total of $1,125,746.55 the net balance of the sums Mr Isaac advanced to the first defendant. 85The only credit recorded in favour of the first defendant in what was, in substance, a record of loans made to her between 7 September 2005 and 3 May 2010 or thereabouts was a single payment of $11,000 recorded as having been made on 1 April 2010 against the description "part reimbursement M Cuturic". 86No entry in the ledger account suggests that the first defendant was charged interest for the moneys lent to her by Mr Isaac.

THE CHARACTER OF THE PAYMENTS MADE TO OR FOR THE FIRST DEFENDANT 87Having accepted the authenticity and accuracy of the ledger account styled "J.A. Isaac (M Cuturic)", and having accepted the evidence of Mr Isaac to the effect that that ledger account records advances made by him to the first defendant, I also find that those payments bore the character of loan moneys (as the plaintiff contends) rather than payments for consultancy services (as the defendants contend). 88That finding is reinforced by the following facts. First, the second defendant was paid a distinct, separate monthly amount of $5,000 as a retainer fee for consultancy services referable to any work that she may have done for Mr Isaac's business. Secondly, the first defendant was paid a distinct, separate amount by way of a single lump sum for the one transaction in connection with which the defendants may have had an entitlement to commission referable to work done for Mr Isaac's business. Thirdly, the frequency, nature and pattern of payments in varying amounts made by Mr Isaac as recorded in the ledger account bears no apparent connection with a pattern of work that may have been undertaken by the first defendant but, rather, appears to reflect a more general pattern of consumption or investment on the part of the defendants. Fourthly, the evidence of Mr Isaac, which I accept, is that, from time to time, he provided a printout of the ledger account to the first defendant as a record of her indebtedness to him. Fifthly, nowhere in the evidence is there any suggestion that the defendants, jointly or severally, treated the payments recorded in the ledger account as income taxable in their hands.

THE DEFENDANTS' ALLEGATION OF SHAM 89The defendants' contention that each of the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge was part of a sham arrangement (designed to defeat or delay creditors of the defendants) depends critically upon an acceptance of the evidence of the first defendant over the evidence of Messrs Isaac and Vince. 90For reasons earlier given, I prefer the evidence of Messrs Isaac and Vince over that of the first defendant. 91More specifically, I decline to find that it was the common intention of Mr Isaac and the first defendant to enter the three nominated deeds for the purpose of effecting a fraud on third parties or doing otherwise than providing a measure of security to Mr Isaac for moneys advanced, and likely in the future to be advanced, by him to her. 92There are a number of particular factors, in addition to acceptance of the evidence of Messrs Isaac and Vince and rejection of the evidence of the first defendant, that point away from any finding of sham. First, at the respective dates of execution of the Loan Agreement (11 July 2006) and the Supplementary Loan Agreement and the Deed of Charge (20 December 2006), Mr Isaac had in fact lent to the first defendant substantial amounts of money (albeit not then at the level of indebtedness recorded in the deeds) which were a real, not a phantom transfer of resources by Mr Isaac for the first defendant's benefit. 93Secondly, at the time of execution of the deeds, Mr Isaac anticipated that he would be called upon to make, and would make, further advances to t he first defendant to assist her to place her affairs in order. 94Thirdly, the difference between the amounts in fact lent by Mr Isaac at the time of execution of the respective deeds and the principal sum recorded as the first defendant's indebtedness in the deeds was not so substantial as to impugn the bona fides of the deeds, particularly in circumstances in which there was a common expectation that Mr Isaac would be called upon to make, and would make (as he did make), additional advances in the first defendant's favour. 95Fourthly, more than a year passed between the time, in or about mid-2005, when the first defendant suggests that a sham loan transaction was proposed and the time, in July 2006, when the Loan Agreement was executed. That delay is inconsistent with any determination on the part of the contracting parties to bring into existence sham documentation. The first defendant's third party creditors were pressing her throughout the whole period. 96Fifthly, the terms of the Loan Agreement and the Supplementary Loan Agreement were inconsistent with an intention to create an illusion of indebtedness on the defendant's part insofar as they allowed an extended time for the repayment of moneys without interest. Had the parties intended to paint a picture of the existence of a debt having priority over third party creditors they would hardly have overlooked the utility of a provision for the payment of interest at a commercial rate from the time or times of advancement of moneys. 97Sixthly, I am not prepared, on the evidence adduced by the defendants, to find that Mr Isaac signed or caused to be delivered to the first defendant any form of written admission expressly incriminating himself of participation in a fraud. 98Seventhly, the deeds the subject of the defendants' allegation of a sham arrangement were apparently prepared by solicitors acting for the contracting parties in a professional manner and at arm's length. 99Eighthly, those solicitors engaged in a process of negotiation about the terms of the Loan Agreement in particular. 100Ninthly, the evidence of Mr Vince (which I accept) was that he was not aware that Mr Isaac had instructed Mr Green to prepare the Loan Agreement, and a caveat referable to that Agreement, until he received a copy of those documents shortly after 2 November 2006, and he was not involved in implementation of the Loan Agreements or Mr Isaac's caveats.

THE OPERATION OF ESTOPPEL BY DEED 101The plaintiff asserts that the defendants are bound by the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge such that they are estopped from denying that the sum of $550,000 was advanced by Mr Isaac to the first defendant. It relies upon the concept of "estoppel by deed" which, by reference to Offshore Oil NL v Southern Cross Exploration NL (1985) 3 NSWLR 337 at 340-341, it characterises as a subset of the concept of "estoppel by convention". 102The plaintiff's case is predicated on five propositions which require notice, if not examination. First, that each of the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge is a deed. Secondly, even if they are not deeds the defendants are bound by those instruments as if they were deeds. Thirdly, upon their proper construction each of the deeds is capable (by reference to its terms, if not a recital) of supporting an estoppel against the defendants. Fourthly, the plaintiff is entitled to relief against the defendants on the basis that, as between it and the defendants, the defendants are bound by an estoppel by deed or, in the alternative, an estoppel by convention. Fifthly, estoppel by deed is a subset of estoppel by convention. 103An analysis of these propositions is necessary for several reasons. First, there is a disconnect between quantification of the first defendant's indebtedness in each of the Loan Agreement and the Supplementary Loan Agreement and the Deed of Charge (on the one hand) and (on the other) the amount in fact lent by Mr Isaac to the first defendant at the time of execution of the respective Agreements. Secondly, the plaintiff relies upon the existence of an acknowledgement of indebtedness, in the amount it claims in these proceedings, in the Supplementary Loan Agreement and the Deed of Charge. Thirdly, after the date of those two instruments Mr Isaac did, in fact, lend the first defendant additional moneys, taking her total indebtedness beyond the amount formally acknowledged in the instruments as having been received by her. Fourthly, the plaintiff took an assignment of Mr Isaac's rights under the instruments without notice of the disconnect between the documented and actual levels of indebtedness. 104Fifthly, the plaintiff took that assignment without prior notice to the defendants and in circumstances in which (but for the defendants' execution, and delivery to Mr Isaac, of the instruments) there is no evidence of any representation made to the plaintiff by the defendants, personally, about the existence or level of their indebtedness so that, unless their delivery of the instruments to Mr Isaac can be taken as having armed him to make representations to third parties about their obligations vis á vis him, the plaintiff cannot establish an estoppel against the defendants in its own right personally: Spencer Bower, Estoppel by representation (Lexis Nexis, UK, 4th ed, 2004), paras [VI.2.8]-[V.2.9] on pp 140-141 and paragraph [VIII.14.1] note 3 on p 203; cf, Norton on Deeds (2nd ed, 1928), p 213. Sixthly, Mr Isaac (assignor to the plaintiff) is not a party to these proceedings and the defendants have not sought any equitable relief calling into question the enforceability of the Loan Agreement, the Supplementary Loan Agreement or the Deed of Charge according to their terms. 105Estoppel by deed. The essential idea of estoppel by deed is that a party who, by entry into a deed, expresses a solemn intention to be bound by a particular proposition will, in proceedings against a party entitled to the benefit of the deed, be precluded (ie, stopped), by reason of entry into the deed, from denying the truth, or at least the operation, of that proposition: K.R. Handley, Estoppel by Conduct and Election (Thomson, Australia, 2006), ch 7; Spencer Bower, Estoppel by Representation (4th ed, 2004), ch 8, pp 201-208; R.F. Norton, A Treatise on Deeds (Sweet & Maxwell, London, 1928), pp 211-215, 225-228 and 626-627; P.W. Young, C. Croft & M.L. Smith, On Equity (Law Book Co, Sydney, 2009), para [12.80]. 106Estoppel by convention. The essential idea of estoppel by convention is that parties who have conducted their relations with each other on an agreed or assumed state of affairs (adopted as the conventional basis of their relationship) will, in proceedings against one another, be estopped from denying that agreed or assumed state of affairs: Handley, Estoppel by Conduct and Election, ch 8; Spencer Bower, Estoppel by Representation (4th ed) ch 8, pp 179-201; Young, Croft & Smith, On Equity, para [12.100]. 107Parties to an estoppel. The operation of an estoppel is not necessarily confined to the original parties to it; the benefit and burden of an estoppel may pass to third persons: Young Croft & Smith, On Equity, para [12.120]. An estoppel may be enforceable by or against a person (such as an assignee) who is "privy" to the estoppel: Partridge v McIntosh and Sons Ltd (1933) 49 CLR 453 at 462-463, 465 and 466-467; Effem Foods Pty Limited v Trawl Industries of Australia Pty Limited (1993) 43 FCR 510 (on appeal from Gummow J, (1992) 36 FCR 406) applying Ramsay v Pigram (1968) 118 CLR 271, implicitly following Coke on Littleton with reference to "privies of blood, of title and of interest". 108An estoppel by deed can, generally, be relied upon by anyone who can sue on a deed against anyone who can be sued on it: Spencer Bower, Estoppel by representation (4th ed, 2004), para [VI.2.10] on p 142 and paras [VIII.14.1]- [VIII.14.2] on pp 203-204. 109Each of the three instruments constitutes both a contract (between Mr Isaac, on the one hand, and one or both of the defendants on the other) and property. The fact that the Loan Agreement and the Deed of Charge both expressly contemplate enforcement of the first defendant's obligation to pay a principal sum against real estate, and the lodgement of a caveat to "secure" performance of that and ancillary obligations, is indicative of the proprietary character of statements made in the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge as interlocking instruments. Statements made as to the first defendant's indebtedness were not intended to be for the benefit of Mr Isaac alone, incapable of assignment to a third party such as the plaintiff. 110If (as I find) Mr Isaac was at the time of his assignment of rights entitled to the benefit of an estoppel by deed, that entitlement was capable of transmission to the plaintiff as an incident of the assignment. The subject matter of the estoppel was a recognised form of property: a chose in action in the form of a debt. 111Independently of principles governing privies, an estoppel may have scope for operation beyond persons known or knowable where, for example, a representation is made to "all the world" and it is available to be, and is in fact, relied upon. An example of this is where a creditor has relied upon a search of the business names register in dealing with a "business name" and is, by reason of that reliance, entitled to sue a "registered user" of the name: Re Johnson; Ex parte Greendale Engineering & Cables Pty Limited (1967) 11 FLR 335; Aikman v Brown (1973) 1 ACTR 121. Cf, Pethybridge v Stedikas Holdings Pty Limited [2007] NSWCA 154. 112It is not necessary to determine the question whether, had Mr Isaac's entitlement to an estoppel by deed not passed to the plaintiff by assignment, the defendants (by their execution of deeds and their delivery of those deeds to Mr Isaacs) armed Mr Isaacs to hold them out, or held themselves out, to the world, including the plaintiff, as under an obligation to Mr Isaac (including an obligation of debt on the part of the first defendant) so as to ground a personal entitlement in the plaintiff to an estoppel by conduct. 113On the facts of this case I am satisfied that the plaintiff, as Mr Isaac's assignee, is entitled to rely upon an estoppel by deed against each of the defendants. 114Classification of estoppel by deed. In the absence of clear authority binding me to a contrary conclusion, I doubt the plaintiff's proposition that estoppel by deed is a subset of estoppel by convention. I accept that estoppel by convention developed by analogy with estoppel by deed (Saleh v Romanous (2010) 79 NSWLR 453 at 459 [53]; Handley, Estoppel by conduct and election, paras [8-002]-[8-003] on pp 116-117); but not that it subsumed it. Development of estoppel by convention as a species of estoppel with rules of its own did not affect estoppel by deed: Handley, para [7-001] on p 109 and para [7-0005] on pp 111-112. 115There is a general perception within the legal community that controversy, uncertainty or fluidity attach to classification of estoppels in the framework of modern Australian law. See, for example, Young, Croft and Smith, On Equity, para [12.80] at p 805, contrasting the judgment of Gummow J in Caboche v Ramsay (1993) 119 ALR 215 at 236-239 with that of Clarke J in Offshore Oil NL v Southern Cross Exploration NL (1985) 3 NSWLR 337 at 340G-341C; and Meagher Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, 2002), para [17]-[005]. 116One cannot but notice unresolved debate about whether Australian law embraces a "unified doctrine" of estoppel by conduct. Suggestions that it may (in Legione v Hateley (1983) 152 CLR 406 at 430-437, Foran v Wight (1989) 168 CLR 385 at 411-412 and 435, and Commonwealth v Verwayen (1990) 70 CLR 394 at 411 and 440) are counterbalanced by the High Court of Australia's express reservation in Giumelli v Giumelli (1999) 196 CLR 101 at 112-113 [7] of the question "whether the various doctrines and remedies in the field of estoppel are to be brought under what Mason CJ called 'a single overarching doctrine' or what Deane J identified as a 'general doctrine of estoppel by conduct'". 117Justice Handley's reasoned rejection of generalist theories of estoppel, and his elaboration of a particularist perspective, in Estoppel by conduct and election (ch 1, esp para [1-28] on pp 20-21) counsels caution against adoption of any form of overarching doctrine. It is not necessary for me to explore, further, in that direction. 118Whatever may be the future course of Australian law, in its analysis of principles of estoppel the High Court has to date proceeded (as illustrated by Legione v Hateley (1983) 152 CLR 406 at 430) on the basis that the system of classification, involving three categories of estoppel, associated with the name of Sir Edward Coke (and Coke on Littleton) provides a convenient starting point: see Coke, The First Part of the Institutes of the Laws of England, or a Commentary upon Littleton (18th ed, corrected, 1823; reprinted by Law Book Exchange Limited, 1999); volume 2, pp 352a-352b. 119In Coke's terms, those three categories can be identified as, first, estoppel by record; secondly, estoppel by writing; and, thirdly, estoppel in pais. In modern terms, the same categories may be described as, first, estoppel by record; secondly, estoppel by deed; and, thirdly, estoppel by conduct. 120At least some of the confusion that attends analyses of estoppel appears to stem from four factors. The first is adherence to Coke's terminology for descriptive labels for the second and third of his categories despite long-expressed reservations such as those of JS Ewart (An Exposition of the Principles of Estoppel by Misrepresentation (Stevens & Sons, London, 1900), p 1) and Handley (Estoppel by conduct and election (2006), para [1-007] note 24 on p 4). The second is a focus on the concept of "estoppel" without due emphasis on the continuing importance (and, possibly, variations in meaning across jurisdictions) of the concept of a "deed" independently of the principles of estoppel. The third is a tendency to treat Coke's third category as something other than a residual category, the primary significance of which is that it relates to something other than an estoppel by record or an estoppel by deed distinct from a closed set of cases having some other distinctive, common characteristic. The fourth is a failure to appreciate the fact that, and the extent to which, the development of principles governing estoppel may have been affected by changes in the practice and procedure of courts called upon to consider the operation of an alleged estoppel. 121As Coke's Commentary upon Littleton is the current "good root of title" for Australian law, it warrants direct examination. The following extract is taken from the 18th (1823) edition. Although nothing turns on the point, an Australian lawyer might notice that that edition was current on 25 July 1828, the date appointed for the reception of English law in New South Wales by 9 Geo. IV c 83 (Imp), named the Australian Courts Act 1828 (Imp) by the Short Titles Act 1896 (Imp). As a practice book in common usage, the 18th edition of Coke's Commentary might fairly be taken as representative of law "received" by New South Wales by virtue of s 24 of the 1828 Act. A 19th edition was published in 1832. 122In extracting Coke's commentary, I omit passages specifically referable to the section in Littleton upon which Coke's statements of law were a commentary, footnotes which serve as a gloss on the commentary and the non-exhaustive "rules" governing estoppels (including the first, relating to "privies") which form part of the commentary and follow the passage extracted: "'Estoppe'," commeth of the French word estoupe, from whence the English word stopped: and it is called an estoppel or conclusion, because a man's owne act or acceptance stoppeth or closeth up his mouth to alleage or plead the truth.... Touching estoppels, which is an excellent and curious kinde of learning, it is to be observed, that there be three kinde of estoppels. viz. by matter of record, by matter in writing, and by matter in paiis. By matter of record, viz. by letters patents, fine, recoverie, pleading, taking of continuance, confession, imparlance, warrant of attorney, admittance. By matter in writing, as by deed indented, by making of an acquittance by deed indented or deed poll, by defeasance by deed indented or deed poll. By matter in paiis, as by liverie, by entry, by acceptance of rent, by partition, and by acceptance of an estate, as here in the case that Littleton putteth; whereof Littleton maketh a speciall observation, that a man shall be estopped by matter in the countrey, without any writing." 123Direct reference to Coke is important for several reasons. First, it offers explanations of the derivation of the word "estoppel" and, to some extent, the expression "estoppel in pais". Secondly, it demonstrates that Coke's second category, although described generally by reference to "writing", was particularised exclusively by reference to deeds. Thirdly, it shows that Coke's third category, illustrated by sundry examples, may be defined, at least in part, by a contrast with the second category insofar as an estoppel involving an absence of "writing" can fall within the third category. Fourthly, supplemented by knowledge that Sir Edward Coke was a leading exponent of the common law (as distinct from equity), it illustrates that, at common law, estoppel was once a rule of evidence rather than a substantive law concept. 124It must be remembered that Coke, a common lawyer, was writing at a time (in the 17th century, circa 1628) when the common law and equity were administered separately, and that the same state of judicial administration pertained at the time of publication (in 1823) of the work here extracted. 125At the time Coke wrote, deeds were the quintessential form of "writing", they constituted a distinctive essential element in an action in covenant, and they served an important evidentiary function in the conduct of a trial by jury: W. Holdsworth, A History of English Law (3rd ed, London, 1944), vol 9 at 130-131 and 144-170, especially 154-157; J.H. Baker, An Introduction to English Legal History (4th ed, London, 2002), pp 318-320; W.J.V. Windeyer, Lectures on Legal History (2nd ed revised, Sydney, 1957), pp 90-91 and 239. Coke's terminology should not be taken, today, as justification for extension of his second category to writing which is not in the form of a deed. Such an extension is apt to undermine clear points of distinction between the second and third categories and, possibly, also the distinctiveness of the concept of a deed under the general law. It may, in particular, cause unnecessary confusion upon a consideration of estoppel by convention. 126The principal differences between estoppel by deed and estoppel by convention are threefold. 127First, estoppel by deed is governed by the existence, and content, of writing recognised by law as having the status of a deed by virtue of compliance with formalities confirmatory of a solemn intention. Estoppel by convention is not dependent upon the existence of writing, let alone a deed. The facts of a particular case might be analysed in terms of an estoppel by convention, albeit that the conventional basis upon which parties have conducted their affairs is embodied in a deed, but a finding of estoppel by convention is not pre-conditioned on the existence of a deed. 128Secondly, estoppel by deed does not (whereas estoppel by convention does) require a person claiming an entitlement to rely on an estoppel, as a primary party to the alleged estoppel, to prove, as a fact, that the parties adopted (or that he, she or it relied, to his, her or its detriment, on) the agreed or assumed conventional basis upon which the parties' affairs have been conducted: Young, Croft and Smith, On Equity, p 805. 129In MK & JA Roche Pty Limited v Metro Edgley Pty Limited [2005] NSWCA 39 at [72] (recently applied by Ward J in Painaway Australia Pty Limited v JAKL Group Limited [2011] NSWSC 205; 249 FLR 1; 91 IPR 298 at [246]-[251]) the Court of Appeal rejected a submission that reliance and detriment are not essential for the existence of conventional estoppel. On the basis of references to Thompson v Palmer (1933) 49 CLR 507 at 547 and Grundt v Great Boulder Proprietary Gold Mines Limited (1937) 59 CLR 641 at 674-675 (which remain central to an understanding of Australian law), and Commonwealth v Verwayen (1990) 170 CLR 394 at 444, Hodgson JA (with whom Beazley and Ipp JJA agreed) held that "common law estoppel by representation or conventional estoppel still requires that the party relying on the estoppel must have 'placed himself in a position of significant disadvantage if departure from the assumption be permitted'". 130A qualification on that statement of principle - more apparent than real - may be that estoppel by convention can arise in circumstances in which parties adopt a convention as the basis of a transaction they are about to enter. When they have acted in their transaction on the basis of the convention then, as regards that transaction, they will be estopped, vis á vis one another, from questioning the truth of the convention. In that class of case, the convention cannot be disputed without destruction of the very basis of the transaction: Dabbs v Seaman (1925) 36 CLR 538 at 548-550. 131Thirdly, the law of deeds is idiosyncratic: eg, Halsbury's Laws of Australia, (Lexis Nexis, Australia), Title No 140: "Deeds and Other Instruments"; Norton on Deeds; Odgers' Construction of Deeds and Statutes (Sweet & Maxwell, London, 5th ed, 1967), Part I; Needham, "Deeds - Formalities" (1985) 1 Aust Bar Rev 3; Mirzikinian v Waterhouse Pty Ltd [2009] NSWCA 296; 400 George Street (Qld) Pty Ltd v BG International Ltd [2010] 2 Qd R 302; Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253; Commentary on Conveyancing Act 1919 , s 36C, Part 3(ss 38-51A) and ss 116-118, together with reference to Real Property Act 1900 NSW, s 36(11), in Peter Young, Anthony Cahill and Gary Newton, Annotated Conveyancing and Real Property Legislation, NSW (Lexis Nexis, Australia, 2012) . 132Estoppel by deed, like an agreement under seal in contract law, derives legal force from the solemnity of a deed. A finding of contract by deed can be made notwithstanding the absence of consideration necessary to support the finding of a simple contract: Roxborough v Rothmans of Pall Mall Ltd (2001) 208 CLR 516 at 556, citing Cannon v Hartley (1949) Ch 213 at 223-224. An estoppel by deed can be found notwithstanding the absence of detrimental reliance on the existence, or provisions, of a deed. 133Estoppel by convention may straddle Coke's concepts of "estoppel by writing (deed)" and "estoppel in pais (estoppel by conduct)" because "an agreed or assumed state of facts ... adopted by ... parties as the conventional basis of their relationship" (Con-stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 at 244-245 citing, inter alia, Dabbs v Seaman (1925) 36 CLR 538 at 549) may, or may not, be embodied in a deed. 134Writing extra-judicially, in his essay Concerning Judicial Method, Dixon CJ confirmed that an estoppel by convention (governed by the general principles of estoppel by conduct that he had articulated in Thompson v Palmer (1933) 49 CLR 507 at 547, Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 at 734-735 and Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674-677) may be found "with or without consideration [,] writing or a seal": (1956) 29 ALJ 468 at 475; O. Dixon, Jesting Pilot (Law Book Co, Australia, 1965), pp 164-165. 135If the category of "estoppel by deed" depends for its application upon the existence of a "deed" (however defined), an "estoppel by convention" not involving a deed must either fall within the category of "estoppel by conduct" or call for expansion of the concept of "estoppel by deed" by analogy. "Estoppel by conduct" is capable of absorbing the concept of "estoppel by deed" - whether or not it be regarded as a subset of "estoppel by convention" - but only at the price of reducing Coke's distinction between "estoppel by deed" and "estoppel by conduct" to next to nothing and, to some extent at least, reducing the significance of the concept of a "deed" under the general law. 136Entry into a deed is, of itself, "conduct" but, in an age of writing, and moreover, electronic media, writing in the form of a deed (which, ultimately, depends for its existence as such on the intention of parties that it operate as a deed) might not strike utilitarian minds as a rational necessity of a modern legal system, particularly as some of the bare formalities historically, customarily required of a deed (such as the affixing of a "seal" in fact or in pretence) lose their connection with everyday life. Nevertheless, deeds continue to have idiosyncratic functionality that underwrites their continued existence. 137In distinguishing estoppel by convention from estoppel by deed a practical point worthy of notice may be that a finding of estoppel by convention may typically require consideration of a broader range of conduct relating to the parties' transaction than estoppel by deed, where the transaction is evidenced by a deed and the only evidence extrinsic to it that might be required is confined to evidence about delivery of the deed. 138There remains utility in working within the analytical framework of Coke's three categories of estoppel. 139The concept of "estoppel by record" is distinguishable from the other two classes because of the centrality to it of a judgment, or the like, in adversarial proceedings. Its central, modern manifestations are probably res judicata (cause of action estoppel) and issue estoppel, distinguished in Blair v Curran (1939) 62 CLR 464 at 531-533. Cf, Jackson v Goldsmith (1950) 81 CLR 446 at 466-467 and Rogers v The Queen (1994) 181 CLR 251. At its periphery are concepts such as the elaboration of Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589; and, possibly, the concept of abuse of process developed by reference to Reichel v Magrath (1889) 14 App Cas 665 in Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 at 410B, Rippon v Chilcotin Pty Limited (2001) 53 NSWLR 198 and other cases. 140Continued resort to a distinction between estoppel by deed and estoppel by conduct probably depends upon the continued utility, or otherwise, of deeds. The formal requirements of a "deed" may vary over time, and between jurisdictions, but the essence of a deed is a formal document recording a solemn intention: Manton v Parabolic Pty Limited (1985) 2 NSWLR 361 at 366-369. 141Provided the requisite formalities are complied with, legal consequences may attend the making of a deed without compliance with other requirements of the general law. In the current proceedings, the fact that the Loan Agreement and the Supplementary Loan Agreement both took the form of a deed means that there is no necessity, at law, to consider whether the first defendant's promise to pay the principal sum was, in whole or part, supported by consideration; if they did not take the form of a deed, a question may have arisen as to whether loan advances made before execution of the agreement constituted "past consideration" and accordingly no consideration at all to support a contractual bargain. 142Because a deed derives effect, at law, from the solemnity attaching to compliance with requirements of form it is capable of adaptation to a wide variety of circumstances. It might embody little more than a declaration, an agreement or (by gift, declaration of trust or otherwise) a transfer or reconfiguration of property. The law of deeds, because of its focus on form, permits deeds to straddle, or to stand at the intersection of, substantive law concepts like "contract" and "property". A promise, under seal, to pay a liquidated sum is enforceable as a debt (Alexander v Ajax Insurance Co Limited [1956] VLR 436 at 445) and, at least to the extent that it is capable of assignment, constitutes property. 143The concept, and adaptability, of a "deed" has endured in Anglo-Australian law despite evolutionary changes to legal procedure and substantive law. The tenacity with which it has endured counsels caution against any assumption that "estoppel by deed" can be subsumed in some other category of estoppel. 144Continued use of the expression "estoppel in pais" may explain some of the blurred edges around current deployment of Sir Edward Coke's scheme for distinguishing various types of estoppel. The expression "in pais" may be accepted as literally meaning "in the country": Young, Croft and Smith On Equity (Law Book Co, Sydney, 2009) at para [12.90]. Its application to the concept of "estoppel" might be, one suspects, a reflection of Sir Edward Coke's learning as a common lawyer and the common law origins of "estoppel" as a "rule of evidence": Greer v Kettle [1938] AC 156 at 171. 145Osborn's Concise Law Dictionary (Thomson Reuters, 11th ed, 2009) defines the word "pais" by reference to the expression "in pais" which, in turn, it defines in the following terms: "[In the Country.] Without legal proceedings or documents. Trial per pais means trial by the country, ie. trial by jury." 146To define the expression "in pais" as "in the area" (by reference to the word "pays" in modern French), as Justice Handley does in Estoppel by conduct and election, para [1-001] on p 1, may be to pass over something significant. The expression "in pais" certainly conveyed to earlier generations the idea of a fact notorious in a community served by the law, but it may have meant more. It may also have conveyed the idea of a question of fact determinable by a jury. 147Historically, the common form of procedure for a party to appeal to a jury to decide facts in dispute was for a party to "put himself upon his country": AKR Kiralfy, Potter's Historical Introduction to English law and its institutions (4th ed, London, 1958) at p 328 note 63; W Blackstone, Commentary on the Laws of England (1st ed, 1765-1769; 9th ed, 1783, reproduced in modern English by Cavendish Publishing, edited by W Morrison, 2001). A jury spoke with the voice of, and for, "the country": W.J.V. Windeyer, Lectures on Legal History (Law Book Co, Sydney, 2nd ed, revised 1957), pp 60-62 and 68 note 28. 148In his treatment of estoppel in A History of English Law (3rd ed, London, 1944), vol 9, at pp 144-146, Sir William Holdsworth made the following observations that may bear upon the close connection between the expression "estoppel in pais" and trial by jury: "In the 12th and 13th centuries cases were decided [in English law], not by a process of reasoning from evidence offered to the court, but by modes of proof selected by the parties or ordered by the court. In those days the matters relied upon to create an estoppel were regarded as operating as modes of proof which settled the case in much the same way as battle compurgation or ordeal. Probably the earliest way of proving one's case by means of an estoppel, and therefore the earliest form of estoppel, is that which is known as estoppel by matter of record; and it is a direct result of that machinery for the enrolment of pleas which was instituted in the 12th century. In the 13th century statements made by a person under his seal were allowed an effect very similar to the statements contained in a record; and at the close of the medieval period, certain acts, such as the giving of livery of seisin, entry on property, or acceptance of an estate - acts of which the pays or jury might be expected to know something - were given the same effect as statements in a deed. They created an estoppel 'by matter in pais'.... [By the time of Coke] we can see that the modern ideas as to the nature of a trial, which were coming with the development of the jury system, were introducing the modern conception of the nature of an estoppel. Lawyers were ceasing to regard the facts which created the estoppel as a mode of proof, and were beginning to regard them as a conclusive presumption which was raised either by a statement in a record, or by the parties' own words or acts. It was becoming clear that estoppels of the latter sort - estoppels by deed and by matter in pais - depended ultimately on the words or acts of the parties; and, since a trial was coming to be regarded as an adjudication upon the facts in issue by the light of the evidence offered, they were regarded as operating, not as modes of proof, but as conclusive presumptions which precluded the necessity of offering further evidence. The growth of this modern view of the nature of an estoppel comes out clearly enough in Coke's well-known description - 'it is called an estoppel or conclusion because a man's own act or acceptance stoppeth or closeth up his mouth to alledge or plead the truth'. In other words, it is an admission which creates so conclusive a presumption that no further evidence is admissible, even though that evidence could prove that the real truth was contrary to the presumption. But, when this point had been reached, it was inevitable that the principle should be further developed. There are signs of this development in the common law during the medieval period and later. But at common law the doctrine long continued to be involved in the technicalities which had gathered round it in the Middle Ages, and to be applied mainly in a sphere of the land law. It was developed and broadened mainly by equity, and by its application in a sphere of mercantile law. As the result of these new applications, the common lawyers began to see that the doctrine depended on the fact that the party estopped had so conducted himself that another, in reliance on that conduct, had acted in a manner in which, but for that conduct, he would not have acted. But it was long before the principle in this generalised form found expression. It was not till 1837 that Lord Denman, CJ, stated it in this way in the case of Pickard v Sears, and so rendered possible the development of the modern doctrine of estoppel by conduct. .... Thus the doctrine of estoppel has accommodated itself to the gradual changes of men's ideas as to the nature of a trial. Originating in an age where the main interest of the trial centred around the modes of proof, it was at first regarded simply as a mode of proof. But, now that the main interest of the trial centres round the evidence produced to prove the issues, it is, in its most important modern form, simply a rule of evidence." [Footnotes omitted]. 149The gravitational pull of practice and procedure on substantive law has not ceased to operate since Holdsworth, in 1944, was content to describe the "modern law" of estoppel as "a rule of evidence". 150Some changes in the principles governing estoppel may be causally connected with the decline in the use of trial by jury in civil proceedings, and the commensurate rise in the conduct of judge-alone trials, associated with the operation of Judicature Act systems of judicial administration in Anglo-Australian law. The tendency has been towards recognition of estoppel as a substantive law principle rather than a rule of evidence (The Laws of Australia (Thomson Reuters), "Unfair Dealing: Estoppel", para [35.6.10]; Handley, Estoppel by conduct and election, para [1-007] note 24 on p 4, and paras [1-010]-[1-014] on pp 6-9; Young, Croft and Smith, On Equity, p 809 note 97), and towards acceptance that estoppel can operate in relation to a question of law rather than in relation only to a question of fact (Handley, Estoppel by conduct and election, para [2-013]; Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312 at 348 [149]-[154]). Distinctions between adjectival and substantive law, and between questions of fact and law, do not have the practical utility for a judge-alone trial that they can have in a jury trial where a judge is charged with supervision of the fact finding functions of laymen. Some perceived changes in the law governing estoppel may be but, or largely, adaptations of the same underlying concept(s) to changes in procedure. 151Development of the modern tendency to treat principles of estoppel as part of our substantive law rather than merely as a rule of evidence may, in particular, be traced, at least in part, simply to the practice of courts: Spencer Bower, The Law relating to estoppel by representation (4th ed, London, 2004) at paras [1.4.4]-[1.4.6], on pp 14-16. A rule of evidence is generally regarded as determining the admissibility of evidence that may be adduced in support of findings of fact, to which substantive law might be applied, to produce an outcome in adversarial proceedings. As a matter of practice, courts (more particularly, courts constituted by a judge sitting without a jury) have for many years not uncommonly proceeded on the bases that: first, the availability or otherwise of an estoppel can, as a matter of convenience, be determined upon publication of a final judgment, after receiving not only evidence said to ground an estoppel but also evidence which, if an estoppel were to be applied as a rule of evidence, could have been ruled to be inadmissible; and, secondly, all the facts relied upon as establishing, or refuting, a claim to estoppel should be pleaded. Before courts were prepared to characterise estoppel as a principle of substantive law the legal profession at large first ceased treating it simply as a rule of evidence. Theory sometimes follows practice, rather than precedes it. 152In an era in which trial by jury has all but been abolished in civil proceedings, the expression "in pais" is foreign to the vernacular, and some at least of the estoppels in vogue have their origins in equity, continued use of the expression "estoppel in pais" is a remarkable example of the persistence of language in the law if not an impediment to its understanding. 153Estoppel by conduct is capable of embracing a wide variety of more particularly described forms of estoppel, one only of which is "estoppel by convention". Estoppel by deed is not one of them if deeds are to retain their distinctive character. Estoppel by deed has a lineage all of its own which continues to shine through other legal categories to which it may, from time to time, be subordinated: eg, Spencer Bower, The Law relating to estoppel by representation (4th ed, London, 2004), para VIII.12 on pp 203-208. 154The character of the security instruments as deeds. There is no dispute in these proceedings that the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge were duly executed by the parties or that they appear, on their face, to be entirely regular. As each of the instruments is expressed to be a "deed" and to have been "signed, sealed and delivered" by each party it follows, I believe, that there is no serious challenge to the character of the security instruments as deeds. 155Section 38(3) of the Conveyancing Act 1919 NSW provides that every instrument expressed to be an indenture or a deed, or to be sealed, which is signed and attested in accordance with that section is deemed to have been sealed. 156In accordance with a requirement of section 38(1) of the Act, each of the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge was attested "by at least one witness not being a party to the deed". It matters not that the defendants' execution of the latter two instruments (by a person purporting to have executed them as an attorney) is not attested by a non-party witness. Section 38(1) does not, in terms, require each and every signature to have been attested by a non-party witness: Ellison v Vukicevic (1986) 7 NSWLR 104 at 112D-G (read with 107G-108D), affirmed in Vukicevic v Alliance Acceptance Co Limited (1987) 9 NSWLR 13. 157Even if the defendants' mode of execution of the instruments was defective, in equity a party who knowingly takes the benefit of a deed may be bound by it even without execution of it: Lady Nass v Westminster Bank Limited [1940] AC 366 at 373. The defendants took the benefit of the instruments in that they allowed Mr Isaac to continue to lend money to the first defendant (beyond the amount formally acknowledged in the instruments as having been received) on the faith of their purported execution of the instruments. 158Physical delivery of a deed is not necessary; delivery is a matter of intention: Xenos v Wickham (1866) LR 2 HL 296 at 312-313; Macedo v Stroud [1922] 2 AC 330 at 337; Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80 at 85 and 87. Prima facie, execution imports delivery and there is, in this case, no evidence to rebut a finding of delivery: Hooker Industrial Developments Pty Limited v Trustees of the Christian Brothers [1977] 2 NSWLR 109 at 116F, 118D-119B and 119E-F. 159Construction of the deeds as supportive of an estoppel. Not every statement made in a deed is capable of supporting an estoppel. It is generally said that a statement capable of supporting an estoppel must be precise, clear and unambiguous, read in the context of the deed as a whole. That seems to be an abiding requirement: Coke on Littleton, para [352b], second rule. More technical requirements of earlier times appear largely to have melted away. The law appears no longer to confine an estoppel to statements of fact as distinct from statements of law; express as distinct from implied statements; and statements contained in a recital, as distinct from an operative part, of a deed: Spencer Bower, Estoppel by representation (4th ed, 2004), para [VIII.17.1] on pp 2005-2007; Handley, Estoppel by conduct and election (2006), para [7-002] on pp 109-110. It is, perhaps, a measure of the evolution of the concepts of a deed, and estoppel by deed, that contrary views of the law on such basic topics can be found in reputable works, with a consensus apparently emerging but slowly. 160For present purposes, it is not necessary to dwell on points of disagreement in the authorities. The Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge jointly and severally contain statements in which the first defendant's indebtedness is acknowledged, and particularised as arising from a request for the provision of money by way of loan, an agreement to lend and an agreement to repay moneys lent, and an acknowledgement of receipt of moneys lent. The Deed of Charge, to which the Mr Isaacs and both defendants are parties, contains a clear statement (in a preliminary section entitled "Introduction" which bears the character of recitals) that "[the] total amount outstanding under the Loan Agreement and the Supplementary Loan Agreement is $550,000". 161That statement provides a bedrock for a finding that the instruments, on their proper construction, are capable of supporting an estoppel by deed. 162Enforceability of a "Receipt" clauses in a deed. Law and equity may have different fields of operation in the context of an estoppel by deed. A classic example of that, required to be considered in these proceedings, relates to the refusal of equity to countenance enforcement of an estoppel arising from a receipt clause in a deed if money acknowledged to have been received has not in fact been paid: Greer v Kettle [1938] AC 156 at 170-172; Cousens v Grayridge Pty Limited [2000] VSCA 96 at [58]. 163Neither a receipt in the body of a deed, nor a receipt indorsed on a deed, was, in equity, conclusive that moneys recorded as having been received were in fact paid: Norton on Deeds (2nd ed, 1928), pp 226-228, and p 213 (para 4); Conveyancing Act 1919 NSW, ss 39-40; Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 at 483C-484B, affirmed in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326. Equity's divergence from the common law was founded upon the availability, on the facts of a particular case, of an equitable remedy (such as rectification or rescission precluding the enforcement of an estoppel that would otherwise arise from the terms of the particular deed). 164The rationale for the difference between law and equity is important here because, as between the original parties to the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge, a question may have arisen as to the enforceability of any estoppel arising from the acknowledgement of receipt of a precise principal sum (namely, $450,000 in the Loan Agreement and an additional $100,000, bringing the sum to $550,000 in the Supplementary Loan Agreement and the Deed of Charge) in circumstances in which, at the date the particular deeds were made, lesser sums had been paid. 165However, on the facts established by the evidence the plaintiff took an assignment of Mr Isaac's rights under the deeds without notice of any (temporary) deficiency in the amounts paid, compared with the amounts acknowledged as having been received, at the time the deeds were made. 166The consequence is that the defendants are unable to set up as against the plaintiff any equity which they may have against Mr Isaac arising from mis-statements in the deeds as to the quantum of the first defendant's indebtedness and the plaintiff is entitled to a judgment in debt in the sum of $550,000 and ancillary relief: Odgers' Construction of Deeds and Statutes (5th ed, 1967), pp 165-167. 167Should Mr Isaac and the defendants hereafter engage in litigation - assuming that they are not precluded by the passage of time, their conduct or compromise of earlier proceedings from doing so - equitable principles may require that adjustments be made so as to ensure that the defendants do not bear the burden of having to pay (to Mr Isaac and his assignee, the plaintiff) more than the total amount of moneys actually advanced by Mr Isaac. An equitable principle against double recovery may operate to protect the defendants: cf, Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427 at 455-456 [101] note 92.

CONCLUSION 168In the final analysis, the plaintiff is entitled to the substance of the relief it claims in the proceedings: (a) a judgment in debt against the first defendant in the sum of $550,000, with interest; (b) a declaration that the indebtedness of the first defendant is, by virtue of the respective terms of the Loan Agreement, the Supplementary Loan Agreement and the Deed of Charge, secured against the first defendant's land at Oatlands and the second defendant's land at Newtown; and (c) such, if any, consequential orders as may be necessary. 169Having published these Reasons for judgment, I propose to direct that the parties bringing in short minutes of orders to give effect to them. 170In their consideration of draft orders, the parties will need to address three particular, additional matters. First, quantification of pre-judgment interest, bearing in mind that the Loan Agreement provides for the payment of interest, after an interest-free period, at the overdraft rate specified by Mr Isaac's bank. Secondly, the question whether there should be a reservation of liberty to apply to facilitate a judicial sale (by reference to s 103 of the Conveyancing Act 1919 or otherwise) for the purpose of enforcing the plaintiff's security rights. Thirdly, the question whether there should be any order for costs other than that the defendants pay the plaintiff's costs of the proceedings on the ordinary basis.

Amendments 01 March 2013 - The reference to "the plaintiff" should be a reference to "Mr Isaacs". Amended paragraphs: 160 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: 01 March 2013