Loizou v Derrimut Enterprise Pty Ltd [2004] VSC 176

2. In April 1989 the Australian Property Group, a division of the Commonwealth Department of Administrative Services, invited tenders for a block of land at Derrimut on the outskirts of Melbourne. The land had been used by the Commonwealth as an explosives storage facility and for other purposes. The successful tenderer was the third defendant, Mr Vincenzo Ceravolo. He was part of a group of four who came together to buy the land. The other members of the group were the first plaintiff, Dr Nick Loizou, the second plaintiff, Mr Albert Tomassi, and the third plaintiff, Mr Darryl Wilson. The group envisaged that in due course a nomination would be made in favour of a corporate entity of which the four men would be directors. The entity which it was envisaged would perform this role was the first defendant, Derrimut Enterprise Pty Ltd. This company was dissolved before the proceeding was issued. Reference hereafter to "the defendants" is a reference to the second and third defendants.

5. It was also envisaged that a unit trust would be created, of which Derrimut Enterprise Pty Ltd would be the trustee, and that units in that trust would be held by a corporate trustee of a family trust of each of the four individuals. The corporate trustees of those family trusts were the fourth plaintiff, Oxfel Pty Ltd, the fifth plaintiff, Varmot Pty Ltd, the sixth plaintiff, Tippula Anna Nominees Pty Ltd, and the second defendant, Crofthill Pty Ltd.

8. As matters transpired, the proposed unit trust arrangement never eventuated. This was because before the sale was settled three of the participants, Dr Loizou, Mr Tomassi, and Mr Wilson, left the venture, leaving Mr Ceravolo to complete it alone. This proceeding concerns the circumstances in which those three participants left the venture. As plaintiffs they claim that they were persuaded to agree to leave the venture by Mr Ceravolo as a result of fraudulent misrepresentations by him and breaches of fiduciary duties which he owed to them. Mr Ceravolo denies the alleged misrepresentations and breaches of duty and says the individual plaintiffs repudiated their agreement with him and he accepted their repudiation.

11. The contract of sale named Mr Ceravolo as purchaser. There was a right of nomination. If the nomination was in favour of a company the directors were required to give personal guarantees. The purchase price was $2,500,000 and settlement was originally due in September 1989. Settlement was repeatedly delayed for reasons to which I will refer later. By late 1991 settlement had still not occurred. The plaintiffs' complaints concern matters they were told, or not told, at a series of meetings in 1991. As initially pleaded, the plaintiffs relied on meetings on 22 August 1991, 10 September 1991, 1 October 1991, and 10 October 1991. As a result of an amendment during trial, they also relied upon a meeting alleged to have occurred on 3 October 1991.

14. The events which are the subject of the proceeding took place against the background of a significant decline in the value of real property of this kind. Between the time when the tender was lodged in mid 1989 and the time of the resignations in late 1991 there had been a substantial decline in the value of the property. The extent of the decline was somewhat debated in the evidence but the fact that there had been substantial decline was uncontroversial.

17. Whilst the pleadings at the commencement of the trial suggested a wider controversy, in the conduct of the case certain matters became clear and were common ground.[1] These matters were:

(a) The three individual plaintiffs and the third defendant were partners in the venture and owed each other fiduciary duties as such.

(b) The third defendant, Mr Ceravolo, was the project manager. His duties included arranging the nomination of Derrimut Enterprise Pty Ltd, and dealing with finance for the project, settlement of the contract, and rezoning and development.

(c) In late 1991 the resigning partners wished to extricate themselves from the partnership and remove themselves from all the benefits and burdens of the land acquisition, and they never resiled from that position until the issue of these proceedings on 10 October 1997. All parties agreed the partnership ended in October/November 1991, either as a result of an agreement to that effect, as the plaintiffs contend, or as a result of acceptance of repudiation, as the defendants contend.

23. In the end, the crux of the case concerns why the three partners left, were they misled or not informed of matters of which they should have been informed, or did they leave with full information so as to avoid what then appeared to be a significant loss? If they have a valid complaint about the information they acted on in 1991, their conduct thereafter becomes important, as the defendants say any claim the plaintiffs otherwise have to relief should be denied because of laches, acquiescence and delay.

26. What was said at the meetings in late 1991 is critical. Before turning to those meetings it is necessary to set out the sequence of events prior to August 1991.

30. In April 1989 the Australian Property Group invited tenders for the subject land. Dr Loizou, Mr Tomassi, Mr Wilson and Mr Ceravolo agreed to lodge a tender for the purchase of the land in the name of Mr Ceravolo alone with a purchase price of $2,500,000. On 16 May 1989, Mr Ceravolo, as the successful tenderer, entered into a contract with the Commonwealth to purchase the land for the sum of $2,500,000. The contract provided for a right to nominate, but in the event of nomination of a proprietary company, each of the company's directors was required to execute a guarantee. A deposit of $250,000 was paid on 20 May 1989, with each of the partners contributing $62,500. The partners agreed Mr Ceravolo would be the working partner, or project manager, and would be paid $1,000 a week and be given certain other entitlements for that work.

33. In August 1989, under instructions from Mr Ceravolo, Mr Ross Stevens of the firm Raine and Horne prepared a written valuation of the land. He concluded that the value of the land as at 3 August 1989 was $2,700,000. It was initially the intention of Mr Ceravolo and Mr Tomassi not to apply for bank finance. However, by August 1989 the partners had decided that bank finance would be sought, and an application for finance was made in that month. By a letter of 2 October 1989, the Footscray West branch of the National Australia Bank ("NAB") advised of approval of finance to assist in the purchase of the land in a total sum of $1,750,000.

36. Settlement was originally due on 20 September 1989. An extension was requested by a letter of 11 August 1989, written by Mr Frank Sagaria of the solicitors' firm Frank J Sagaria, Italia & Co. Mr Sagaria was Mr Ceravolo's solicitor. The reason given was delay in realising a property. Mr Ceravolo's evidence suggested some property realisation by him would have been necessary before settlement, but he described this reason as a "white lie". He said the real reason a delay was needed was because his partners were not ready. By a letter dated 11 October 1989, Mr Timm Kurth, the Manager, Property Sales, of the Australian Property Group, advised Mr Ceravolo that an extension of the settlement date had been given from 20 September 1989 to 20 December 1989. This extension was formalised by a deed of extension dated 10 October 1989. It was agreed that interest at a rate of approximately 9 per cent would be paid during the period of delay. This rate was considerably lower than commercial rates at that time.

39. Notwithstanding that the contract named Mr Ceravolo as purchaser, the NAB offer of finance was directed to the first defendant, Derrimut Enterprise Pty Ltd, which was then named 650 Enterprises Pty Ltd. Similarly, on 13 October 1989, town planning consultants, Hurnall Nicolls, were engaged on behalf of the company Derrimut Enterprise Pty Ltd. The letter of engagement was written by a firm of solicitors, J & J Acquaro, who were acting at that time on behalf of the company. The person at Hurnall Nicolls who was to undertake the town planning work was Mr Mark Bartley, and the engagement letter of 13 October 1989 was directed to his attention. One of the matters which he was required to attend to was the preparation of a rezoning submission.

42. The four partners all wished to delay settlement in late 1989 if that could be done. According to Dr Loizou, Mr Tomassi and Mr Wilson, Mr Ceravolo devised a scheme or "tactic" to delay settlement by raising the issue of potential contamination of the land. Their evidence was that this was nothing more than a tactic at all relevant times. Mr Ceravolo's evidence was that contamination was a real concern and emerged as such in October or November 1989. Dr Loizou drafted a letter for Mr Ceravolo, raising what Dr Loizou says was this spurious concern, in order to obtain a delay in settlement. Mr Ceravolo did not use the letter that Dr Loizou had drafted. However, the issue was raised and used to support a request for a delayed settlement by a letter of 23 November 1989 to the Australian Property Group, written by Mr Ceravolo's solicitor, Mr Sagaria. The letter referred to recent media publicity concerning contamination and said that the issue had been raised by the purchaser and "by his lending source". It said that the problem had meant that the purchaser had "made little progress in settlement arrangements", and it stated that the "lender therefore requires proof that the land is not contaminated in any way prior to any other progress being made towards loan approval and evential [sic] settlement of the purchase transaction". The relevant bank manager at the NAB at the time was Mr Mark Galante and he gave evidence in the proceeding. His evidence was that he could recall concerns about contamination, but, not surprisingly given the lapse of time, he was vague about these concerns. He said if NAB had required proof of non-contamination he would have expected that to have been put in writing. When Mr Ceravolo gave evidence he was cross-examined extensively on this letter. Reluctantly, he conceded that much of what the letter said was untrue. He eventually agreed that the representations about the "lender" were all untrue. Mr Ceravolo attempted to shift responsibility for this onto Mr Sagaria. Mr Sagaria's evidence was that the letter had been written on instructions from Mr Ceravolo.

45. At the time of the tender and purchase, the land in question was zoned "existing public purposes 7 (Office of Defence Production)". Mr Bartley, the town planner from Hurnall Nicolls, gave evidence. Mr Bartley's evidence was that upon sale by the Commonwealth, the zoning would revert to "general farming", in the absence of a successful application to achieve some other zoning, and that if the zoning reverted to general farming, the possibility of subdivision was greatly restricted and the property's attraction as a development proposition was significantly diminished. His evidence was not challenged on this, nor indeed on any other relevant matter. In late 1989 Mr Bartley prepared submissions to the Werribee Council for the purpose of obtaining a rezoning. The rezoning sought at that time was the introduction of a "Derrimut Special Purpose Industrial Storage and Transport Zone". Copies of the draft submission were forwarded to both Mr Ceravolo and Mr Tomassi.

48. In his evidence Mr Bartley explained the potential significance of the contamination issue in late 1989. Prior to the sale, the Commonwealth had arranged for a preliminary contamination study to be carried out by a firm named Dames and Moore. This study had found no relevant contamination. Mr Bartley said that if the land was to be rezoned for industrial uses, this study would be adequate to satisfy the environmental concerns of the Environment Protection Agency ("EPA"). However, if the land was to be rezoned for residential purposes, this study would not be adequate and a more detailed investigation would need to be undertaken. The starting point of that more detailed investigation would be the compilation of a detailed history of the site. The source for information of this kind was the Commonwealth itself. Mr Bartley said in his evidence that concerns about contamination had been highlighted at the time (1989) as a result of a controversial contamination issue involving Commonwealth land at another site in the area, which he referred to as a "case in Ardeer".

51. Whatever the partners may or may not have believed in late 1989, the issue of potential contamination was a real concern to their town planning consultant, Mr Bartley, from the time he became involved in the project in late 1989.

54. By the end of 1989 at least some work had been done on the preparation of the documentation necessary for the venture to be structured as a unit trust, the trustee of which would be Derrimut Enterprise Pty Ltd. There was controversy in the evidence as to whether that matter was pursued as diligently as it ought to have been. It is clear, however, that by December 1989, at the latest, a unit trust deed had been prepared and was being considered by the parties. The rest of the documentation was not prepared until October 1991. Evidence was given as to who was responsible for the delay; in my view, the reasons for the delay are not relevant.

57. During 1990 the partners met from time to time and discussed progress. An overdraft was obtained from the West Footscray branch of the NAB, which was initially $30,000 and later extended to $50,000. A submission to the City of Werribee was made supporting the introduction of the proposed Derrimut Special Purpose Industrial Storage and Transport Zone, and Mr Ceravolo and his solicitors, Frank J Sagaria, Italia & Co, successfully delayed settlement of the contract by relying on concerns expressed to the Commonwealth on behalf of the purchaser as to possible contamination of the land. Mr Bartley's evidence was that the rezoning submission was not supported by officers of the City of Werribee who suggested that alternatives should be pursued.

60. By a letter dated 4 May 1990, Mr Bartley advised Mr Ceravolo that "the issue of contamination has been raised by the Department of Planning and Urban Growth (previously the Ministry for Planning and Environment) and by the EPA". The letter said a copy of the report by Dames and Moore (the preliminary report the Commonwealth had arranged) had been supplied to the EPA and that he was awaiting their advice. The letter further advised:

"In the circumstances I believe the least the Commonwealth should do is provide you with whatever information is available on the history of the use of the site."

Mr Bartley in his evidence indicated that a history of this kind would be important if the EPA were ever to give the necessary clearance for a residential development, but it was not essential if there were to be a rezoning for industrial uses. By a letter of 19 October 1990, the EPA advised Mr Bartley that the Dames and Moore report could be used "as the basis for rezoning of the site for industrial storage or transport uses". It went on to advise as follows:

"Any change to residential, public purpose or open space zoning would require a certificate of environmental audit to be obtained from an auditor appointed under the Environment Protection Act 1970 to satisfy the requirements of the Minister's Direction No 1 (copy enclosed). I have also included a list of appointed Environmental Auditors. To satisfy the criteria for rezoning to a residential use it will be necessary to develop and implement a more extensive site testing program."

66. In October 1990 Mr Bartley prepared a new proposal for the rezoning of the land. Under this proposal, the council was requested to introduce a new zone described as the "Werribee Environmental Living Zone". What was proposed was the sub-division of the land into "rural residential lots".

69. In November 1990 the Department of Planning and Urban Growth published a Minister's direction entitled "The Werribee Growth Area Plan". Pursuant to that direction, the area in which the relevant land was situated was designated "proposed residential". Mr Bartley's evidence was that this was "in a sense ... the worst of all possible options" because the land was at the north-eastern extremity of the growth area, and a residential rezoning for this land was unlikely to be approved for a considerable period of years, possibly 10 or 20 years. The Department of Planning and Housing gave Mr Bartley advice to this effect by a letter of 5 March 1991. The letter stated:

"Staging for the Growth Area proposes an incremental expansion outward from the existing Werribee urban area with development proceeding generally east to west. Your client's land is on the north eastern edge land in Stage 2, designated for development between the years 2000 and 2015."

The letter concluded by emphasising that it was neither the Government nor the council's intention to "create isolated communities in which it would be costly to provide and maintain ... services." Later that year the City of Werribee confirmed that its attitude was the same as that of the Department in letters to Mr Bartley of 11 October 1991 and 22 October 1991. The city engineer was a Mr John Nicol. He advised in the letter of 11 October that a residential development of the subject land was "premature". He indicated that the council supported incremental rezoning and was concerned not to create a residential development which was remote and isolated. Mr Nicol had discussed this position with Mr Bartley in a number of meetings in October 1991, some of which had also been attended by Mr Ceravolo. The Planning and Environment Committee of the council approved Mr Nicol's recommendation that the development proposal for the subject land was "premature" on 7 October 1991, and the council confirmed this decision on 21 October 1991.

74. Thus, in October 1991 the position was that the issue of possible contamination of the land was a real and important issue and had been so for some time. The contamination issue had been relied upon to delay settlement. The land had been designated "proposed residential", but any eventual rezoning of the land for residential purposes was likely to be many years in the future (between 9 years and 24 years based upon the Department's letter of 5 March 1991).

77. During 1990 a significant downturn in the property market had become apparent. On 16 May 1990, the NAB at West Footscray advised Derrimut Enterprise Pty Ltd in a letter sent to Mr Ceravolo's office at 70 Essex Street, West Footscray that approval of the facility which had been offered on 2 October 1989 was subject to:

"Updated Sworn Valuation for Lending purposes from Raine and Horne confirming value of $2.7 million in today's environment."

81. The letter stated that the facility offered to assist in financing the purchase, being a fully drawn advance of $1.7M, would expire on 30 September 1990. The letter set out the fees due, being a line service fee of $6,800 payable half yearly, a commitment fee of 1.5 per cent payable on 30 August 1989, and an application fee of $7,000 which was then due. Mr Galante gave evidence that the bank never pressed for payment of the commitment fee and the application fee. He said this was because Mr Ceravolo was a good customer and the facility was never drawn down. He agreed that the NAB's letter of 16 May 1990 stated that these fees were then payable, and he also agreed that an NAB letter of 23 March 1994 suggested that the NAB position in 1991 had been that the commitment fee would be charged as the bank had continued to hold the commitment.

84. A separate overdraft facility of $50,000 from the NAB had been taken up by the partners, and on 3 September 1990 each of the partners executed a guarantee in favour of the NAB in relation to that facility.

Mr Ceravolo sought an updated valuation from Raine and Horne, as had been required by the NAB's letter of 16 May 1990. On 20 September 1990, he received a letter from Raine and Horne. The letter was written by Mr Stevens, who had prepared the earlier valuation. It advised that in the opinion of that firm, the value of the subject property as at that time was within the range of $1,250,000 to $1,500,000. One of the assumptions set out in the letter upon which the opinion of value was based was:

"The property is not contaminated in any manner and ... the EPA will not have cause to register the property as a contaminated site."

90. A diary note of an interview with Mr Ceravolo at the NAB on 10 December 1990 was tendered in evidence. The note indicates that by that time the NAB had a negative attitude to the proposed borrowing. The relevant part of the note reads as follows (the reference to "Enzo" being a reference to Mr Ceravolo):

"Enzo is still actively striving to obtain something concrete, but at present is still having discussions with council and project manager. Enzo explained that land being purchased is now being zoned as proposed residential and this now gives greater value to the property. However our main concern is that limit has expired and that in order to re-assess the proposal for the future we will require a fresh valuation and concrete plans for the development. Enzo is proposing a sub-division but as mentioned to Enzo we are not in the market for projects of this nature, particularly in present economic market. As facility has expired we will need to review position on presentation of fresh proposal."

Mr Galante, the NAB Branch Manager and author of the note, gave evidence which confirmed the accuracy of this note. He said that if a new proposal had been put the NAB would have reconsidered the security required, including the need for personal guarantees.

95. Thus, by the end of 1990 the partners could not rely on the previously approved facility, and Mr Ceravolo had been informed of that position. There is no evidence of any change in that position throughout 1991.

98. It was not all bad news in late 1990, however. By a contract dated 10 December 1990, Rade Popovic and Nada Popovic agreed to purchase a small section of the subject land for the sum of $300,000. A deposit of $100,000 was paid and a special condition provided for the release of that deposit forthwith. The price per hectare inherent in this sale was considerably in excess of that inherent in the contract with the Commonwealth. One of the terms of the contract with the Popovics was that in the event that Mr Ceravolo did not proceed to settlement of the contract with the Commonwealth, he would "give the purchasers [the Popovics] first option to be nominated as substitute purchasers". The existence of this term has become an important part of the plaintiffs' complaint. I will refer to it as the "right of nomination". Completion of the transaction with the Popovics prior to settlement on the land as a whole required the co-operation of the Commonwealth, as the Commonwealth would need to agree to separately transfer that portion of the land.

101. On either 25 September 1990 or 26 September 1990, a meeting was held at the offices of the Australian Property Group. The meeting was attended by Mr Timm Kurth, Mr Sagaria, Mr Ceravolo, and perhaps other personnel from the Australian Property Group or the Australian Government Solicitor. One of the matters discussed was the proposed sale to the Popovics. Mr Sagaria made a note of this meeting which deals with that issue. Mr Sagaria's note also contains the following entry:

"The question of interest would be looked at in relation to that agreement whereby the settlement date has been extended."

In a letter of 4 October 1991, written by Mr Kurth, he addressed the question of interest and what had occurred at the meeting in September 1990. His letter stated:

"This Office and other Commonwealth organizations have been investigating the former usage and public records (dating back to acquisition) since the questions were raised in November 1989. Accordingly, my recommendation on penalty interest remains as detailed at our meeting with legal representatives on 26 September 1990, ie that penalty interest should not accrue whilst these investigations are proceeding and continuing up to settlement notification."

107. Thus, in September 1990 the position was that settlement remained indefinitely delayed pending the Commonwealth's investigation of former usage. The question of interest during this period of delay beyond 20 December 1989 was not resolved, but Mr Kurth's recommendation was that the Commonwealth should not seek interest whilst the investigation was continuing. In 1993, in the course of attempts to reach a settlement with the Commonwealth, Mr Ceravolo claimed that at the meeting on 26 September 1990 it had been agreed that the Australian Property Group would obtain a "clearance" from EPA Victoria. In cross-examination in this proceeding, Mr Ceravolo agreed that claims to that effect made by him or on his behalf in 1993 were not accurate.

110. On 25 July 1991, the Australian Radiation Laboratory produced a radiation survey of the subject land. The survey found that there was no indication of the presence of radioactivity other than that occurring naturally.

113. Both Mr Ceravolo and Mr Bartley gave evidence that on 1 August 1991 they met Mr Joe Perillo, a valuer employed by the estate agents, Baillieu Knight Frank. Mr Ceravolo said he had asked Mr Perillo to give an indicative oral valuation of the land. Both Mr Ceravolo and Mr Bartley's evidence was that Mr Perillo told them he valued the land at between $900,000 and $1.2M. Mr Bartley's evidence in this respect, which was given in answer to a question of mine, was objected to by counsel for the plaintiffs. I indicated that I would receive the evidence subject to objection. I was not addressed further on the issue in submissions, notwithstanding the fact that I reminded counsel for the plaintiffs of the objection. I rule that the evidence is admissible, not as to the "truth" of the valuation, but as evidence of what Mr Perillo said to Mr Bartley and to Mr Ceravolo. Mr Ceravolo's evidence was that he telephoned Mr Tomassi shortly after this meeting and told him what Mr Perillo had said.

116. On 28 August 1991, the first of the meetings occurred at which it is alleged that representations were made which form the basis of the plaintiffs' complaints. All four of the partners gave evidence about these meetings. Before dealing with these meetings I set out my general conclusions on the credibility of the four partners as witnesses.

120. The three individual plaintiffs displayed a strong sense of grievance against Mr Ceravolo. They said they had been duped. Mr Wilson said Mr Ceravolo was a liar, a thief and a cheat. Mr Ceravolo, for his part, also displayed a strong sense of grievance against the three plaintiff partners who he said had abandoned him.

123. Generally, the account of meetings and conversations given by the plaintiff partners was more ordered and comprehensible than that given by Mr Ceravolo. I had the impression that this was the result of careful preparation.

126. There were aspects of each of the individual plaintiffs' evidence which I found difficult to accept. I found Dr Loizou's evidence as to his belief about the availability of bank finance[2] difficult to believe. Mr Tomassi's evidence about his beliefs concerning the Popovic sale[3] and his evidence about the note concerning interest[4] were difficult to believe. Mr Wilson's evidence about what was said about bank establishment fees at the meeting of 22 August 1991 was internally contradictory. On the one hand, he said that Mr Ceravolo said the bank required payment of a $32,000 fee,[5] and on the other hand, he had Mr Ceravolo saying that a cheque for $12,000 was needed because he had negotiated a reduced fee.[6] In my view, notwithstanding these concerns, the plaintiff partners were all doing their best to tell the truth. It does seem to me, however, that they were to some extent reconstructing from the documents, and that their recollections have been affected by their strong sense of grievance against Mr Ceravolo. Given these concerns, on controversial issues contemporaneous records (where they exist) are to be preferred to the recollections of the individual plaintiffs in the witness box almost 13 years after the events.

129. Mr Ceravolo's evidence presents more serious problems. In the course of Mr Ceravolo's evidence it became clear that, through his solicitor Mr Sagaria, he had been prepared to mislead the Commonwealth in order to pursue his objectives. Representations made to the Commonwealth by Mr Sagaria concerning the attitude and requirements of "the lender" were, somewhat reluctantly, conceded by Mr Ceravolo to have been untrue.[7]

132. The impact of Mr Ceravolo's preparedness to mislead the Commonwealth is reduced to some extent by his preparedness, albeit reluctantly, to admit the untruths in his sworn evidence, and by the fact that the course he embarked upon in and prior to 1991 in this respect was, at least in broad outline, agreed to by his partners at the time. The impact of Mr Ceravolo's attempts to mislead the Commonwealth after 1991 is reduced in my mind by the desperate situation in which he found himself in 1992 and 1993. His evidence was that he was facing ruin and bankruptcy at the time if the Commonwealth had been able to force him to settle and I accept that that was the case. Again, in his evidence he admitted the untruths which appeared in correspondence written on his behalf and in his pleading in proceedings instituted by the Commonwealth. On the other hand, there were instances where Mr Ceravolo's evidence appeared to me to entirely lack credibility. At one point he appeared to me to change his evidence of how Mr Sagaria had advised him of a matter in response to a call by counsel for the plaintiffs for production of a letter to which Mr Ceravolo had just referred.[8] I was not able to believe his evidence as to Mr Tomassi's knowledge of the Popovic contract[9] and his evidence as to a particular $12,000 cheque.[10]

135. Overall, where conversations are in issue I find that the contemporaneous records are more reliable than the participants' recollections, and that if a choice must be made between the accounts of the individual plaintiffs on the one hand and of Mr Ceravolo on the other, I generally prefer that of the plaintiffs.

139. In their Amended Statement of Claim, the plaintiffs allege that six representations were made to them by Mr Ceravolo at a meeting on 22 August 1991. They were that:

(a) a valuer, Joe Perillo, had valued the land at about $1,200,000 as at July 1991;

(b) the bank would only lend $700,000, which left the participants to find $425,000 each;

(c) if settlement were not to occur, the partners would lose the deposit and be sued for the losses incurred by the Commonwealth upon the resale of the land;

(d) once the contamination report, which was very imminent, became available, the partners would have to settle very soon, being within one or two months;

(e) a part of the settlement would include interest which would be approximately $600,000 plus penalties;

(f) the bank was pressing for payment of approximately $32,000 in loan establishment fees.

The last three alleged representations were introduced for the first time by an amendment made during the course of the hearing. In the Second Amended Defence, Mr Ceravolo admits advising in August 1991 that Joe Perillo had valued the land at $900,000 to $1,200,000, admits expressing the opinion that if settlement did not occur they would all lose the deposit and he would be sued for losses on re-sale, and otherwise denies the allegations.

145. In his evidence Dr Loizou said that at a meeting of the partners on 22 August 1991, Mr Ceravolo said that Mr Perillo had given Mr Ceravolo a valuation of between $.9M and $1.2M, and that based on that the bank had informed Mr Ceravolo that at best they may be able to give the partners a $700,000 loan. He also gave evidence that Mr Ceravolo said the contamination report was very imminent and that the partners should expect to settle in between one and two months. Dr Loizou said that Mr Ceravolo had said that in that circumstance penalties and interest in excess of $600,000 would be payable. Dr Loizou said that Mr Ceravolo had said that it was time to nominate, but they should all be aware that if the settlement fell through the Government would auction the property and the individuals would be liable to the Commonwealth for their losses. Dr Loizou said that Mr Ceravolo added what Dr Loizou described as "his little catch phrase", which was: "If I was you guys I would have jumped out a long time ago." Dr Loizou also gave evidence that Mr Ceravolo said that he had managed to get the bank to accept establishment fees of $12,000 down from $32,000.

148. Mr Tomassi's evidence was also to the effect that Mr Ceravolo had said Mr Perillo had valued the land at between $.9M and $1.2M. He also said that Mr Ceravolo had said the best the bank would lend was $700,000, but he could not remember whether that was an expression of opinion by Mr Ceravolo or a statement that that was something the bank had told him. He said Mr Ceravolo had told the partners that if settlement fell through the bank would ask for a guarantee on the loan. I could not follow Mr Tomassi's evidence on that matter. He said Mr Ceravolo asked him to sign a cheque for bank establishment fees in the sum of $12,000 and that he did sign that cheque. He identified the cheque. He said that at this meeting Mr Ceravolo said the Commonwealth was pressing and that settlement was very near.

151. Mr Wilson's evidence was that Mr Ceravolo said at this meeting that Mr Perillo had valued the land at between $900,000 and $1.2M. Mr Wilson initially said that the valuation was represented to be $900,000 to $1M, but later corrected himself. He said Mr Ceravolo had said that the NAB had withdrawn the offer of $1.7M and were only prepared to offer $700,000, that the NAB required an establishment fee of $32,000 to be paid, and that the Commonwealth was pressing for settlement and required penalties and interest of $600,000 to be paid. He said that Mr Ceravolo had said the contamination report was pending and would be due soon. He also said that it was at this meeting that a cheque for $12,000 was presented. He said this was done at the end of the meeting and that Mr Ceravolo had said that the establishment fee had been reduced to $12,000. As previously mentioned, there was an inconsistency between his evidence that a representation had been made that an establishment fee of $32,000 must be paid, and his evidence given a short time later that Mr Ceravolo had presented a $12,000 cheque for signature to the same meeting on the basis that he had negotiated a reduction.

154. Mr Ceravolo's evidence as to dates and as to the sequence of meetings was less coherent than that of the individual plaintiffs. A meeting did occur on 22 August 1991. The date is known because Mr Tomassi made notes to which I will refer below. In his evidence Mr Ceravolo did not identify a meeting on this date, but it seems to me to be the meeting that he referred to as occurring not long after he had met Mr Perillo on 1 August 1991 and then telephoned Mr Tomassi to tell him the outcome. Mr Ceravolo says that he told his partners that the valuation was $900,000 to $1.2M according to Mr Perillo. He says that at this meeting suggestions were made to borrow in different ways and that everyone was "doing numbers". He says that he said he wished that his partners would fulfil their obligations to "nominate", an expression which was used as a shorthand for the nomination of Derrimut Enterprise Pty Ltd as purchaser under the contract of sale with the Commonwealth and the execution of directors' guarantees. In cross-examination he expressed doubt whether his statement that Mr Perillo had valued the property at between $900,000 and $1.2M was made at this meeting. As to the suggestion that he had said the bank would only lend $700,000, he said he was never concerned with what the bank would or would not lend and that he never participated in discussion about it. He agreed with the suggestion that he had said that the contamination report was imminent and that the Commonwealth were pressing to settle. He denied ever saying that the Commonwealth wanted interest and penalties of $600,000, and denied ever saying that the bank sought establishment fees of $32,000. In cross-examination, when asked about the cheque for $12,000, he said that Mr Tomassi and Dr Loizou wanted him to go to the bank with that cheque in order to pay the bank something for establishment fees. He agreed that he cashed the cheque and used the money for his own purposes. He said he told Mr Tomassi he had done this and that he replaced the money within a few days. None of this had been put to either Mr Tomassi or Dr Loizou. He reiterated in cross-examination that his principal interest at that time was the nomination.

157. Mr Tomassi made notes of this meeting. The notes are brief. The notes support the making of a representation that Joe Perillo had valued the land at about $1.2M in July 1991, and support discussion to the effect that only $700,000 would be coming from the bank. The notes also support the making of a representation as to the consequences of a failure to settle. In my view, the notes do not support the making of a representation that settlement would require the payment of interest of approximately $600,000 plus penalties, or, as Dr Loizou put it in his evidence, a sum "in excess of $600,000". Interest and penalties are not referred to in the note. Further, a portion of the note reads as follows:

"4 - 2,500,000 700,000 FROM BANK $1,700,000÷4=$425,000E"

In my opinion, this part of the note indicates that what was said at the meeting was that $700,000 would or could or might be obtained from the bank, and that accordingly a shortfall of about $1,700,000 would have to be met by the partners, being $425,000 each. In answer to a query I raised with Mr Tomassi, he said that his state of mind on 22 August 1991 was that if settlement had been required that day he would have had to come up with $425,000. This is not consistent with a belief that $600,000 in interest was payable. If $600,000 was added to the balance of the purchase price considerably more than $1,700,000, or $425,000 from each partner, would have been required in order to settle.

(a) Mr Ceravolo did represent that Mr Perillo had valued the land at $900,000 to $1,200,000 as at July 1991;

(b) I do not find that Mr Ceravolo represented that the bank would lend $700,000 or would only lend $700,000, although I find that the figure of $700,000 was discussed as the likely sum to be obtained from the bank;

(c) Mr Ceravolo did represent that if settlement did not occur the deposit would be lost and the Commonwealth would seek to recover its losses on a resale;

(d) Mr Ceravolo did represent that a contamination report was imminent and that the Commonwealth would then be pressing for settlement;

(e) I do not accept that Mr Ceravolo stated at this meeting that $600,000 would have to be paid at settlement by way of interest and penalties;

(f) there is no satisfactory evidence establishing the making of a representation at this meeting that the bank was pressing for payment of $32,000 in fees.

The rather extraordinary position concerning the $12,000 cheque is not relevant other than to issues of credit.

Meeting 10 September 1991

168. The partners met again on 10 September 1991. In their Amended Statement of Claim, the plaintiffs allege that at this meeting Mr Ceravolo made the following representations:

(a) the sale to the Popovics was not likely to proceed and the deposit of $100,000 was likely to have to be repaid with interest;

(b) a proposal to sell off 40 per cent of the land had not received a good response;

(c) the bank finance previously arranged was at risk and the bank had asked for personal guarantees for the loan.

In the Second Amended Defence, Mr Ceravolo admits informing the other three partners in September 1991 that he would not proceed with the Popovic sale unless the nomination of Derrimut Enterprise Pty Ltd was completed, admits expressing the opinion that the bank finance previously arranged would be difficult to obtain and that personal guarantees would be required, and otherwise denies the allegations.

174. Dr Loizou gave evidence that at this meeting his recollection was that Mr Ceravolo informed the partners that the "annexation" of the 7½ acres for the Popovic sale did not look as though it was going through, and that the partners should get their funds ready to repay the deposit. It was clear that Dr Loizou's references to "annexation" were intended to be references to the Commonwealth's agreement to a separate transfer. He also gave evidence that Mr Ceravolo said to the partners that the loan from the NAB, then expected to be $700,000, was uncertain as "they seemed to be changing their mind". Dr Loizou said that Mr Ceravolo repeated the remark: "If I was you guys I would have jumped a long time ago."

177. Mr Tomassi said in his evidence that at this meeting Mr Ceravolo said that the Popovic land sale was not going to go ahead, and that if it did not go ahead the partners would have to return the deposit and 12 per cent interest. He said that Mr Ceravolo told them that a search he had been making for a partner to take over 40 per cent of the land did not have a good response. He said that Mr Ceravolo had also said that if the bank was to lend money the partners would have to give a personal guarantee. Mr Tomassi said he was asked to sign another cheque for bank fees in the sum of $14,000, and was told that this was to replace the previous one where the amount had been erroneous. He said he signed a cheque in blank and he identified it.

180. Mr Wilson's evidence was that at this meeting Mr Ceravolo said that the sale to the Popovics was not likely to proceed, and that the deposit would have to be returned with 12½ per cent interest. He said that Mr Ceravolo had also said that the Commonwealth was pressing for settlement to go through and that penalties would have to be paid. He could not recall anything else.

183. In his evidence in chief Mr Ceravolo did not give any evidence identifiably confined to a meeting on 10 September 1991. Generally, he was concerned to emphasise that the purpose of this series of meetings in late 1991, from his point of view, was to further his requirement that the nomination take place forthwith. In cross-examination, when the specifics of the meeting on 10 September were put to him, he responded that there had been "a lot of meetings". It was put to him that he had said that the Popovic sale was not likely to proceed and that Popovic wanted his money back, and Mr Ceravolo responded that that was a lie.

186. Mr Tomassi also made notes at the meeting of 10 September 1991. On the issue of the Popovic sale, the relevant part was read out by Mr Tomassi, its author, at transcript p 385. His reading of the note was:

"The Commonwealth still has not given any news for the Popovic 10 acres. Time is lapsing. Therefore Popovic wants money back plus 12% interest. 20th November 1991. Therefore we have to put $20,500 each to cover the debts or negotiate new contracts."

190. The notes also refer to the 40 per cent proposal, but I do not need to concern myself with that as there is no allegation that that representation was relevantly untrue. The notes do not contain any reference to the bank finance being at risk. The notes do contain a reference to "four partners fully and equally responsable [sic]." Looking at the note, it is not clear what this is a reference to. In cross-examination Dr Loizou said that this was a reference to the fact that the four partners were fully and equally responsible for the liabilities of the acquisition. Mr Tomassi interpreted it as a reference to a proposed guarantee to the bank.

193. The plaintiffs' evidence about a representation concerning the bank finance was inconsistent. The note does not assist them. I am not prepared to make a finding on that matter beyond what Mr Ceravolo has admitted. On the Popovic issue, the note appears to me to be comprehensive, and, in my view, it is more reliable than the plaintiffs' recollections. In the circumstances, my findings on the pleaded allegations as to what was said at this meeting are as follows:

(a) Mr Ceravolo advised the partners of the position in relation to the Popovic sale in the terms set out in Mr Tomassi's note, rather than in the more negative terms referred to in the evidence of Dr Loizou, Mr Tomassi and Mr Wilson;

(b) the pleaded representation about a 40 per cent sale is irrelevant;

(c) Mr Ceravolo expressed the opinion that the bank finance previously arranged would be difficult to obtain and that personal guarantees would be required.

Meeting 1 October 1991

199. The next meeting of significance occurred on 1 October 1991. Again the four partners were present. The critical issue which the plaintiffs say arose at this meeting concerned the possibility of continued delay and imminent settlement. As previously indicated, Mr Ceravolo, with the concurrence of the other partners, had successfully delayed settlement for a considerable period relying on the contamination issue.

202. In their Amended Statement of Claim, the plaintiffs allege that at this meeting Mr Ceravolo represented to them that:

(a) the Commonwealth required the contract to be settled almost immediately;

(b) the Commonwealth required the payment of interest and penalties amounting to $600,000;

(c) the value of the land had dropped in August 1991 to about $900,000;

(d) in order to settle, the partners would have to find the $1,700,000 previously coming from the NAB, which meant they each had to find $425,000 because the bank would probably not lend the money since the land no longer met the valuation requirements of the bank;

(e) the contamination report was completed and there was no contamination of the land;

(f) the bank was asking for loan establishment fees.

The last two representations were added in the amendment made during the trial. The alleged representation about contamination in the Amended Statement of Claim starkly contradicted the representation about contamination alleged in the original statement of claim. In the Second Amended Defence, Mr Ceravolo admits saying that settlement was imminent, repeats the earlier admission concerning Mr Perillo's valuation, admits advising of the radiation report, and otherwise denies the allegations.

208. In his evidence Dr Loizou said that he was given the radiation report prepared in July 1991 and was told by Mr Ceravolo that that was the contamination report. He said it was presented to him in such a way as to lead him to believe that the contamination issue had now been resolved. He said that Mr Ceravolo told the partners that the bank had "pulled the pin on us, they're not giving us any money". Mr Frank Sagaria, the solicitor to whom I have previously referred, was also at this meeting. According to Dr Loizou, he announced that the "annexation" of the Popovic land "had been successful". Dr Loizou said that in response to this Mr Ceravolo went "every colour under the sun" and "dismissed him like a naughty school boy". In relation to the contamination report, Dr Loizou's evidence was that Mr Ceravolo told them they needed to "get ready, we have to settle". He also gave evidence that Mr Ceravolo said that the Government was "very adamant on the penalties and interest"; he said that Mr Ceravolo was not specific about the figures at this meeting. In relation to establishment fees, Dr Loizou gave evidence that Mr Ceravolo said the bank was still demanding establishment fees totalling $32,000. Dr Loizou said in his evidence that he was making calculations during this meeting as to what funds were going to be required by the partners. In his evidence he varied in describing these calculations between a calculation based on $2M[11] and a calculation based on $3M.[12] He said that at this meeting he announced that he would find it very difficult to come up with "these sort of funds" and that he believed he was a liability to the venture. He asked whether the other partners could proceed without him. He said the partners then discussed the options, one of which was to leave Mr Ceravolo as the only nominee but to stand behind him. Dr Loizou's evidence was that that suggestion was quite unacceptable to Mr Ceravolo. It was then suggested that they should try to rescind the contract. Dr Loizou said that all four partners agreed that that was the best course to follow, and that Dr Loizou then proposed to contact his solicitor, a Mrs Kyriacou, to find out whether that was possible.

211. Mr Tomassi said that Mr Sagaria was present at the meeting to take details for the purpose of preparing the nomination documents. He said that Mr Sagaria announced that the Commonwealth had released the 10 acres to be sold to Popovic. He said that Mr Ceravolo was visibly upset at this announcement and "dismissed" Mr Sagaria. He said Mr Ceravolo also told the meeting that the bank had completely withdrawn the loan. His evidence was that Mr Ceravolo said that the contamination issue had been cleared and handed a document to Dr Loizou saying that that was the final report. His evidence was that Mr Ceravolo told the partners the Commonwealth was pressing and that interest would have to be paid in the sum of $600,000. Mr Tomassi said that Mr Ceravolo told the meeting the settlement would be in December. He said that Dr Loizou asked if he could ask his solicitor whether the contract could be rescinded, and Mr Tomassi's evidence was that all of the partners agreed that he could do that.

214. Mr Wilson's evidence was that the 1 October 1991 meeting began with Mr Ceravolo tabling the contamination report. He said that the report had "come through". He said Dr Loizou looked at it. Mr Wilson said that Mr Ceravolo had said that the site was free of contamination and that now the report had come through they had to settle. Mr Ceravolo had said there were no more delaying tactics available to them. Mr Wilson said that Mr Ceravolo had also said the NAB had withdrawn the loan, and that the partners would have to fund the purchase with their own money. He said Mr Ceravolo had said that penalties and interest were still being "chased" by the Commonwealth. According to Mr Wilson, at this point Dr Loizou said that he would have his lawyers look at the contract to see if it could be rescinded. Mr Wilson could not recall the response. Mr Wilson said that Mr Frank Sagaria arrived at the meeting after this had all been spoken about. According to Mr Wilson, Mr Sagaria said he had good news and that the Popovic land could be sub-divided as the Commonwealth had responded. He said Mr Ceravolo dealt with Mr Sagaria very curtly, saying, do what you are supposed to do and then go, or words to similar effect.

217. In his evidence in chief Mr Ceravolo originally suggested that a meeting had occurred on 1 September; he subsequently referred to this meeting as being the one on "the first of the month". In my view, he was referring to the meeting of 1 October. He said that at this meeting he stressed again that he wanted the nomination to go ahead, and that he had contacted his own lawyer in order to organise the documentation. He said that it was he who announced that the Popovic transfer had been approved and that the land sale to Popovic could go ahead. He said that Dr Loizou talked extensively about raising or finding the necessary money. He said he was not concerned with that issue. He said that Mr Frank Sagaria arrived about 20 minutes after the meeting started. He said that Mr Sagaria took details for the purpose of preparing the nomination documents and that he did not stay long. After Mr Sagaria had left, according to Mr Ceravolo, Dr Loizou announced that he was not going to sign the nomination documents. He said that Mr Wilson said something similar, and that Mr Ceravolo then turned to Mr Tomassi, asking whether he was going to abandon him, too. He said that Mr Tomassi said words to the effect: "I have no alternative." In cross-examination Mr Ceravolo denied that he said at this meeting that the Commonwealth was pressing for settlement. Mr Ceravolo admits in his Second Amended Defence that he said settlement was imminent. He denied suggesting interest and penalties of $600,000 would have to be paid. He denied that the radiation report was available at this meeting, and his denial in that respect is consistent with the documentary evidence to which I will refer later. He could recall Dr Loizou saying that he would obtain legal advice on avoiding the contract.

220. Mr Tomassi also took notes of the meeting of 1 October. His notes record the presence of Mr Frank Sagaria and then read as follows:

10 acres subdivision as separate title as [sic] been agreed [the figures 27/9/ are written above the word agreed]. Interest component from DEC 89 up to the time we settle we have to paid [sic] the interest if the goverment [sic] want to be difficult. If we are 4 = 425 each If ½ ½ 5 = 340 ½

224. As previously, I find Mr Tomassi's note to be a more reliable record of what was said than the parties' recollections 13 years after the event. To my mind, the note indicates that on 1 October 1991 the partners believed that if the partnership remained at four they would need to find $425,000 each to settle the purchase, just as had been the case on 22 August 1991. In their pleading and in final submissions, the plaintiffs maintained that at this meeting the "425" was a reference to the extra amount required to raise the money to replace the bank loan. I do not accept that. I find it was the same calculation as had been done at the August meeting. I asked Mr Tomassi if the note "If we are 5 = 340 each" was made because it was thought someone else might be joining the venture and he agreed. It seems to me that a prospective incoming partner's share calculation would be the full amount then anticipated to be required at settlement. For the reasons previously given, this part of the note is not consistent with a belief that penalties and interests of a substantial amount, such as $600,000, were certain to be payable. Perhaps more significantly in this respect, the note records that the partners were told that interest would be payable if the Government wanted to be "difficult". This suggests to me that the partners were told liability depended on the as yet unknown final attitude of the Commonwealth. In my view, the note is consistent with the suggestion that the partners believed the long period of delay was coming to an end, and that practical consideration needed to be given to arrangements for settlement. Mr Ceravolo's pleading admits a representation that settlement was imminent. The plaintiffs gave evidence that they were told settlement was imminent. In relation to the Popovic land, the partners were told that the Commonwealth had agreed to a separate transfer; the only controversy concerns who said it and for present purposes it does not matter. There is no reference to a "withdrawal" of bank finance in the note. It is difficult to accept that a representation was made, or would have been believed if made, that no finance at all could be obtained on land valued, at the lower end, at $900,000. If I am correct that the $425,000 calculation is the same calculation as that done earlier, then it assumes some bank finance could be obtained.

227. My conclusions as to what Mr Ceravolo relevantly represented at the meeting on 1 October 1991 are as follows:

(a) Mr Ceravolo did represent that settlement was imminent;

(b) I cannot find that Mr Ceravolo represented that the Commonwealth required the payment of interest and penalties amounting to $600,000;

(c) Mr Ceravolo either referred again to Mr Perillo's opinion of the land's value at $900,000 at the lower end, or did not vary previous representations he had made to that effect;

(d) Mr Ceravolo did represent that in order to settle the partners would have to find $1,700,000 meaning $425,000 each, but I do not accept that he represented that this was to replace the bank finance as no bank finance at all could be obtained;

(e) whilst I generally preferred the plaintiffs' evidence to that of Mr Ceravolo, I accept Mr Ceravolo's denial that the radiation report was handed over at this meeting. As will be seen, the evidence is that Mr Ceravolo did not receive a copy of the report until after the meeting;

(f) I cannot find that Mr Ceravolo again raised the matter of the bank's establishment fees.

Events between 1 October 1991 and 3 October 1991

233. Dr Loizou gave evidence that he consulted his solicitor, Mrs Kyriacou, as had been agreed on 1 October 1991. He said he was given advice that the partners could extract themselves from the contract, but he was not able to say on what basis that could have been done. Mrs Kyriacou did not give evidence.

236. On 3 October 1991 Mr Ceravolo received from the Australian Property Group a very significant letter. The words "received 3/10/91" are on the letter. The letter is dated but it is impossible to read the date. It may be 2/10/91. Mr Kurth, the letter's author, was not called as a witness. Relevantly, the letter reads as follows:

"I refer to previous correspondence and discussions concerning the sale of the former Storage Area at Palmer's Road, Derrimut. The survey conducted by the Australian Radiation Laboratory (ARL) has now been completed and the results indicate [reference is made to the absence of any radioactivity contamination]. I enclose a copy of the ARL report for your records. The Department of Defence has conducted an exhaustive search of its records relating to Commonwealth usage of Derrimut Storage Area and the final clearance report is imminent. Accordingly, would you now please arrange the necessary financial transactions to enable prompt settlement of this protracted sale."

Relevantly, this letter states that one final step by the Commonwealth is envisaged before settlement, being a "final clearance report", but that that step is imminent. The opening words of the letter suggest that the contents had previously been relayed to and discussed with Mr Ceravolo. Indeed, the ARL report had been completed in July 1991. Mr Ceravolo's evidence was that he had been ringing the Australian Property Group seeking a copy of the ARL report, which he had been told had been completed at the end of July.

241. One of the things Mr Sagaria had done at the meeting on 1 October 1991 was to take notes of the details of the various family trust companies for the purpose of preparing documents for the nomination of Derrimut Enterprise Pty Ltd as purchaser under the contract. Mr Sagaria proceeded to prepare the necessary documents, and by letters dated 3 October 1991 he advised the partners of the documents he had prepared. Amongst the documents so prepared was a request addressed to Mr Vincenzo Ceravolo asking that he nominate Derrimut Enterprise Pty Ltd as purchaser of the property and a joint and several guarantee in favour of Mr Ceravolo of the due and punctual performance of the contract of sale. This guarantee was to be given by each of the family trust companies and each of their directors, being the four partners and their wives. In the letters, Mr Sagaria advised he had also prepared the guarantee required by the contract of sale with the Commonwealth.

245. The Statement of Claim as originally filed did not contain any reference to relevant representations being made on 3 October 1991. In the evidence, however, a meeting on 3 October 1991 was said to have been critical by the individual plaintiffs. In an amendment made during the trial it is alleged that on 3 October 1991, Mr Ceravolo represented to the other three partners that "he had nothing to lose as he had transferred all his assets out of his name and that if necessary he would go bankrupt". In the original Statement of Claim, the representation was confined to a representation that he had transferred his assets, and it was alleged to have been made on 1 October and 10 October. There is no record anywhere in the documentary evidence of any meeting on 3 October. Mr Ceravolo denies any meeting occurred on 3 October, and denies he made the representation alleged at any time.

248. Dr Loizou gave evidence that it was on 3 October 1991 at a meeting of the four partners that Mr Ceravolo said for the first time that he was prepared to continue on alone. It was in this context that Dr Loizou said Mr Ceravolo had announced that he had transferred his assets and had nothing to lose. Dr Loizou later described this as Mr Ceravolo throwing him (Dr Loizou) a "lifeline". Dr Loizou also later agreed in his evidence that at this time in 1991 he expected that Mr Ceravolo would continue to fight the Commonwealth and continue to seek to "put them off". He also agreed that the litigation with the Commonwealth which eventually occurred in 1993 was what he would have expected in 1991. He said that Mr Ceravolo asked each of the other partners at the meeting on 3 October to give him a letter saying that they were leaving the venture because of the problems with contamination. Dr Loizou indicated later in his evidence that he believed Mr Ceravolo wanted that letter for use in his dealings with the Commonwealth.

251. Mr Tomassi's evidence was that at a meeting on 3 October 1991, Dr Loizou advised the partners that his solicitor had said that the contract could be rescinded. His evidence was that in response to that Mr Ceravolo said to the other partners that they could go out but that he would continue. Mr Tomassi said Mr Ceravolo said that he had nothing to lose since he had transferred all of his assets.

254. Mr Wilson's evidence was that at a meeting on 3 October 1991, Dr Loizou announced that his lawyers believed the contract could be rescinded. Mr Wilson gave evidence that he said that seemed to be good news. Mr Wilson's evidence was that at that point Mr Ceravolo said that he had transferred all his assets out of his name and that if the others were not prepared to continue he would go it alone, as he had nothing to lose. Mr Wilson said he was shocked by this announcement. He could not recall anything else at the meeting.

257. Mr Ceravolo gave no evidence in chief about any meeting on 3 October 1991. In cross-examination he said he could not recall any such meeting. He could recall a phone call from Dr Loizou, which he said was on 2 October, where he was told that Dr Loizou's lawyers had said the contract could be avoided. Mr Ceravolo said that he was happy to try to avoid the contract as long as it occurred after a nomination so that they could all act together. He said that Sagaria and Acquaro (a reference to the two solicitors) had checked the contract, and that he was "sick and tired of waiting". He denied ever saying that he had transferred his assets or that he had nothing to lose.

260. Mr Ceravolo's evidence generally raised problems of credibility to which I have referred. Generally, I have accepted the account given by the individual plaintiffs where it was consistent with the contemporaneous notes. On this occasion, however, there is no note. The allegation that this representation was made at a separate meeting on 3 October 1991 was introduced for the first time during the hearing, approximately 13 years after the event, in circumstances where there is no documentary record of any kind of either the meeting or the representation. I cannot find that the representation was made.

264. By a letter dated 4 October 1991, the Australian Property Group addressed the issue of interest. The relevant part of the letter reads as follows:

"The issue of penalty interest on the balance outstanding is clear from 20 September 1989 until 20 December 1989, ie 2/3 of 13.7% per annum. However, the application of penalty interest for the period beyond 20 December 1989 is disputable. In this regard I note your solicitor's letters dated 23 November 1989 and 11 May 1990 which inter alia query the continuation of the interest rate and the need for proof of non-contamination. This office and other Commonwealth organisations have been investigating the former usage and public records (dating back to acquisition) since the questions were raised in November 1989. Accordingly my recommendation on penalty interest remains as detailed at our meeting with legal representatives on 26 September 1990, ie that penalty interest should not accrue whilst these investigations are proceeding and continuing up to settlement notification."

It seems to me that the terms of that letter lead to the following conclusions:

(a) the position in relation to penalty interest was uncertain, but the relevant Australian Property Group officer's recommendation was that the Commonwealth should not insist upon interest after 20 December 1989;

(b) the Commonwealth did not consider that the investigation into the contamination issue had concluded.

The letter's tone contrasts somewhat with the letter received by Mr Ceravolo the previous day.

272. Dr Loizou said he decided to take Mr Ceravolo's "life line" on 3 October 1991. He prepared a resignation letter which was dictated to him by his solicitor Mrs Kyriacou. The letter was typed the next day and was signed by him. It is dated 4 October 1991. Mr Tomassi and Mr Wilson remained undecided about whether to resign at that time.

276. The partners met again early in the morning of 10 October 1991. In addition to the four partners, Mr Allan Freeman, an adviser to Mr Wilson and Mr Tomassi, was also present. On this occasion, Dr Loizou took detailed notes and those notes were subsequently typed up. In the Amended Statement of Claim, the plaintiffs alleged that Mr Ceravolo represented to them at this meeting that:

(a) he had spoken to Perillo and that the valuation of the land was $900,000 to $1,100,000;

(b) if the partners were to proceed they needed to find extra money, and the Commonwealth was pressing for settlement;

(c) it would take up to 10 years to rezone the property, but it could be done within two years if a payment of $500,000 was made;

(d) the Commonwealth required the payment of interest and penalties amounting to approximately $600,000.

In the Second Amended Defence, Mr Ceravolo refers again to the earlier admitted representation concerning Mr Perillo, admits saying settlement was imminent, admits saying rezoning and subdivision would take many years, and otherwise denies the allegations.

282. Dr Loizou's evidence closely followed his note, the contents of which are referred to below. He was specifically asked whether anything was said about settlement of the purchase at this meeting, and his response was that it was understood, by this point, that settlement was being demanded within the next one or two months, but that he did not recall it being specifically discussed.

285. Mr Tomassi said that Mr Ceravolo reported to this meeting regarding rezoning and said that it was at least 10 years away. He said that Mr Ceravolo had said that settlement was imminent or very close. He had a recollection that he was told it would be on 20 December. He could not recall if the amount required for settlement was discussed. After being led by his counsel, he said the question of penalties had been raised a few times at meetings, but he could not recall at which ones. He said that Dr Loizou tendered his resignation that day but that he and Mr Wilson did not. A resignation of Dr Loizou dated 10 October 1991 is in evidence. Mr Tomassi said he still believed in the development "in his heart" but he wanted to think about the position.

288. Mr Wilson's account of the meeting was that Mr Ceravolo asked who was staying in, said that he had had enough, and said that he was thinking of pulling out himself. He said Dr Loizou resigned at this meeting. He said there was discussion of the proposed rezoning and that his adviser, Mr Allan Freeman, produced newspaper cuttings concerning a study being undertaken by the Werribee City Council. In response to that he said that Mr Ceravolo had said that Werribee were not interested and it would take another 10 years for the rezoning. He said that Mr Ceravolo had said that they still owed the penalties to the Commonwealth of about $600,000 which would have to be paid. Mr Wilson said that he and Mr Tomassi did not resign at the meeting but that they discussed the matter and made the decision to resign pretty soon after.

291. Dr Loizou's note is consistent with a representation having been made that rezoning may take up to 10 years. The note records, however, that what was said was that John Nicol, the officer of the Werribee Council referred to earlier, had stated that the land would not "become rezoned for 10 years +". It seems to me that this is a reference to rezoning for residential use. Dr Loizou's note indicates a representation was made that Mr Perillo had valued the land at between $900,000 and $1,100,000. Dr Loizou's note contains no reference to the payment of interest or penalties. The note contains no express reference to the Commonwealth pressing for settlement, but the note is not inconsistent with that being said or assumed at the meeting. In the note Dr Loizou records himself as saying:

"I feel no matter how hard this thing is pushed, it won't be in time to get better valuation so as to see the purchase through. Therefore, I have no choice but to tender my resignation."

It seems to me that Dr Loizou's note in this respect is consistent with a belief in imminent settlement.

296. Dr Loizou's note records Mr Ceravolo saying he was happy to "pull out" and all the partners agreed in their evidence that that was what he said.

299. Mr Ceravolo's account of the meeting on 10 October 1991 in his evidence in chief was that the meeting was called as a means whereby he could again push for completion of the nomination documents. He agreed that Mr Allan Freeman was present along with the four partners. He described Dr Loizou's notes of the meeting as "pretty accurate". He said that he realised at this meeting that he could not convince the others to sign the nomination documents. He said that he said he would also like to pull out. He did not believe he could not stay on his own. In cross-examination he reiterated that at the meeting of 10 October 1991 he said that he was ready and willing to pull out. He denied saying that interest and penalties of $600,000 were payable. He said that he told the meeting he had been told by Nicol at a meeting on 6 October that it would take a minimum of 10 years to rezone the property. He said that he told his partners what Nicol had told him.

302. In the circumstances, the findings I make as to the representations on 10 October 1991 are as follows:

(a) Mr Ceravolo again referred to Mr Perillo's valuation of the land, which was $900,000 to $1.2M;

(b) Mr Ceravolo either said that settlement with the Commonwealth was imminent and that the partners would have to find the money to enable settlement to occur, or did not say anything to alter the previous representations he had made to that effect and which the plaintiff partners continued to believe;

(c) Mr Ceravolo said that Mr Nicol from the Werribee Council had said it would take a minimum of 10 years to rezone the land, the reference to rezoning being, and being understood to be, a reference to rezoning for residential use;

(d) I cannot find that Mr Ceravolo made a representation that the Commonwealth required payment of interest and penalties of $600,000. There is no reference to any such representation in the detailed notes that Dr Loizou took.

Events after 10 October 1991

308. As referred to earlier, Frank J Sagaria, Italia & Co had written letters dated 3 October 1991 to each of the partners and to their wives and family trust companies. The letters referred to instructions obtained from the respective addressees and referred to or enclosed documents said to have been prepared on those instructions. The documents were documents necessary to, or considered to be desirable for the purpose of, nomination of Derrimut Enterprise Pty Ltd. On 7 November 1991, Frank J Sagaria, Italia & Co wrote letters addressed to the three plaintiff partners. These letters were expressly written on behalf of Mr Ceravolo alone. They referred to the letter of 3 October 1991 sent respectively to each of the three partners, and then asserted that the failure to execute the documents enclosed "constitutes a breach of the Agreement made with our client. Our client accepts your breach as a repudiation of the Agreement". The reference to "our client" can only be a reference to Mr Ceravolo. The letter continues: "Our client will shortly be called upon to settle under the Contract with the Commonwealth." The letter then makes a demand for payment of a liability which it said that each partner had to meet expenses incurred. The letter concluded by noting each partner's intention to resign as a director and shareholder of Derrimut Enterprise Pty Ltd. It is noteworthy that the letter made no attempt to require, nor did it request, that the nomination documents be executed.

311. On 11 November 1991, Mr Wilson and Mr Tomassi signed resignations in similar terms to those previously signed by Dr Loizou. Mr Wilson sent a copy of his letter of resignation to the NAB and advised that his responsibility under the guarantee was to be limited to the present debt. On 18 November 1991, the outgoing partners (or in Mr Wilson's case, his representative) met with Mr Stasi, the partnership's accountant, and settled the respective contributions they ought to make in order to meet all the expenses incurred up to 11 November 1991.

314. On 14 November 1991, a meeting occurred at the solicitors firm of Dunhill Madden Butler. Present at the meeting was Mr Ceravolo, Mr Sagaria, and two solicitors from Dunhill Madden Butler, Mr Craig Penn-Tonkin and Mr Bernard O'Shea. A note of the meeting prepared by Mr Sagaria is in evidence. Mr Ceravolo was seeking Dunhill Madden Butler's advice as to, in Mr Sagaria's words, his "whole situation". It seems that at the time of the meeting it was known that Mr Wilson and Dr Loizou were resigning, but it appears not to have been known that Mr Tomassi was also resigning, although the note states that the "indications" were that he was. The note records a need to force the other partners to decide if they were continuing or not, and states that resigning as a director would not mean giving up rights and obligations under the initial agreement. The note records that advice was given confirming that Mr Sagaria's action in writing the letters of 7 November 1991 had been appropriate. The note includes the following entry:

"It was further agreed in discussion with Mark Buckley [a reference to Bartley], Enzo and myself over lunch that they [the outgoing partners] would be put on notice that settlement is required by the Commonwealth and that they were to confirm that they would proceed with the purchase and to confirm within seven days that they have the funds to do so. In practise we did not think that would happen because of the resignation of the two of the Directors of the Company Derrimut Enterprises Pty Ltd and that Albert [a reference to Mr Tomassi] was expected to resign also. It was thought necessary to document that fact so that there would be no fall back on Enzo at a future date, provided also that Enzo was prepared to accept liability to the Commonwealth at a future date under the Contract of 1989."

The note refers to the impending Popovic sale, and in the course of discussing which company ought to be the vendor refers to Derrimut Enterprise Pty Ltd and adds "which, by then hopefully be controlled by Enzo Ceravolo".

319. In late November 1991, the NAB "froze" the overdraft and began querying when the bank might expect clearance.

322. In December 1991 Mr Ceravolo instructed Mr Jerrems at Mallesons Stephen Jaques on his behalf. Mr Jerrems wrote to each of the outgoing partners. The letters were in similar terms to Mr Sagaria's letters of 7 November 1991 and carried a similar message. Acceptance of repudiation was confirmed and Mr Ceravolo's continued liability under the contract of sale to the Commonwealth was referred to. The letter then invited discussions with a view to reaching a commercial solution.

325. In December 1991 the Popovic sale was finalised. Mr Ceravolo and the Commonwealth entered into a deed (dated both 12 and 13 December 1991) pursuant to which Mr Ceravolo nominated his company Crofthill Pty Ltd as transferee of the Popovic land and the Commonwealth agreed to transfer the land for a sum of $70,000. A new contract between the Popovics and Crofthill Pty Ltd was entered into whereby the land was sold for $300,000. The Commonwealth and Crofthill Pty Ltd also entered into a new contract of sale on the same date.

328. On 21 February 1992, Frank J Sagaria, Italia & Co wrote to the solicitor for the Commonwealth, the Australian Government Solicitor. In that letter Mr Ceravolo's solicitors asserted that a reply on the "very important issue" of contamination had not been received, and that Mr Ceravolo's lender would be reluctant to lend money "until this issue has been satisfactorily dealt with". The letter went on to say that the delay caused by the Commonwealth had created a problem between the purchaser and the other partners, and that the partners had "abandoned" the venture, which had "left my client on his own". The letter concluded:

"My client wishes to proceed with the purchase. He will need to re-negotiate the terms and conditions of the Contract. He will need time to re-organise partners for his venture and arrange finance."

The Australian Government Solicitor responded to this letter by a letter of 19 March 1992. This letter "strongly denied" the allegation that delays had been caused by the Commonwealth.

333. At some time prior to April 1992, Mr Wilson, Mr Tomassi and Dr Loizou instructed Mr Roger Jepson at the solicitors' firm Mills Oakley McKay to act on their behalf. Mr Jepson responded to Mallesons' letter to each of the outgoing partners by a facsimile of 1 April 1992 and a letter of 2 April 1992, which was in identical terms. The letter stated that in October 1991 the outgoing partners "considered the project was no longer viable". The letter continued:

"My clients instruct me at that time your client considered that the project was viable and that in those circumstances he considered he would take the project over and deal with it as his own leaving my clients free from any further commitment and liability. My clients accepted that offer."

The letter asserted that the outgoing partners believed that Mr Ceravolo's subsequent conduct had "confirmed his position as being solely responsible for the project".

338. On 11 May 1992, Mr Bartley wrote to the Australian Property Group requesting an urgent meeting to address problems of environmental clearance from the Victorian EPA.

341. On 20 May 1992, the Australian Government Solicitor wrote a letter advising that the Commonwealth "intends to proceed to settlement". The letter gave notification that settlement would take place on 25 September 1992. The letter referred to previous correspondence whereby a minimum of 30 days notice would be given before settlement, and stated:

"In any event due to the long periods of inactivity in this matter the Vendor has allowed you a period of 120 days notice, however, in this regard time is of the essence."

345. Whilst the accounts between the partners had been settled on 18 November 1991, Mr Wilson did not pay his share, as he was not satisfied that the liabilities purportedly occurred on behalf of the partnership represented true liabilities of the partnership. Whilst it was not an issue in the case, Mr Wilson's evidence was that he discovered things in the course of the accounting process that made him reach a poor view of Mr Ceravolo. Mr Wilson and his advisers attempted to obtain information in relation to these matters from the NAB; the NAB was prevented from providing any such information due to the intervention of Mr Ceravolo. At the same time, Mr Ceravolo moved the issue concerning settlement with the Commonwealth into the political arena, engaging the services of a public relations firm and seeking the intervention of various politicians.

348. By July 1992 NAB's patience in relation to the overdraft, which then stood at $44,542.30, was exhausted and demands were made on the guarantors.

351. Representations to the Australian Government Solicitor on behalf of Mr Ceravolo succeeded in obtaining a further delay in settlement until Friday 30 October 1992. By a letter of 11 December 1992, the Commonwealth gave notice to Mr Ceravolo that settlement was set for 12 midday on 13 January 1993. Mr Ceravolo sought discovery from the Commonwealth as a prospective defendant in December 1992. When settlement did not occur on 13 January 1993, the Commonwealth gave a notice of rescission the next day.

354. In August 1992 Mr Ceravolo had engaged yet another firm of solicitors to act on his behalf, Gadens Ridgeway. By letter of 19 August 1992, Gadens Ridgeway wrote to Mills Oakley McKay. The letter referred to the money required to settle, referred to the fall in the value of the land, and sought "proposals your clients have to enable our client to complete the contract". Dr Loizou said in his evidence that he considered this letter was simply a "ploy" to build up a case against the Commonwealth.

357. In 1992 Mr Ceravolo unsuccessfully attempted to on-sell the land at a price below his contract price by approaching the next highest tenderer. Mr Bartley also attempted unsuccessfully to find equity participants in the project on Mr Ceravolo's behalf.

360. In late 1992 the Commonwealth and Mr Ceravolo attempted to negotiate new arrangements to address Mr Ceravolo's concerns and problems. It is not necessary to go into the detail of the complicated proposals that were put by Mr Ceravolo and the Commonwealth in relation to the matter in late 1992. The attempt to renegotiate the contract on terms satisfactory to Mr Ceravolo failed. After the notice of rescission had been given, Mr Ceravolo continued to seek a solution at the political level. Two aspects of these dealings are noteworthy. The first is that in 1992 and 1993 Mr Ceravolo was prepared to resolve the matter with the Commonwealth by returning the land to it. He gave evidence to that effect. The offers put on his behalf in writing never went quite that far, although a Gadens Ridgeway letter of 29 October 1992 in its last paragraph offered something close to that, as did a proposal Mr Ceravolo put to Senator Ray, in a letter written for him by Mr Bartley, on 15 February 1993. The second noteworthy aspect is that the Commonwealth was prepared to concede to Mr Ceravolo an extended settlement date (up to July 1998), and to undertake an obligation to conduct an environmental audit.

363. Whilst Mr Ceravolo continued his attempts to find a political solution to his problem, on 11 June 1993 the Commonwealth issued proceedings against him, seeking a declaration that the contract had been rescinded together with other relief, including interest on the outstanding purchase price. On 6 September 1993 Mr Ceravolo filed a defence and counterclaim. Mr Ceravolo's pleading is significant because in paragraph 8 it was alleged that an agreement had been made with the Commonwealth between 23 November 1990 and 23 September 1991, pursuant to which settlement of the contract of sale was to be postponed until the Commonwealth had provided to Mr Ceravolo "proof of non-contamination of the land". In cross-examination Mr Ceravolo conceded that many of the factual allegations in his defence and counterclaim were untrue.

366. In March 1993 the NAB issued proceedings against the guarantors. By deed of release of 22 December 1994 that proceeding was settled. In commercial terms the settlement involved Mr Wilson paying a lesser amount than his originally calculated contribution to expenses as at 11 November 1991 and Mr Ceravolo making a small additional contribution. Although the proceeding with the NAB was settled, proceedings amongst the guarantors for contribution or indemnity were not. In May 1995 Mr Ceravolo delivered a statement of claim on his contribution claim against the outgoing partners.

369. The outgoing partners read Mr Ceravolo's defence and counterclaim in the Commonwealth proceeding in late 1993. In 1995, on the instructions of the outgoing partners, Mills Oakley Lawyers undertook a property search in relation to Mr Ceravolo. The plaintiff partners were advised of the results by a letter dated 31 May 1995. The search revealed that Mr Ceravolo was still the registered proprietor of his home in Evans Street, Braybrook, his office in Essex Street, Footscray, and his holiday house in Blairgowrie. A number of other properties were referred to which were not in fact associated with Mr Ceravolo.

372. Mr Bartley gave evidence that all attempts to achieve a rezoning solution were unsuccessful until the occurrence of a number of events which dramatically changed the position in the mid 1990s. He said that these events were the replacement of the Werribee Council with Commissioners by the Victorian Government, proposals in late 1994 and early 1995 for the relocation of the Pentridge prison, and a controversial proposal to establish a Jewish cemetery on nearby land in 1995. Mr Bartley said the Commissioners were "business people" who were different in their approach to elected councillors. He said that although attempts to relocate the prison onto the subject land were unsuccessful, a good working relationship with the Commissioners was formed whilst pursuing that proposal and that the prison was relocated immediately opposite the subject land. Finally, he said that a dispute surrounding the establishment of a Jewish cemetery on nearby land enabled the subject land to be used as part of a practical solution to that dispute, whereby the land was rezoned industrial (an outcome assisted by the proximity of the prison) and an area was set aside for the Jewish cemetery. An industrial rezoning did not raise the contamination issues which had earlier been a potential problem with any proposed residential rezoning.

375. The rezoning meant that development and subdivision was now possible. The formalities of the rezoning were completed in early 1997.

378. Mr Ceravolo settled his proceeding with the Commonwealth by terms of settlement dated 30 January 1997. Pursuant to those terms, he was given an extended period in which to settle and was given the capacity to sell off portions of the land prior to final settlement. This settlement was viable for Mr Ceravolo because of the rezoning, which meant the land could be sub-divided and developed for industrial uses.

381. The agreed position between the parties is that all of the land other than 290 acres has now been subdivided and sold, that the entire purchase price has been paid to the Commonwealth, and that Mr Ceravolo now holds the remaining 290 acres unencumbered. In evidence it was suggested the land may be worth $100,000 an acre.

385. In the course of the trial each of the individual plaintiffs gave evidence that until discovery in this proceeding they had not seen the contract of sale with the Popovics, and were unaware of the Popovics' right of nomination. By an amendment made during the course of the trial, this alleged omission was said to constitute a further breach of fiduciary duty by Mr Ceravolo.

388. Save for his evidence concerning Mr Tomassi witnessing a document to which I refer below, Mr Ceravolo agreed that he never brought this special condition to the attention of his partners. On his account of events the condition was never of any significance to him, and he said that he had indeed forgotten about it by October 1991. His evidence was that the idea of Mr Popovic ever taking up this option was "a joke", and he explained that Mr Popovic had a particular interest in the specific parcel of land which he was purchasing (as an enthusiast for military vehicles), and that he was in any event by 1991 terminally ill. Mr Ceravolo claimed in his evidence that Mr Tomassi had been shown either the contract with the Popovics, or a draft of it, and had signed a document of some kind which had attached that contract or draft. The document was called for but not produced. I was given an explanation from the bar table but no evidence was called about the matter. I cannot accept Mr Ceravolo's evidence of disclosure to Mr Tomassi in those circumstances. I do not, however, similarly reject Mr Ceravolo's evidence concerning Mr Popovic. It seems to me that his conduct (and that of Mr Bartley) in 1992 and 1993 suggests that if there had been a viable way out of the purchase without loss to himself through recourse to Mr Popovic then he would have pursued it.

392. My findings on the representations and omissions alleged by the plaintiffs in the amended statement of claim accordingly are as follows:

(a) In relation to the valuation by Mr Perillo, Mr Ceravolo represented that Mr Perillo had valued the land at between $900,000 and $1.2M. This occurred at the meeting on 22 August 1991 (and was either repeated or continued thereafter) and at the meeting on 10 October 1991.

(b) On the issue of contamination and the imminence or otherwise of settlement Mr Ceravolo represented:

(i) on 22 August 1991, that a contamination report was imminent and that the Commonwealth would then be pressing for settlement;

(ii) on 1 October 1991 (and either repeated or continued on 10 October 1991), that settlement was imminent and that in order to settle the partners would need to find $1.7M, meaning $425,000 each;

(iii) on 22 August 1991, if settlement did not occur the deposit would be lost and the Commonwealth would seek to recover its losses on a re-sale.

(c) In relation to the Popovic sale Mr Ceravolo:

(i) represented on 10 September 1991 that the Commonwealth had still not responded in relation to the Popovic sale, that Popovic wanted his deposit back with interest, and that the partners would have to contribute $20,500 each to enable that deposit to be repaid;

(ii) did not advise his partners of the existence of the right of nomination in the Popovic contract;

(iii) represented on 1 October 1991, either himself or through his solicitor Mr Sagaria, that the Popovic transaction had been approved by the Commonwealth and would proceed.

(d) In relation to bank finance, Mr Ceravolo represented on 10 September 1991 that, in his opinion, the previous bank finance would be difficult to obtain and the bank would require personal guarantees.

(e) In relation to zoning, on 10 October 1991 Mr Ceravolo represented that Mr Nicol from the Werribee Council had said it would take a minimum of 10 years to rezone the land, the reference to rezoning being, and being understood to be, a reference to rezoning for residential use.

Disclosure between partners: applicable principles

398. Both counsel cited and relied upon the description of the partnership relationship by Dixon J (as he then was) in Birtchnell v Equity Trustees, Executors & Agency Co Ltd.[13] The partnership relationship is a fiduciary one, and is a fiduciary relationship of the strongest character. It is a relationship of mutual trust and confidence. The subject matter over which the fiduciary obligations of partners extend is to be determined by the character of the venture, and the character of the venture is to be ascertained both from the agreement of the partners and from the course of dealing actually pursued.

401. The individual plaintiffs and Mr Ceravolo were partners. Mr Ceravolo undertook a range of duties on behalf of the partnership for which it was agreed he would be paid and for which he was paid. Those duties included dealings concerning bank finance, and in particular, finance from NAB; dealings concerning the Commonwealth, and in particular, concerning contamination and settlement, interest and penalties; dealings concerning rezoning, and in particular, dealings with the Council of Werribee; and dealings concerning the sale of a portion of the land to the Popovics. The Second Amended Defence filed and served during the trial admitted the fiduciary relationship, admitted that Mr Ceravolo was the project manager, and substantially admitted Mr Ceravolo's duties, although some vestiges of the original denials remained.

404. The pleadings of the parties refer to their arrangement using the expression "joint venture". That term is apposite to describe a partnership, and would also have been apposite to describe the position had Derrimut Enterprise Pty Ltd been nominated in the manner originally envisaged.[14]

407. As a partner, Mr Ceravolo owed a duty to each of his fellow partners to disclose information concerning the partnership's affairs to them. That obligation is fundamental to the relationship and is also provided for in s 32 of the Partnership Act 1958 (Vic).

410. In dealing with the nature of Mr Ceravolo's duty of disclosure, counsel for the plaintiffs submitted that the test to be applied was that set out by Teague J in Hanlon v Brookes.[15] Counsel for the plaintiffs also relied upon Brickenden v London Loan & Savings Co[16] and upon Hill v Rose,[17] amongst other authorities.

413. Counsel for the defendants in his submissions was concerned to emphasise that the scope of fiduciary duties is necessarily limited by the scope of the undertaking. There was no controversy about that matter. Counsel for the defendants also submitted that Mr Ceravolo was under no duty to ascertain the true state of affairs in relation to the various relevant matters and to give advice to the plaintiff partners on those matters. Again, there was no controversy about that. In the course of his oral address, counsel for the defendants accepted that Mr Ceravolo was duty bound to reveal to his partners information which was material and which he knew. Counsel for the defendants accepted that information concerning the availability of finance, the Commonwealth's attitude to settlement and payment of interest and penalties, the question of whether the Popovic sale was proceeding, and the position on zoning, was all material. Counsel for the defendants did not accept that the test postulated by Teague J in Hanlon was correct. He submitted that the High Court decision in Maguire v Makaronis[18] required a reconsideration of Teague J's analysis. Counsel for the defendants submitted that if there had been a breach there needed to be established a "sufficient connection" between that breach and any profit derived, loss sustained, or asset held, before there was an entitlement to a remedy.

416. It seems to me that the applicable principles are as follows:

(a) When dealing with each other, partners, as fiduciaries, must make full and fair disclosure.[19]

(b) Full and fair disclosure requires the fiduciary to disclose all information which he or she has and which is "material". Teague J in Hanlon held that information was material if a reasonable person in the position of the plaintiff would be likely to attach significance to it.[20] In Hill, Tadgell J said the obligation was to "lay bare the essentials" of the matter.[21] In Hanlon, Teague J emphasised that the question is not whether having the information the recipient, or a reasonable person in the recipient's position, would or might have acted differently.[22] Tadgell J in Hill made a similar observation, saying that information is material not because it would or might have caused the plaintiff to act differently, but because it was "essential" to the decision which had to be made.[23] With respect, I do not share Teague J's apprehension that Tadgell J's use of the word "essential" meant that he was more narrowly confining the ambit of disclosure than Teague J considered to be appropriate.[24] In this context it seems to me that Tadgell J was saying a matter is "essential" if it is, using the fifth meaning given in the Macquarie dictionary, "an indispensable element" of, or a "chief point" in relation to, the issue under consideration. In all the circumstances, I adopt Teague J's test of materiality, which, in my view, does not differ from Tadgell J's approach. What must be disclosed is all that is material. What is material is information to which a reasonable person in the recipient's position would be likely to attach significance.

(c) Once a breach of duty is found, issues which may be described as "causation" become relevant. In Brickenden, the Privy Council said that once the court determined that the non-disclosed facts were material, speculation as to what course would have been taken on disclosure is not relevant.[25] The apparent rigour of that view needs to be read in the light of the High Court's analysis of the remedies for breach of fiduciary duty, and the discussion of Brickenden, in Maguire.[26] I do not take the view that Maguire requires a reconsideration of the test of materiality suggested by Teague J, as was submitted by counsel for the defendants. In my view, the relevant aspects of the High Court majority judgment in Maguire are as follows:

(i) Where rescission is sought, there is no causation issue as the right is immediately generated by the breach itself.[27] The facts of each particular case need to be considered, of course, in deciding whether the remedy of rescission is to be granted.

(ii) Where an account of profits, compensation for loss, or a constructive trust is sought, there is a causation issue in the sense that the profit must have been obtained by reason of the fiduciary's position,[28] and the loss must have been suffered by the fiduciary acting in the relevant wrongful way.[29] This is not the same causation issue as arises in the contract or tort context. In this area, the underlying policy of the remedy is to hold fiduciaries to their duties.[30] Notwithstanding this policy, there remains a need to establish a "sufficient connection" between the breach of duty and the profit derived, the loss sustained, or the asset held, where an account of profit, compensation for loss, or a constructive trust is sought.[31]

422. Accordingly, in order to determine if there was a breach of fiduciary duty by Mr Ceravolo, it is necessary to analyse whether the representations which I have found were made were accurate and complete, and to then consider whether any inaccuracy or incompleteness was material, in the sense that a reasonable person in the position of the plaintiff partners would have been likely to attach significance to it. The question of remedies can then be considered if an entitlement is otherwise established, and certain remedies will involve the need to consider whether there is a "sufficient connection" between the subject matter of the remedy and the breach.

Accuracy and completeness of what was represented

427. Mr Ceravolo represented that Mr Perillo had valued the land at between $900,000 and $1.2M. Mr Ceravolo gave evidence that that is what he was told by Mr Perillo at a meeting with him and with Mr Bartley. Mr Bartley gave evidence to the same effect and identified the date of the meeting as being 1 August 1991 by reference to his diary, the relevant extract from which is in evidence. Mr Perillo was not called as a witness. In his final address, Mr Schlicht did not address any submission to this representation, other than a submission that the representation was made. I find that the representation was accurate and complete.

431. I have found that Mr Ceravolo represented to his partners before they decided to leave the venture that a contamination report was imminent on 22 August 1991, and that the Commonwealth was pressing for settlement, and that settlement was imminent on 22 August 1991 and thereafter. I have also found that he represented that if settlement did not occur the deposit would be lost and the Commonwealth would seek to recover its losses.

434. Two aspects of these representations can be dealt with briefly. On 22 August 1991, receipt of a contamination report, being the July ARL report, was imminent. If there had been wrongful default in settlement by the purchaser, the deposit would have been forfeited and the Commonwealth would have been entitled to sue for any losses.

437. The question of the "imminence" of settlement as at October/November 1991 when the individual plaintiffs decided to leave the venture is more difficult. There had been a long period during which the Commonwealth had been content to allow, or had acquiesced in, indefinite delay in the settlement. This delay occurred as a result of matters raised on behalf of the purchaser about possible contamination. The plaintiff partners say these contamination concerns were never more than a "tactic" and had no substance. The evidence suggests otherwise, but accepting that the plaintiff partners have truthfully stated their own state of mind, it can readily be appreciated that they might easily have been persuaded that the "tactic" had run its course. Mr Ceravolo said that the contamination concerns were real, but when in cross-examination he was tested on the factual grounds relied upon to resist the Commonwealth, as subsequently set out in his defence and counterclaim to the Commonwealth proceeding, he was forced to concede that many of the allegations he made against the Commonwealth were groundless. Mr Ceravolo's cross-examination, whilst undermining his credit, fortified the Commonwealth's position. The plaintiff partners knew Mr Ceravolo would continue his resistance to the Commonwealth, however, no one could have anticipated in 1991 that that resistance would achieve a delay of over five more years.

440. Counsel for the plaintiffs relied heavily on the Commonwealth's letter of 4 October 1991 to found a submission that the Commonwealth was not pressing for settlement in October/November 1991. I have set out the relevant terms of that letter above. I agree with counsel for the plaintiffs that the letter indicated that investigations were continuing and that no settlement date had been fixed. Counsel for the plaintiffs also relied on the Commonwealth's letter of 29 August 1990, and the letters of 20 May 1992 when the Commonwealth purported to fix a settlement date in September 1992 and to declare time to be of the essence.

443. Counsel for the plaintiffs submitted that a conclusion that the Commonwealth was not pressing for settlement should be reached "despite" the letter received by Mr Ceravolo on 3 October 1991. I have previously also set out the relevant passages from this letter. It seems to me that the terms of this letter received on 3 October are such that I must reject the submission that Mr Ceravolo's representations about an imminent settlement were inaccurate or incomplete.

446. The letter received on 3 October 1991 enclosed the ARL report which cleared the site of radioactivity contamination. It then referred to the Commonwealth's "exhaustive search of its records ... relating to ... usage" and said "... the final clearance report is imminent." This final clearance report was, as appears from the context, not an expert report but some kind of statement, perhaps an historical statement such as Mr Bartley considered to be necessary to enable EPA and council approval of a residential rezoning. The letter concludes:

". . . would you now please arrange the necessary financial transactions to enable prompt settlement of this protracted sale."

One transaction which needed to be arranged was the nomination of Derrimut Enterprise Pty Ltd. Counsel for the plaintiffs submitted that Mr Ceravolo was asserting urgency so as to persuade the other partners to complete the nomination. This is undoubtedly so, and hardly surprising given Mr Ceravolo's personal exposure. In doing so, he was carrying out what the Commonwealth in the letter received on 3 October 1991 had requested him to do. He was pressing his partners to put in place the arrangements necessary for settlement, a settlement which the Commonwealth expected to be "prompt".

451. It is true, as counsel for the plaintiffs submitted, that the letter received on 3 October 1991 envisaged a further step, being the final clearance report. But that step was said to be "imminent". It is also true, as the plaintiffs' counsel submitted, that no date for settlement was specified by the Commonwealth until May 1992. But that does not alter the way matters stood in October 1991. Then, the Commonwealth asserted that settlement should be "prompt". The outgoing partners knew Mr Ceravolo would continue to fight for delay; the fact that he succeeded beyond any reasonable expectation at the time should not obscure the fact that in the letter received by Mr Ceravolo on 3 October 1991 the Commonwealth maintained that the final step before settlement was "imminent", the Commonwealth asserted that arrangements to enable settlement should be made "now", and the Commonwealth expressed the view that settlement ought to be "prompt".

454. In the circumstances, I do not find Mr Ceravolo's representations as to imminent settlement to have been inaccurate or incomplete.

458. The representations concerning the Popovic sale can be dealt with briefly. No evidence was given on behalf of Mr Ceravolo which would justify the representation I have found was made on 10 September 1991 that the Popovics wanted their deposit back. That matter becomes irrelevant, however, because on 1 October 1991 the plaintiff partners were told the Commonwealth had approved a separate transfer and that the Popovic sale would proceed. This was true. It is what subsequently occurred.

461. The Popovics' right of nomination was never brought to the attention of the plaintiff partners by Mr Ceravolo. I refer to my earlier findings in this respect. The plaintiffs' counsel placed considerable reliance on this omission in his final address. The issue here is not whether the omission occurred, but whether it was material. I will deal with materiality separately.

465. I have found that Mr Ceravolo represented that the previously approved bank finance would be difficult to obtain and that personal guarantees would be required. This representation was a statement of opinion by Mr Ceravolo. In the circumstances, it necessarily involved representations that he believed what he said and that he had grounds for that belief based on his dealings with the NAB. Counsel for the plaintiffs submitted that Mr Ceravolo had breached his fiduciary duty in what he told his partners because the bank had not refused to provide finance. If Mr Ceravolo had represented that the NAB had taken such an unequivocal position, that would have been untrue. That is not what I have found Mr Ceravolo's representation to be, however.

468. The requirement for a new valuation "in today's environment" in the NAB letter of 16 May 1990, the considerably reduced valuation which was obtained in September 1990, the negative attitude that Mr Galante displayed in his meeting with Mr Ceravolo on 10 December 1990, and Mr Galante's evidence as to security and guarantees, in my view, justified the representations made. Indeed, in the circumstances of late 1991, Mr Ceravolo would have been justly criticised for giving anything other than a pessimistic assessment of the NAB's likely attitude to any revised proposal for finance from the partners or their nominee.

472. I have found that on 10 October 1991, Mr Ceravolo represented to his partners that Mr Nicol from the Werribee Council had said it would take a minimum of 10 years to rezone the land. I have found this was intended to be a reference to residential rezoning and was understood as such.

475. I have earlier set out the history of the zoning issue in some detail. For present purposes, the critical facts are these. In November 1990 the land was included in the "proposed residential" area of the Minister's direction entitled the "Werribee Growth Area Plan". At that time this appeared to preclude zoning for industrial purposes. In March 1991 the Department of Planning and Housing advised Mr Bartley that residential expansion was to be incremental, with the subject land "designated for development between the years 2000 and 2015". In September 1991 Mr Nicol advised Mr Bartley that, in his view, residential development of the land at that time was premature. (He subsequently set out his reasons in a letter dated 11 October 1991. They essentially reflect the same view as had been expressed by the Department about "incremental" development.) On 7 October 1991, the Planning and Environment Committee of the Werribee Council met. Its minutes are in evidence. The minutes record that the Committee agreed residential development was premature, would be "out of sequence", and was something the council would not be in favour of as its policy was "incremental growth". Subsequently, on 21 October, the full council confirmed the Committee's recommendation.

478. The circumstances which led to the land's rezoning in late 1996 and early 1997 as industrial and its subsequent development have been set out earlier. There is no suggestion these developments were foreseen, or were foreseeable, in 1991.

481. In final address, counsel for the plaintiffs did not make any submission specifically directed to the zoning representation. In my view, what was said was neither inaccurate nor incomplete in the circumstances.

485. If I had found that Mr Ceravolo had represented to his partners that the Commonwealth was requiring or insisting upon interest and penalties of $600,000, or that such a sum would have to be paid at settlement, that representation, or those representations, would not have been true.

488. If I had found that Mr Ceravolo had represented to his partners that the NAB was insisting upon payment of $32,000 in application and other fees, that representation would not have been true.

491. If I had found that Mr Ceravolo had represented that he had transferred his assets and had nothing to lose, that would have been untrue. If I had found that misrepresentation, the issue of whether equitable relief could have been obtained, based on a misrepresentation that he had undertaken, or would undertake, what seems to me to have been an arrangement to defeat or defraud creditors (see Property Law Act 1958 (Vic) s 172), would have had to be considered.

495. In the circumstances, the only relevant allegation which needs to be analysed to determine whether it was material is Mr Ceravolo's omission to advise his partners of the Popovics' right of nomination. Indeed, as matters transpired, that issue was the only one where materiality was controversial, as the defendant's counsel conceded the materiality of the issues of the bank finance, the valuations, and the imminence of settlement, and counsel for the plaintiffs conceded that the bank fees representations were not material in themselves.

499. Each of the plaintiffs gave evidence that if they had been aware of the Popovic right of nomination they would have taken that into account in determining what they would do. Dr Loizou said that if he had known of the right of nomination in the Popovic contract it would have affected his attitude to the venture in 1989, as it would have been "like a backstop", its significance being that Dr Loizou saw it as Mr Popovic displaying his keenness for the land by the price he was prepared to pay for 7½ acres. Dr Loizou said if he had known of the Popovic right of nomination in 1991 his behaviour would have been different, in that his "first option" in October would have been "to perhaps try and give the parcel over to Mr Popovic". He went on to indicate that "if nothing else" it would have at least meant they recovered their deposit. Mr Tomassi said that if he had known about the Popovic right of nomination that would have been a factor in his decision making in 1991, as that would have given him a "much better feeling" about the position. In cross-examination he said knowledge of the provision would have given him "more comfort ... to carry on". Mr Wilson said in his evidence in chief that knowledge of the Popovic right of nomination would have influenced his decision to resign. He said that if Popovic had purchased the entire property he would have been entitled to get his deposit back, and that he would have thought Popovic would be "very interested", given the price he paid for the 7½ acres. In cross-examination he agreed that he knew nothing of Mr Popovic's personal circumstances, and reiterated that he thought the significance of the Popovic right of nomination was to be found in the price that he had paid for the 7½ acres.

502. I have earlier set out what Mr Ceravolo said about the Popovic right of nomination.

505. It is impossible to test the plaintiffs' evidence against any earlier indication of their attitude to the Popovic right of nomination, because they say that they did not become aware of it until discovery was obtained of the Popovic contract in this proceeding.

508. Notwithstanding what the plaintiffs have said, in my opinion, judged objectively, the Popovic right of nomination was not material in October/November 1991. My reasons are as follows:

(a) The relevant condition gave the Popovics a right. It imposed no obligation on them, and it gave no right of any kind to Mr Ceravolo. Putting it at its highest, its only significance is as an indication that the Popovics saw a right to purchase at $2,500,000 (but no obligation) as an option worth having if Mr Ceravolo did not proceed himself. A right, without an obligation of this kind, represented no risk to the Popovics. Although the issue was not explored in the evidence, it is the kind of provision a solicitor acting for purchasers such as the Popovics might seek, so as to give the clients an alternative if the intermediate transaction (Ceravolo's purchase from the Commonwealth) should fail, without the Popovics necessarily giving any consideration to whether they were in fact interested in the entire land at that price.

(b) Mr Ceravolo's evidence, where he dismissed out of hand the suggestion that the Popovics would ever have entertained the possibility of purchasing the entirety of the land, did not lack credibility in the same way that some of his other evidence did. A conclusion that a Popovic nomination was most unlikely to have ever constituted a realistic possibility is fortified by the considerable decline in the value of the land after 1989, by Mr Ceravolo's unsuccessful attempt to sell the land at a lower price in 1992, and by Mr Bartley's unsuccessful attempts to find equity participants for the project.

514. Viewed objectively, the Popovic right of nomination pales into insignificance compared to the issues which were material in October/November 1991, being the value of the land, the finance needed for settlement, the timing of settlement, the prospects for rezoning and development, and the potential losses the Commonwealth might seek to recover if there was a failure to settle. Even viewed subjectively, the aspect of the transaction which the plaintiff particularly referred to, being the price Popovic was prepared to pay for the portion he was buying, was a matter they did know about.

518. In summary, I have found that the plaintiffs' claim for breach of fiduciary duty fails because:

(a) the evidence does not establish that the representations alleged concerning Commonwealth claims to penalties and interest, concerning bank fees, and concerning Mr Ceravolo's assets were made;

(b) the representations which were made concerning the Perillo valuation, the Commonwealth attitude to settlement, the settlement of the Popovic sale, bank finance, and zoning were not inaccurate or incomplete;

(c) the representation made as to the Popovic sale on 10 September 1991 was false in one respect, but any effect this may have had was removed on 1 October 1991 before any relevant decision was made by the plaintiffs;

(d) the omission to advise the plaintiff partners of the Popovic right of nomination was not material.

524. The claim made for fraudulent misrepresentation fails for the same reasons.

527. Even if the plaintiffs had established one or more of the breaches of fiduciary duty which they allege, their claim in that respect would fail for a further reason, being laches, acquiescence and delay.

531. The three individual plaintiffs were not at one on the issue of when they discovered that they had, to use Dr Loizou's expression, been "duped". Dr Loizou said that he discovered he had been duped in 1995, when the investigation of Mr Ceravolo's real estate holdings by Mills Oakley revealed to him that Mr Ceravolo still owned his home, his office premises, and his holiday house. Dr Loizou said that he did not know that the Commonwealth had not been pressing for settlement or for penalties until seeing documents in the course of discovery in this proceeding. This proceeding was not issued until 10 October 1997. When tackled on this matter in cross-examination, Dr Loizou candidly admitted that he decided to wait to see if Ceravolo was successful in his litigation with the Commonwealth before suing him. When tackled on why there was a delay between what he said was his discovery in 1995 and the time when proceedings were issued, he said:

"... I will tell you what my mind was telling me at the time; I felt very embittered by Mr Ceravolo. I felt that in 1991 he made his decision, he decided to get me out by deception. I wasn't feeling very nice about him. After I found this revelation, I didn't want to jump into the frying pan with him. I started to look after, and I started to look into, what was happening with the property and that was why I instructed my solicitors to find out where the property was standing at."[32]

"I did not feel very nice about Mr Ceravolo at that time, I discovered he had duped me. I didn't feel nice about him. I didn't want to go in and share his losses if he had losses."[33]

The following interchange then occurred with Mr Tsalanidis**:**

So your intention was, "I'm not going to embark upon any litigation while there's a risk that I won't be exposed by joining in it. I'll only do so if Mr Ceravolo were successful"?

After what he did to me I felt that it was poetic justice.

541. Mr Tomassi said that he realised that what Mr Ceravolo had been telling the partners had not been true when he read Mr Ceravolo's defence and counterclaim in the litigation with the Commonwealth in late 1993, and in particular paragraph 8. He said that he realised then the Commonwealth had not been pressing for settlement and that interest did not have to be paid. He said that he instructed Mills Oakley to find out what else was not true, and that, as a result of their investigations, in May 1995 he also found out that Mr Ceravolo still had assets in his name. Mr Tomassi also used the expression that he then realised they had been "duped". He said that at that time he did not instruct proceedings to be taken against Mr Ceravolo because there were still contribution claims on foot between the partners concerning the NAB overdraft, and in particular Mr Ceravolo's claim against the other three partners, and because they changed solicitors. In cross-examination he gave an additional reason, being what he said was the then continuing claim by the NAB against the four partners. As was pointed out to him by counsel for Mr Ceravolo, that could not have been correct, as that claim had been settled in December 1994. Mr Tomassi said he believed he had been "duped" in 1993, or had a good idea that he had, but he was not 100 per cent certain until the property searches in 1995 revealed that Mr Ceravolo had retained his real estate. When asked about his delay Mr Tomassi said, amongst other things, that no one is mad enough to buy into debt.[34]

544. It seems to me that Mr Tomassi also decided that he would wait and see if Mr Ceravolo succeeded in his litigation with the Commonwealth before bringing proceedings against him. Counsel for the defendants submitted that I should conclude Mr Tomassi, like Dr Loizou, decided to stand by and see what the outcome of the litigation with the Commonwealth was before taking these proceedings. I think that is correct.

547. Mr Wilson said that when he saw the results of the Mills Oakley search in 1995, that was "the third thing" that made Mr Ceravolo "a thief, a liar and a cheat". He said the three things were his disagreements with Mr Ceravolo and his disputes with him about the accounts, the fact that in the litigation with the Commonwealth Mr Ceravolo was alleging the Commonwealth had not required settlement and did not require payment of penalties, and finally the fact that he had not transferred his assets. When Mr Wilson was asked why proceedings were not taken between his discovery and October 1997, he said:

"Enzo had proceedings against the Commonwealth so I was waiting, I had the proof now and I was waiting till the time was right, if he won the court case."[35]

Acquiescence, laches and delay: legal principles and application

552. Counsel for the defendants submitted that equity would not permit a plaintiff to stand back and let the defendant run all the risks associated with a venture, and then, only when it was clear that the venture was profitable, make a claim for equitable relief. He relied in this respect on Rule v Jewell;[36] Cushing v Lady Barkly Gold Mining Co;[37] Rowe v Oades;[38] In re Jarvis;[39] and Meagher, Gummow and Lehane's Equity: Doctrines and Remedies.[40]

555. It was submitted on behalf of the plaintiffs that laches ought not to bar them, because there was no evidence of prejudice which was suffered by Mr Ceravolo by reason of their delay. Counsel for the plaintiffs sought to distinguish the cases relied upon by the defendants on the basis that they were, predominantly, mining cases where principles peculiar to the speculative nature of mining undertakings were applicable.

558. The relevant test, in my view, is whether the plaintiffs, by their inaction and standing by, have placed Mr Ceravolo in a situation in which it would now be inequitable and unreasonable if the remedies sought were to be granted.[41]

561. For present purposes, the relevant principle is that where the property in question is a business, or some other asset, which necessarily involves both the possibility of gain and the possibility of loss, the claimant cannot stand by awaiting the outcome. In the words of Knight Bruce LJ in Clegg v Edmondson:

"He should show himself in good time willing to participate in possible loss as well as profit, not play a game in which he alone risks nothing."[42]

565. Clegg v Edmondson was a mining case, but In re Jarvis, where Upjohn J quoted and applied the passage referred to above, was not, and Upjohn J's analysis in this respect was cited with approval by the High Court in Warman International Ltd v Dwyer.[43]

568. It may be true, as counsel for the plaintiffs submitted, that "no sensible person would claim an interest in a venture that was unresolved and had potential for failure". But the fact that the course that the plaintiffs chose was sensible does not mean that they are now to be permitted to claim in equity a share of the profits, or of the property, when they were not prepared to accept the possibility of sharing the losses.

571. In my view, this defence is made out. The plaintiffs did stand by awaiting the outcome. They were not prepared to risk the possibility of loss.

575. A plea relying on the statute of limitation was included in the Second Amended Defence, but was abandoned by counsel for the defendants in final submissions. No substantive submission was put by counsel for the defendants in support of the estoppel plea in paragraphs 35A to 35F of the Second Amended Defence. Counsel's treatment of that plea in his address leads me to treat it as abandoned. I would have rejected it if it had not been abandoned.

579. In view of the findings I have made, it is not necessary to consider the issue of remedies for breach of fiduciary duty. If it had been necessary I would have found that rescission ought not to be granted in this case, as it is not possible to return the parties to the position they were in in 1991. Since then, there has been substantial litigation with the Commonwealth which Mr Ceravolo has conducted alone; extensive amendments to the contract of sale have been made as a result of the settlement of those proceedings; considerable work in relation to rezoning has been conducted by Mr Ceravolo and his consultants, resulting in an eventual rezoning of the land for industrial purposes, development and sub-division of the land; and all of the land, other than 290 acres, has been sold.

582. Insofar as the plaintiffs sought an account of profits, compensation for the loss and a remedy by way of constructive trust over the 290 acres still held, with one exception (referred to below), if they had otherwise established their claims, those remedies would have been available to them, in my view, and I would have sought further submissions from the parties in the light of my reasons.

585. The exception concerns the Popovic omission. If that omission had constituted a breach of fiduciary duty, it could not have formed a proper basis for an account of profit by reference to the entire venture, or a constructive trust over the remaining land. The Popovic omission was not a factor which might have militated towards continuance of the venture, it was a factor which might have militated towards pursuit of an alternative means of exit, via a nomination of the Popovics. Accordingly, had that breach of duty been established, in my view, and subject to hearing further from the parties on the question of remedies, the remedy ought to have been confined to compensation for loss, and the loss would have been modest, being confined to the contributions paid by each of the partners to the deposit. If it had been possible to extricate themselves from their predicament in 1991 through a nomination of the Popovics, the deposit would have been recovered.

588. The plaintiffs' claims are dismissed. I will hear the parties on the question of costs.

[1] In due course amendments in the Second Amended Defence substantially reflected (a) and (b).

[13] [1929] HCA 24; (1929) 42 CLR 384 at 407-408.

[14] See United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1 at 10 and Whywait Pty Ltd v Davison [1997] 1 Qd R 225.

[15] [1996] ATPR 41-523 at 42,715 ("Hanlon"). There was an appeal in Hanlon but not on the issue relevant here.

[16] [1934] 3 DLR 465 ("Brickenden").

[17] [1990] VicRp 13; [1990] VR 129 ("Hill").

[18] [1997] HCA 23; (1997) 188 CLR 449 ("Maguire").

[19] Hill v Rose [1990] VicRp 13; [1990] VR 129 at 141; Hanlon v Brookes [1996] ATPR 41-523 at 42,712.

[20] [1996] ATPR 41-523 at 42,715.

[21] [1990] VicRp 13; [1990] VR 129 at 141.

[22] [1996] ATPR 41-523 at 42,715.

[23] [1990] VicRp 13; [1990] VR 129 at 142.

[24] [1996] ATPR 41-523 at 42,715.

[25] [1934] 3 DLR 465 at 469.

[26] The majority deals with these issues in [1997] HCA 23; (1997) 188 CLR 449 at 467-474.

[27] [1997] HCA 23; (1997) 188 CLR 449 at 467-468, 472.

[28] [1997] HCA 23; (1997) 188 CLR 449 at 468.

[29] [1997] HCA 23; (1997) 188 CLR 449 at 469.

[30] [1997] HCA 23; (1997) 188 CLR 449 at 470.

[31] [1997] HCA 23; (1997) 188 CLR 449 at 468.

[36] (1881) 18 Ch D 660.

[37] [1883] VicLawRp 21; (1883) 9 VLR (E) 108.

[38] [1905] HCA 42; (1905) 3 CLR 73.

[39] [1958] 1 WLR 815.

[41] Lindsay Petroleum Co v Hurd (1874) LR5PC 221 at 239-240 per Lord Selborne LC speaking for the Privy Council; Erlanger v New Sombrero Phosphate Company (1878) 3 App Cas 1218 at 1240-1242 per Lord Cairns LC, and 1279-1280 per Lord Blackburn; and Orr v Ford [1989] HCA 4; (1989) 167 CLR 316 at 341 per Deane J.

[42] [1857] EngR 375; (1857) 8 De GM & G 787 at 814 [1857] EngR 375; (44 ER 593 at 604).

[43] [1995] HCA 18; (1995) 182 CLR 544 at 559.