Multi-Span v Portland

41 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2869/2000 - MULTISPAN CONSTRUCTIONS NO 1 PTY LIMITED & ORS v 14 PORTLAND STREET PTY LIMITED & ORS

Parties and factual background 1 These proceedings involve various disputes surrounding two property development joint ventures, one in Sinclair Street, Wollstonecraft and the other in Sydney, at the corner of Harris Street and Broadway. These are referred to as "the Wollstonecraft venture" and "the Broadway venture" respectively. It is appropriate to begin with a short statement of the parties and their background. 2 The first plaintiff is Multispan Constructions No 1 Pty Limited which I shall call "Multi No 1". The shares in Multi No 1 were, at all material times, owned in equal proportions by two other companies, Multispan Group Pty Ltd (formerly Multispan Constructions Pty Ltd) and SM Plastering Services Pty Limited. I shall refer to those two companies as "Multi Group" and "SM". There was no commonality of ownership between Multi Group and SM. The shares in Multi Group were owned in equal proportions by Stipo Lovrinovic (the second plaintiff) and Vlatko ("John") Rasic (the third plaintiff). The shares in SM were owned in equal proportions by two other companies, one of which was wholly owned by Mark Komadina (the fourth plaintiff) and his wife and the other by Stipo Kasalo (the fifth plaintiff) and his wife. In concept, therefore, half the equity in Multi No 1 was ultimately owned equally between Lovrinovic and Rasic and the other half was ultimately owned equally between Komadina and his wife and Kasalo and his wife. Lovrinovic, Rasic, Komadina and Kosalo were also, at all material times, the directors of Multi No 1. 3 Lovrinovic, Rasic and Komadina owned all the equity of a separate company, Malenia Pty Limited ("Malenia"). Kasalo, the fourth participant in Multi No 1, had no interest in Malenia. 4 Lovrinovic and Rasic first became associated together in business ventures in 1988. In 1996, they undertook a residential property development at Waverton. Komadina and Kasalo had also done business together over a long period. The two pairs became associated in 1996. Lovrinovic and Rasic, who were arranging the purchase of the Wollstonecraft site, asked Komadina to join them in the development venture. He brought Kasalo with him. 5 The first defendant, 14 Portland Street Pty Limited ("Portland") was, at all material times, a family investment company owned and controlled by Joseph Ross, a retired medical practitioner, and his wife. The second defendant, CVC Communications and Technology Pty Limited ("CVC") was a subsidiary of Continental Venture Capital Ltd. John Read was a substantial shareholder in the latter and a director of CVC. The third defendant, Broadway Developments Pty Ltd ("BDL"), was a company the shares in which were owned in equal proportions by CVC (which, as stated, was associated with Read) and another company which was wholly owned by Ross and his wife. Ross and Read, through their corporate interests, had gone into various ventures together. Ross was essentially an investor, while CVC and Read played a more active role of seeking out projects in need of development capital and assessing potential investments. Ross saw Read as a manager of investments. 6 The fifth defendant, St Helens Broadway Pty Ltd ("St Helens") was, at all material times, a company owned and controlled by Ronald Dunkley (the fourth defendant) and his family. They also owned and controlled St Helens Northside Pty Ltd ("Northside"), St Helens Tower Pty Ltd ("Tower") and St Helens (WS) Pty Ltd ("WS"). Dunkley had a background in property development. 7 At the centre of the present controversy is the Wollstonecraft venture constituted by an agreement dated 5 December 1996 and made among Multi No 1, Lovrinovic, Rasic, Komadina, Kasalo, Northside, Dunkley, Multi Group and SM. The purpose of the venture was to develop land in Sinclair Street, Wollstonecraft which Multi No 1 had purchased in October 1996 for $4.1 million. The development involved construction and sale of home units. If one looks beyond corporate entities, the individuals interested in this venture were Lovrinovic, Rasic, Komadina, Kasalo and Dunkley. 8 The Broadway venture was a quite separate joint venture established by agreement dated 24 March 1997 between St Helens and BDL for the purpose of developing the site in the City of Sydney. That site had been acquired by St Helens by exercise of an option granted to it on 16 October 1996 at a price of some $8.1 million. Again looking beyond corporate entities, the principals here were Ross, CVC (or Read) and Dunkley. Before that agreement was entered into, St Helens had agreed to give Malenia an interest in any development of the Broadway site, thus introducing the interests of Lovrinovic, Rasic and Komadina. This was done by heads of agreement dated 13 December 1996, the quid pro quo being a payment of $300,000 by Malenia to St Helens. When the joint venture agreement of 24 March 1997 was concluded, the heads of agreement were varied by an agreement of the same date so that the entitlement of Malenia became an entitlement to twenty per cent of St Helens' interest in the joint venture. In an underlying sense, therefore, the participants were, in terms of individual interests, Ross, CVC (or Read) and Dunkley and, through Malenia, Lovrinovic, Rasic and Komadina. 9 One aspect of the acquisition of the Broadway site by St Helens should be noted as it assumed importance in the matters which became the subject of this litigation. Under the purchase contract, as originally exhibited to the option agreement, certain elements of the consideration were to be satisfied by providing the vendors with title to parts of the re-developed site. To secure its obligation to make those future transfers, the purchaser agreed to grant to the vendors a second registered mortgage "in an amount of $6,350,000" (the first mortgagee being OCBC) and to provide two bank guarantees, one for $3,000,000 and the other for $3,350,000. These arrangements were altered by a "settlement agreement" made on 16 January 1998. The requirement for the $3,000,000 was waived altogether and the requirement for the $3,350,000 was replaced by an arrangement under which a sum of $3,350,000 termed a "security deposit" would be placed with a bank at interest, with a right for the purchaser to reclaim that sum upon arranging for an equivalent bank guarantee to be provided. 10 On 19 August 1997, Portland, CVC, Multi No 1, Dunkley, Lovrinovic, Rasic, Komadina and Kasalo entered into an agreement to obtain further financing for the Wollstonecraft venture. Under that agreement, Portland (associated with Ross) and CVC (associated with Read) agreed to make a loan facility available to Multi No 1 for the purpose of that venture, against the security of a registered second mortgage given by Multi No 1 over the Wollstonecraft site and guarantees given by Dunkley, Lovrinovic, Rasic, Komadina and Kasalo. The "Initial Advance" of $1.6 million was made on or about that date. A first mortgage was already held by Westpac Banking Corporation which had made available a $15 million loan facility for the Wollstonecraft venture. Westpac's mortgage replaced a first mortgage given to St George Bank which had provided the funds to purchase the site. 11 Yet further loan financing for the Wollstonecraft venture was obtained by Multi No 1 under a deed of the same date (19 August 1997) between Sam Zdrilic (the sixth defendant) and Multi No 1. Zdrilic and Komadina were friends of some thirty five years standing. The deed of 19 August 1997 provided for a loan of $1.3 million to Multi No 1 but, because it incorporated a pre-existing debt of $380,000, the facility involved a new advance of only $920,000. A recital to the deed stated that the advance would be made upon the signing of both the deed itself and "the security documents" being "Deeds of Guarantee by" Lovrinovic, Rasic, Komadina, Dunkley and Northside. The recital also said that the advance was to be made upon simultaneous grant by Multi No 1 of "call option over" certain units in the Wollstonecraft venture. A deed of option in respect of those units was entered into on 19 August 1997 between Multi No 1 and Zdrilic, as were five separate deeds whereby payment by Multi No 1 was guaranteed to Zdrilic by each of Lovrinovic, Rasic, Komadina, Dunkley and Northside. 12 Part of the Zdrilic loan proceeds (to the extent of $500,000) was on-lent by Multi No 1 to WS by a loan agreement between Multi No 1 as lender, WS as borrower, Multi Group, SM, Northside and Lovronovic, Rasic, Komadina and Dunkley. Although persons other than the borrower and lender were parties to the agreement, they did not give guarantees. Another part of the loan proceeds received by Multi No 1 from Zdrilic was on-lent to Multi Group under a loan agreement dated 25 August 1997 between Multi No 1 as lender and Multi Group as borrrower, again with SM, Northside, Lovrinovic, Rasic, Komadina and Dunkley as parties but not guarantors. The sum lent was $200,000. 13 On or about 5 May 1998 all the parties to these proceedings (except the sixth and seventh defendants) entered into a deed which caused the affairs of the Wollstonecraft venture and those of the Broadway venture to come into direct contact with one another. That deed was entitled "Deed of Variation" and is referred to in these reasons as "the May 1998 deed". The parties were given the following appellations in the May 1998 deed: Portland and CVC - together "the Lender" Multi No 1 - "the Borrower" Dunkley - "Dunkley" Lovrinovic, Rasic and Komadina - together "The Guarantors" Kasalo - "Kasalo" BDL - "BDL" St Helens Broadway - "St Helens". 14 By the May 1998 deed, CVC (associated with Read) and BDL (associated with Ross and Read) agreed to make an advance of $1 million (referred to as "the Further Advance") to Multi No 1 and St Helens. Clauses 2.1 and 2.2 of the May 1998 deed are of particular importance and should be set out in full: "2.1 Subject to the terms and conditions of this Deed, the Lender and BDL agree to make a further advance to the Borrower and St Helens in the sum of one million dollars ($1,000,000) on the date hereof ('the Further Advance') in the manner agreed by the Lender, BDL and St Helens, the receipt of which is hereby acknowledged. 2.2 The parties each agree that in relation to the Further Advance: (a) the Further Advance is to be used solely by St Helens in relation to the Broadway Project; (b) subject to (c) below, the Further Advance is hereby secured as being part of the Second Mortgage over the Wollstonecraft Project and the Property and thus being guaranteed to the Lender and BDL by each of the Guarantors as provided in the Deed of Loan; (c) simultaneously upon BDL and St Helens varying the Broadway JV to the effect that BDL's interest in the Broadway Joint Venture is bought out and/or the Broadway JV is reformulated to the satisfaction of St Helens and BDL (including the provision by St Helens of the $6,350,000 bond required for the Broadway project with the consequence being the release to BDL of its current $3,350,000 deposit), then the provisions of this Deed of Variation shall have no further force or effect and the Further Advance shall thereafter not form part of any monies advanced or secured by the Borrower, the Property or the Guarantors to either the Lender or BDL as provided herein; (d) subject to any and all other agreements and arrangements between the Borrower, the Guarantors and any related or associated parties thereto, St Helens and Dunkley each indemnify the Borrower and all other Guarantors for any liability and/or exposure to the Lender and/or BDL in respect of the Further Advance (including any interest, costs and damages); (e) if the provisions of clause 2.2(c) apply, all fees and interest payable in respect of this Further advance to either the Lender or BDL shall be governed by the provisions of the Broadway JV and shall not be payable by the Borrower or any of the Guarantors other than Dunkley; (f) if the provisions of clauses 2.2(c) do not apply, all fees, costs, charges and interest payable in respect of the Further Advance (at the rate of 25% per annum calculated daily and compounded monthly) shall be payable by the Borrower; and (g) during the currency of this Deed of Variation, the Borrower is prohibited from drawing down the Second Advance in all circumstances." 15 The genesis of the May 1998 deed should be briefly recounted. BDL (Ross and Read) had invested $5,000,000 in the Broadway venture and Malenia (Lovrinovic, Rasic and Komadina) had invested $390,000. Malenia had invested a further $500,000 into the World Square project to enhance its interest in the Broadway venture. That venture was in a state of some malaise. Pre-sales off the plan had fallen $2,500,000 short of the minimum required to permit draw down of the building finance facility made available by OCBC which, in any event, was not going to be sufficient to complete construction. Abigroup had been contracted to design and construct but required further payment before progressing the design needed to secure building approval from the City Council. It was in these circumstances that Dunkley addressed the need for a further $1,000,000 to enable the project to progress. 16 Solomon gave evidence of discussion among Ross, Read, Dunkley and himself in which the need was considered. Solomon said that Dunkley had come up with the idea of using the existing Portland/CVC mortgage over Wollstonecraft as security for a further advance by those parties to provide the additional funding required for Broadway. An affidavit sworn by Solomon reports the following statement by Dunkley at such a meeting: "If you are prepared to put in the $1 million, I will speak to the boys to see if they will extend your mortgage over Wollstonecraft to cover this advance, subject to the mortgage falling away if we can buy you out of the Broadway JV or renegotiate the Broadway JV to our mutual satisfaction. If they agree, I will get Gavin to draft something up and send it to you."

The reference to "the boys", he explained, is a reference to Lovrinovic, Rasic and Komadina. Evidence of Lovrinovic establishes that Dunkley did raise the matter on or about 20 April 1998 and I am satisfied that Lovrinovic, Komadina and Rasic were aware of it from that time. Rasic played no real part in subsequent events as he left Australia on 24 April 1998 to go to Africa where he was to negotiate an unrelated business venture for himself and colleagues including Lovrinovic. 17 Returning to the May 1998 deed, it will be seen that, although the borrowers in respect of the advance of $1 million were stated to be Multi No 1 and St Helens, it was stipulated that the advance was to be used solely by St Helens in relation to the Broadway project. It was also stated that the advance was "hereby secured as being part of the Second Mortgage over the Wollstonecraft Project and the Property", that being the property at Wollstonecraft of which Multi No 1 was the registered proprietor and which was the subject of the Wollstonecraft project and joint venture agreement. It was also stated that the advance was "thus being guaranteed" to CVC and BDL by each of Lovrinovic, Rasic and Komadina "as provided in the Deed of Loan", that is, the deed of 19 August 1997. There was also a provision involving indemnity by St Helens and Dunkley. 18 The construction and effect of clause 2.2 and, in particular, clause 2.2(c) are matters at the centre of this litigation. 19 The party not so far mentioned is Gavin Solomon (the seventh defendant), a solicitor who, at all material times, was a principal of the firm Solomon Garland Partners which afterwards merged with Gadens. Solomon's firm acted for various of the other parties in various matters, including matters involving the Broadway and Wollstonecraft ventures and the financing of them. Relevant legal work was performed in part by Solomon himself, in part by an employed solicitor Rita Ibrahim who worked as Solomon's assistant and in part by other solicitors in the firm. 20 Solomon's first association with any of the relevant parties appears to have been an association with Dunkley and his companies. Solomon's firm acted for the Dunkley interests when they negotiated the option to purchase the Broadway site in 1996. There was, at that stage, a pre-existing relationship of solicitor and client. During the same period, the firm acted for the Dunkley interests in relation to not only the heads of agreement under which Multi No 1 obtained from Dunkley's interests a promise of participation in the Broadway venture but also the formulation of the Wollstonecraft joint venture agreement. In all those matters, parties other than the Dunkley interests were represented by other solicitors - the Broadway vendors by Mr Downie, the SM interests (Komadina/Kasalo) by Michael Donovan and the Multi Group interests (Rasic/Lovrinovic) by John Shailer who, after Multi 1 had been formed, clearly dealt with Solomon on the footing that he (Shailer) was the solicitor for Multi No 1. The Zdrilic interests were represented first by Michael Taylor and afterwards by Alan Brown. The documents in evidence suggest that Solomon first established a solicitor-client relationship with Multi No 1 in November 1996 when he was retained in connection with the preparation of the construction contract for Wollstonecraft. Shailer continued, after that retainer had been entered into, to represent Multi No 1 in connection with the completion of not only the Wollstonecraft joint venture agreement but also the involvement of Multi No 1 and its principals in the Broadway venture, although there is also evidence that Donovan also represented certain of those interests, as the first draft of the Wollstonecraft joint venture agreement referred to by Solomon was forwarded to both Shailer and Donovan and subsequent correspondence on that aspect passed between Solomon and both those other solicitors until early 1997. 21 When the Broadway joint venture between St Helens and the interests of Portland and CVC was conceived, Solomon acted as solicitor for St Helens. The other parties did not employ a solicitor. Read of CVC conducted negotiations and, in the course of doing so, made detailed comments on a draft joint venture agreement prepared by Solomon, even to the extent of proposing redrafted clauses. 22 There is evidence that, in April 1998 (and specifically on 30 April 1998, a date of particular significance to be discussed presently), Brown was representing the interests of Multi Group, Lovrinovic, Rasic and others (particularly Zdrilic and a Mr Monassa) in the negotiation and documentation of an unrelated transaction. There is also evidence that, at the same time (or, at any rate, in the period surrounding 23 April 1998), Shailer was acting for Lovrinovic, Rasic and others in relation to a proposal involving the Auschina Consultant Economical and Cultural Group. Shailer had previously acted for Lovrinovic and Rasic in relation to a proposed loan from Steenbeck. It was also Shailer who prepared a power of attorney for Rasic in favour of Lovrinovic on 20 April 1998, that is, a few days before the former left for a trip to Africa. Komadina and his company SM had a solicitor-client relationship with Donovan which began in 1996 and was described by Donovan as "ongoing" when he gave evidence on 22 June 2001.

The plaintiffs' claims 23 The plaintiffs' case against all defendants other than the sixth is that they are entitled to a discharge of the mortgage over the Wollstonecraft property upon payment of the total secured by the August 1997 deed and without regard to the further moneys said to have been brought within that security by the May 1998 deed. This entitlement is advanced on several alternative bases, each of which goes to the question whether the May 1998 deed is the source of binding obligations. 24 The plaintiffs' main contention is that clause 2.2(c) of the May 1998 deed has operated to cause the deed to "have no further force or effect" so that the relevant sum of $1,000,000 does "not form part of any moneys advanced or secured by the Borrower, the Property or the Guarantors to either the Lender or BDL as provided herein". That contention is dealt with below under the heading "The May 1998 deed - construction argument". 25 The plaintiffs next say that clauses 2.1 and 2.2 of the May 1998 deed are void for uncertainty. This aspect is dealt with under the heading "The May 1998 deed - uncertainty argument". 26 The plaintiffs' third contention is that the provisions of the May 1998 deed are void because they impose a fetter or clog on Multi No 1's equity to redeem the Wollstonecraft land. This aspect is dealt with under the heading "The May 1998 deed - clog argument". 27 The fourth avenue of attack upon the May 1998 deed or, more precisely, upon the plaintiffs' supposed liability of Multi No 1 for the advance of $1,000,000 and interest thereon is that that advance was never actually made to Multi No 1 - see below "The May 1998 deed - 'no advance' argument". 28 If none of these contentions results in an outcome favourable to the plaintiffs, they say that the May 1998 deed should be set aside because of undue influence. In this part of their case, they allege that a relationship of solicitor and client existed between Solomon and the plaintiffs (or, at least, Multi No 1) at the material time and that a presumption of undue influence on the part of Solomon operated to disentitle Portland, CVC and BDL in such a way that the May 1998 deed cannot be allowed to operate for their benefit. This aspect is dealt with under the heading "The May 1998 deed - presumed undue influence case". 29 In addition to the case based on a presumption of undue influence, the plaintiffs advance a case of actual undue influence and misleading and deceptive conduct within s.42 of the Fair Trading Act 1987 based on representations said to have been made by Solomon on 30 April 1998. These allegations are asserted against both Solomon and Dunkley/St Helens, on the footing that relevant conduct was allegedly engaged in by Solomon as agent of those other parties. These aspects are taken up in the later parts of the judgment, as is the final assertions of the plaintiffs in relation to the May 1998 deed, namely, that it was, when made, unjust for the purposes of the Contracts Review Act 1980 and that the plaintiffs are entitled to be indemnified by Dunkley and St Helens in respect of the further advance under the May 1998 deed. 30 The plaintiffs' case against the sixth defendant, Zdrilic, is not related to the May 1998 deed in any direct sense, although the outcomes in relation to that deed are very relevant to Zdrilic's position as a creditor of Multi No 1 in that his position will be enhanced if the further advance covered by the May 1998 deed is found not to be secured on the Wollstonecraft property. Zdrilic's case concerns the separate loan transaction between Zdrilic as lender and Multi No 1 as borrower. There are questions as to the construction of the loan documents, the amount recoverable by Zdrilic and whether Zdrilic obtained and continues to have an interest in the Wollstonecraft property sufficient to support a caveat under the Real Property Act 1900. These matters are covered under the heading "The Zdrilic aspect".

The May 1998 deed - construction argument 31 The plaintiffs' principal contention is, quite simply, that one of the alternative events upon which clause 2.2(c) is predicated has occurred, with the result that the May 1998 deed no longer operates either to require the further advance of $1,000,000 to be repaid by Multi No 1 (or, in an ancillary sense, by Lovrinovic, Rasic and Komadina) or to cause that further advance to be charged upon the Wollstonecraft property. 32 The first element of this argument is that, in the events which have happened, the Broadway joint venture has been "reformulated" in the way described in clause 2.2(c), that is: "… to the satisfaction of St Helens and BDL (including the provision by St Helens of the $6,350,000 bond required for the Broadway project with the consequence being the release to BDL of it current $3,350,000 deposit)." 33 It is, as I understand it, common ground that a $6.35 million bond of GIO Insurance Pty Ltd was provided by St Helens in substitution for the $3.35 million security deposit and that that deposit was released, with $3 million being returned by BDL to Portland and CVC ($1.5 million each) and $350,000, by a collateral arrangement, being received beneficially by St Helens. This, the plaintiffs say, effected the reformulation to which clause 2.2(c) refers. That contention ascribes a particular meaning to "including" at the start of the words in brackets. According to that meaning, the two events mentioned in the bracketed section - the provision of the $6.35 million bond by St Helens and the consequent release to BDL of the $3.35 million deposit - themselves make up one species of contemplated "reformulation". That result is reached by treating "including" as indicating one instance or example of the reformulation envisaged. Putting this another way, the several possible methods of reformulation to which the clause refers are described as "including", come what may, one particular method which consists wholly of the two events involving the bond and the deposit. 34 I do not accept this construction. It does not afford due weight to at least two aspects of the clause. First, the word "reformulated" must be given its full meaning. According to the New Shorter Oxford Dictionary, 1993, "reformulate" means "Formulate again or differently". It follows that the mere playing out of what is pre-ordained or required by a particular arrangement does not amount to its "reformulation". Having regard to the Broadway joint venture agreement dated 24 March 1997 and an agreement of 16 January 1998 concerning the $3.35 million deposit, the arrangement with the vendor of the Broadway property and among the joint venturers existing at the time of the making of the May 1998 was that the deposit provided by BDL would be released if a bank guarantee was provided. Those steps were, at that stage, pre-ordained in the sense that no new decision making would be necessary to bring them about. It follows that, leaving aside the technicality that GIO is not a bank, the provision of the GIO bond and the release of the deposit to BDL represented a working out or performance of the Broadway joint venture, not some new or different formulation of it. It therefore cannot have been intended that those events alone would amount to the "reformulation" which clause 2.2(c) envisaged. 35 The second difficulty with the construction for which the plaintiffs contend is that it does not accommodate the words "to the satisfaction of St Helens and BDL". Those words indicate, clearly enough, that a reformulation of the necessary kind will not arise unless and until those two parties turn their minds to it and indicate their satisfaction with it. There would be no scope for any such process if the reformulation consisted merely of the two specified and pre-ordained events concerning the bond and the deposit. 36 To my mind, the "including" phrase in the bracketed section of clause 2.2(c) prescribes what might be termed minimum content of the reformulation. It indicates that the elements involving the bond and the deposit are two essential elements of any reformulation, in the sense that the event of reformulation to which clause 2.2(c) refers will not be capable of being seen to have occurred unless at least those elements form part of the reformulation. Beyond that, however, the reformulation will have other elements and the decisive factor will be whether the totality of the elements (including the two made essential) is to the satisfaction of St Helens and BDL. The reformulation reference is thus a reference to those two essential elements plus such others as together cause the Broadway joint venture to take some form which is new or different, compared with its form in May 1998. 37 This construction is consonant with the commercial reality of the situation. Clause 2.2(c) refers to two events. The second is the event of reformulation involving the satisfaction of St Helens and BDL as discussed. The other, which entails no value judgment or assessment of satisfaction, is variation of the Broadway joint venture so that BDL's interest is bought out. A variation entailing buy-out of BDL's interest triggers clause 2.2(c). The parties were thus content to see the clause operate in that situation, whatever the other terms of the variation might be. But in a case of reformulation not involving buy-out, they were not so content. St Helens and BDL were prepared to see the clause operate in such a case if their interests were served by reason of the inclusion of the elements concerning the bond and deposit, but only if they found the additional elements also to their liking.

The May 1998 deed - uncertainty argument 38 The plaintiffs next say that the May 1998 deed is void for uncertainty on one of two bases: that the principal clause dealing with term, repayment, security and liability of borrower and guarantors is unsettled; or that clause 2.2(c), being dependent for its meaning upon the satisfaction of St Helens and BDL, is unacceptably vague. 39 The first contention is at odds with the terms of the document. Recital B to the May 1998 deed refers to the loan arrangement the subject of the deed dated 19 August 1997 (that is, the deed headed "Deed of Loan and Guarantee Wollstonecraft Project"). That 1997 deed is then designated the "Deed of Loan". The property at Wollstonecraft is, by the same recital, designated "the Property". Recital C recites the agreement of Portland and CVC (together, "the Lender") and BDL, at the request of Lovrinovic, Rasic and Komadina ("the Guarantors"), Multi No 1 ("the Borrower") and St Helens "to make a further advance to the Borrower and St Helens as set out herein". The first operative clause, clause 1.1, is as follows: "The terms and definitions contained in the Deed of Loan shall apply to the Deed of Variation." 40 Clause 2 contains the agreement of the Lender and BDL to make "a further advance" of $1 million to the Borrower and St Helens. It is designated "the Further Advance". Clause 2.2(b) provides that: "Subject to (c) below, the Further Advance is hereby secured as being part of the Second Mortgage over the Wollstonecraft Project and the Property and thus being guaranteed to the Lender and BDL by each of the Guarantors as provided in the Deed of Loan." 41 It seems to me clear enough that clauses 1.1 and 2.2(b), read in the context of the references to a "further advance" (that is, an advance additional to or subsequent to some other advance or advances), indicate that the May 1998 deed was intended to be supplemental or collateral to the loan and security documents of August 1997 and that, subject always to the provisions of the May 1998 deed itself concerning that further advance, the provisions of the August 1997 documents would apply. Not only is there a specific provision in clause 2.2(b) tying the Further Advance in as part of the security and guarantee arrangements provided for in the August 1997 deed (which itself, in clause 3, provided for the second mortgage), there is also a statement that the "terms … contained in the Deed of Loan shall apply to this Deed of Variation". 42 The August 1997 deed contained a definition of "Advance" as follows: " 'Advance' means each amount lent to or to be lent by the Lender to the Borrower, and 'Advances' shall have a corresponding meaning (or, where the context permits, the amount for the time being outstanding)."

Provision was then made for the lender to make available a "Loan Facility" consisting of "the Initial Advance together with the Second Advance". For the subsequent deed to refer to "the Further Advance" in the context of a provision of its own importing and making applicable "[t]he terms … contained in" the 1997 deed is consonant with an expression of intention that the provisions of that 1997 deed as to repayment, interest, security and other such matters not expressed in the May 1998 deed should, from the operative date of the that deed, have effect in relation to a "Loan Facility" consisting of not only "the Initial Advance" and "the Second Advance" but also "the Further Advance". 43 There is, however, one factor which militates against thus importing into the May 1998 deed the relevant stipulations of the 1997 deed, namely, the fact that there is not precise correspondence between them as to either parties or roles of parties. BDL is a party to the May 1998 deed but was not a party to the 1997 deed. In addition, Kasalo, although a party to each, played a guaranteeing role in the earlier but not in the later. St Helens was a party to the May 1998 deed but not the 1997 deed. To my mind, these factors do not make it impossible to read the May 1998 deed as deriving meaning and content from the 1997 deed. It is just that the provisions of the latter need some moulding when they are applied to the latter. That does not interfere with sensible application of the parts dealing with repayment, interest, security and the like. And there is nothing fatal about a provision in a contract among A, B and C which imports and relies upon provisions of another contract between A, B and D. 44 One consideration overshadows all others in pointing to the construction of the May 1998 deed I have outlined. We are dealing here with a commercial contract. The parties are property developers and property financiers. Such parties simply do not, as a matter of practice, make and receive loans on indeterminate terms for indeterminate periods. The first questions any such person would ask, either as borrower or as lender, about a loan of a particular amount would be as to repayment regime, interest rate and security. The appropriate approach is therefore that outlined by Barwick CJ (with whom McTiernan J agreed) in Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429: "So long as the language employed by the parties, to use Lord Wright's words in Scammell (G.) and Nephew, Ltd v Ouston (H.C. and J.G.) , [1941] AC 251, is not 'so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention,' the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved." 45 Particularly in light of the inclusion of the cross-references to the 1997 deed, it is by no means impossible to attribute any particular contractual intention to the parties. To the contrary, those cross-references make it clear that they had the intention of bringing the advance of $1 million within the ambit and operation of the 1997 deed in order both to define those terms applicable to that advance which were not stated in the May 1998 deed itself and to cause the security and guarantee created under or pursuant to the 1997 deed to operate also upon that advance. 46 The additional or alternative aspect of the May 1998 deed which the plaintiffs say makes it void for uncertainty is the aspect of clause 2.2(c) which makes its operation dependent on the state of mind of St Helens and BDL - or, more precisely, on reformulation of the Broadway joint venture "to the satisfaction of St Helens and BDL". 47 That submission on the plaintiffs' part must be assessed against principles stated as follows in the judgment of Gibbs CJ in Meehan v Jones (1982) 149 CLR 571: "When the words of a condition state that a contract is subject to finance, or to suitable finance, or to satisfactory finance, the question immediately arises whether the test which is required to be applied is a subjective or an objective one. On the one hand, the contract may be conditional upon the purchaser obtaining finance which he finds sufficient or satisfactory - such finance as he honestly thinks he needs to complete the purchase. On the other hand, the condition may be fulfilled if finance is available which the purchaser ought to find sufficient, or which ought reasonably to satisfy him, even though he honestly, but unreasonably, regards it as insufficient or unsatisfactory. The fact that opinions may differ as to which of these two meanings is given to the words of the clause does not mean that the clause is uncertain. If the Court, in construing the contract, can decide which of the two possible meanings is that which the parties intended, there will be no uncertainty."

Gibbs CJ also said: "It is only if the court is unable to put any definite meaning on the contract that it can be said to be uncertain." 48 Observations in the judgments of Mason, Murphy and Wilson JJ were to the same general effect on the question whether a contractual provision turning upon whether a particular person is satisfied will be regarded as uncertain. 49 In this case, I find no difficulty in deciding what the parties intended when they caused clause 2.2(c) to operate by reference to reformulation "to the satisfaction of St Helens and BBL". They intended that, if any rewriting or revision of the Broadway joint venture were to occur, that rewriting or revision would trigger clause 2.2(c) only if, first, it had the particular characteristics described in the bracketed section (as already discussed) and, second, it was in all other respects considered by the two named parties to be satisfactory in the light of the positions they occupied. That, to my mind, saves the clause from uncertainty. 50 The provision based on the "satisfaction" of St Helens and BDL probably imports a requirement that they act honestly and rationally in coming to their conclusion. It is not necessary in these proceedings to express a final view on that but I would be surprised if that were not the correct construction.

The May 1998 deed - clog argument 51 The plaintiffs contend that clause 2.2(c) is in any event void as a clog on the equity of redemption - presumably the equity of Multi No 1 to redeem under the second mortgage of the Wollstonecraft property given to Portland and CVC pursuant to clause 3 of the 1997 deed. 52 Although this argument was not fully elaborated in submissions, I understood it to be to the effect that the May 1998 deed, by causing the further advance to be secured by the second mortgage along with the earlier advances, had the effect, through clause 2.2(c), of subjecting redemption by Multi No 1 to the contingency of satisfaction on the part of St Helens and BDL with reformulation of the Broadway project. Theoretically, they may never be so satisfied. 53 Any such argument is, to my mind, misconceived. A mortgagor's right to redeem arises upon payment of all moneys secured by the morgage. An impermissible clog or fetter arises if some collateral arrangement seeks to qualify that right so as to compromise the true nature of the mortgage as a security only and to contradict the fundamental proposition "once a mortgage, always a mortgage". Nothing of that kind arises here, whether through clause 2.2(c) or otherwise. If all moneys are paid (including the further advance of May 1998 and interest thereon) a discharge will be forthcoming and nothing in clause 2.2(c) or elsewhere in the May 1998 deed will operate to prevent that result, whatever may be the factual position in relation to the matters covered by clause 2.2(c). The status of the security as a security only is not qualified and the plaintiffs' argument based on fettering or clogging of the equity of redemption cannot be sustained.

The May 1998 deed - "no advance" argument 54 The plaintiffs say that Multi No 1 is not liable to repay the $1,000,000 further advance because Portland/CVC did not advance it to Multi No 1. Again, this contention was not developed in submissions. But the contention does not hold good. On its true construction, the May 1998 deed cast Multi No 1, Lovrinovic, Rasic and Komadina in supporting roles, with the principal actor being St Helens. It was stated by clause 2.2(a) that the further advance was "to be used solely by St Helens in relation to the Broadway project". It may readily be inferred from this that although both Multi No 1 and St Helens were foreseen by clause 2.1 as parties to whom the loan would be advanced, the overriding intention was that St Helens alone would be the recipient of the funds as it was the party by which those funds were to be used. Multi No 1 become an obligor, but without any intent that the money would actually pass physically through its hands. It was seen as merely a constructive recipient of funds destined for St Helens. There is nothing artificial or questionable about that and no reason why the deed should not, in that respect, be accepted as valid.

The May 1998 deed - presumed undue influence case 55 The plaintiffs say that the April 1998 deed should be set aside because Portland, CVC and BDL, the parties benefiting from the participation therein by, in particular, Multi No 1, Lovrinovic, Rasic and Komadina, knew that those other participants did not bring a free will and understanding to bear in deciding to participate, they at that time being overborne in their decision making by actual or presumed exercise in an unconscientious way of a power on the part of Solomon as their solicitor. This part of the judgment deals with presumed undue influence. 56 The relevant equitable principles are explained in Garcia v National Australia Bank Ltd (1998) 194 CLR 395. After referring to the distinction drawn by Dixon J in Yerkey v Jones (1939) 63 CLR 649 between cases of actual undue influence by a husband upon his wife (where "a wife, alive to the nature and effect of the obligation she is undertaking, is procured to become her husband's surety by the exertion by him upon her of undue influence affirmatively established") and cases of presumed undue influence (where the ascendancy of one party over the other raises a presumption that the will of that other has not been freely exercised), Gaudron, McHugh, Gummow and Hayne JJ, referring to the particular case of a guarantee, continued: "Thus, Dixon J was dealing with two kinds of case. In the former, the case of actual undue influence, as Dixon J says, explaining the effect of the document to the surety will not protect the creditor and '[n]othing but independent advice or relief from the ascendancy of her husband over her judgment and will would suffice'. In the latter, '[I]f the creditor takes adequate steps to inform [the wife] and reasonably supposes that she has an adequate comprehension of the obligations she is undertaking and an understanding of the effect of the transaction, the fact that she has failed to grasp some material part of the document, or, indeed, the significance of what she is doing' cannot give her an equity to set the instrument aside." 57 The majority judges then dealt with a submission that principles about unconscionable or unconscientious dealing discussed in Commonwealth v Verwayen (1990) 170 CLR 394 and Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 44 had overtaken the principles in Yerkey v Jones. They continued: "The principles applied in Yerkey v Jones do not depend upon the creditor having, at the time the guarantee is taken, notice of some unconscionable dealing between the husband as borrower and the wife as surety. Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee. It holds, in what we have called the first kind of case, that to enforce that voluntary transaction against her when in fact she did not bring a free will to its execution would be unconscionable. It holds further, in the second kind of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger. And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that: (a) in fact the surety did not understand the purport and effect of the transaction; (b) the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed); (c) the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet (d) the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her." 58 Item (c) in this extract refers to the understanding of the party benefited by the transaction. It makes it clear that that party is to be presumed to understand that undue influence is at work if the party has knowledge of the relevant relationship (in the present case, that of solicitor and client). That notice of the relationship is alone sufficient to sheet home to the party benefited the consequences of undue influence is borne out by subsequent decisions. It is sufficient to refer briefly to two of them, both involving, like Garcia, the relationship of husband and wife. 59 In Commonwealth Bank of Australia v Ridout Nominees Pty Ltd [2000] WASC 37, Wheeler J said: "So far as Dorothy is concerned, in respect of guarantees which she gave in her personal capacity in respect of Ridout Nominees, Cloverdale and Ranleigh, it is appropriate to apply the equitable presumption in favour of wives enunciated in Yerkey v Jones (1939) 63 CLR 649 and subsequently explained by the High Court in Garcia . The only question of notice that arises in such a case is whether the creditor knew at the time of the taking of the guarantee that the surety was then married to the borrower. The principle extends, as in Garcia , to the situation in which the 'borrower' is a company, where the company is effectively under the control of the husband." 60 To the same effect are observations of O'Connor J in Westpac Banking Corporation v Paterson [2001] FCA 556. After noting that the majority in Garcia had held that equity will grant relief to a married woman if she enters into a transaction under the actual undue influence of her husband and misunderstands the nature of the transaction, her Honour continued: "In such a situation, it is not necessary for the lender to have specific notice of the misunderstanding; it is enough that the misunderstanding exists in fact and the lender knows that the surety is a married woman. This is because 'the lender is taken to have understood that, as a wife, the surety may repose trust and confidence in her husband and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife'." 61 If the principles set out in the majority judgment in Garcia are to operate in the present case by reference to some presumed solicitor-client undue influence, it will be necessary to find, first, that Portland, CVC and BDL knew that a relationship of solicitor and client existed between Solomon on the one hand and Multi No 1, Lovrinovic, Rasic and Komadina on the other; and, second, that a relevant misunderstanding on the part of the latter parties existed in fact. 62 There are difficulties with the first of these. When, in August 1997, the original funding arrangements were entered into between Portland/CVC and Multi No 1 (with Lovrinovic, Rasic, Komadina and Kasalo as guarantors), the loan agreement was prepared by Solomon. His firm was nominated in that agreement as the recipient of notices for the borrower and the guarantors. It may be accepted, therefore, that Portland/CVC at that time had grounds to believe, and did believe, that Solomon was the solicitor for those parties. Ross said in cross-examination that he knew Solomon to be Dunkley's solicitor on that transaction. But beliefs held in August 1997 cannot have been held by Portland/CVC at the time they became parties to the May 1998 deed. The evidence shows quite clearly that Read of CVC read closely all drafts of what became the May 1998 deed and that Ross of Portland was content to rely on Read in matters of documentation. Amendments were requested and proposed by Read in several areas. Each such draft contained what was, in the final document, clause 6.3: "The parties acknowledge and agree that Solomon Garland Partners have prepared this Deed and that they only act for St Helens and Dunkley in relation to all matters set forth in this Deed. The parties further acknowledge and that they have each been counselled by Solomon Garland Partners and have sought and received independent legal advice in relation to their individual and joint legal position in relation to the negotiation, drafting and execution of this Deed. Further, each of the parties hereto releases absolutely Solomon Garland Partners in this regard." 63 As Read read closely each succeeding draft containing this clause, he would have seen that, in the particular context, Solomon's firm was not acting for Multi No 1, Lovrinovic, Rasic and Komadina. He would also have read a provision which, upon the deed being executed, would become an acknowledgment by each of those parties that it or he had been counselled by Solomon's firm and had received independent legal advice in relation to the subject matter and execution of the deed. Read's frame of mind would accordingly have been such that he would not have regarded Solomon as the solicitor for any of them. 64 Read was cross-examined about his understanding of who was acting for the counterparties other than the Dunkley interests. The following parts of the cross-examination about clause 6.3 are pertinent: "Q. Did you think that this clause only related to the guarantee part of the document? A. No, I think it related to the parties that weren't St Helen's and Dunkley. Q. So you didn't think, after reading this, that Mr Solomon was acting for, or his firm was acting for, Multi-Span Constructions; is that what you say? A. The first part of this clause states that Solomon Garland Partners -- Q. We can read it, Mr Read. Trust me, we can all read. What is your understanding or what was it when you read this? A. That Solomon Garland acted for Mr Dunkley and his companies. Q. You thought that, did you, that Solomon Garland was not acting for Multi-Span Constructions? A. I would put it in the positive, that Solomon Garland Partners were acting for St Helen's and Dunkley. Q. Who did you think was acting for Multi-Span? A. Again, I reiterate, I didn't put my mind to it. Q. If this caused you, Mr Read, to think about who was acting for whom and you saw that Solomon Garland was acting for St Helen's and Dunkley, then by a matter of elimination, that left one party who was the borrower that wasn't mentioned, didn't it? A. No, it left more than one party. It left the borrower, and the guarantors and the lender. Q. You weren't worried about who was acting for you, did you? A. No. Q. So, who was acting for Multi-Span, in your view, if anybody? A. If anybody, as I say, I didn't turn my mind to it. Q. Who was acting for the guarantors, other than St Helen's and Dunkley? A. Again, I didn't turn my mind to it. It was a matter for those parties. …… Q. So you didn't think, when you signed this or executed the document, you didn't think that Mr Solomon was acting for Multi-Span Constructions; is that what you say? A. That is correct. Q. And are you sure about that? A. Yes. Q. No doubt? A. Not that I am aware of, no. …… Q. Was it your understanding, Mr Read, that Multi-Span Constructions was without legal advice in relation to this document? A. Mr Roberts, that's an incorrect inference from what I said. I said I did not turn my mind to it and secondly, with respect to the second part of clause 6.3, Multi-Span and all parties were counselled to obtain their own advice. Q. How did you know they were counselled to obtain their own advice? A. As in clause 6.3. Q. So you read that as a representation that in fact they had been counselled, including Multi-Span Constructions, who you understood was not represented by Mr Solomon; is that right? A. That's correct, yes. Q. Did you ever ask Mr Solomon who the legal representative was or were who had given this counselling to Multi-Span Constructions and the other guarantors, apart from Helen's and Dunkley? A. To the best of my recollection, no. Q. You trusted Mr Solomon, did you, to carry out the enquiry that is apparently referred to in paragraph 6.4.3, did you? A. No, Mr Roberts. I formed another view that there was no enquiry required because the parties acknowledged they were the parties that were giving up and saying we obtained - I formed the view that clause 6.3 was that the parties had obtained their own legal advice and that thereafter no enquiry would be made. It was upon them to undertake that act." 65 There is not, on the evidence, any basis for concluding that Read and Ross (they being, individually or together, the guiding minds of Portland, CVC and BDL) had, in the period during which the May 1998 deed was developing or when it was executed, any knowledge of a subsisting solicitor-client relationship of the relevant kind beyond that to be inferred from clause 6.3. Ross said in evidence that he knew Solomon was acting for the Dunkley interests in the May 1998 transaction. He said nothing about solicitors for the borrower and guarantors. And Read, clearly enough, was of the view that Solomon was not acting for anyone other than the Dunkley interests. That being the state of mind of both Ross and Read, it is somewhat beside the point to inquire whether a solicitor-client relationship did in reality exist between Solomon and the borrower and guarantors. Even if it did, it was not something of which Ross and Read were at that time on notice. 66 There is, in any event, a question as to whether a basis for the application of principles as to presumed undue influence existed in this case. In their discussion of the presumption in relation to solicitor and client, Meagher, Gummow and Lehane, in "Equity Doctrines and Remedies", 3rd ed (1992), at para 1511(c) refer to eighteen decided cases. Of these, four were decided in the twentieth century, all but one of them before the First World War and the last in 1927. The other fourteen cases were decided before 1900, six (that is, almost half of them) before the Battle of Waterloo. The results in all of these cases were, naturally enough, shaped by the particular circumstances. Without exception, the cases involved natural persons, not corporations. Many involved gifts or other dealings whereby the solicitor gained a benefit at the expense of the client in a way which involved a clear breach of fiduciary duty. It is natural that equity should have intervened in those cases. But one wonders about the utility of those older cases involving individuals as guidance in a case such as the present. 67 More pertinent and instructive, for present purposes, is the decision of the Full Court of the Supreme Court of Victoria in Westmelton (Vic) Pty Ltd v Archer & Shulman [1982] VR 305. That case involved consideration in the modern era of the presumption of undue influence in the context of a solicitor-client relationship where the client was a company. The transaction sought to be impugned was one under which the solicitor agreed to reduce his fees in return for a promise by the client company to pay him a percentage of certain future profits. Starke, Kaye and Fullagar JJ, in a joint judgment, emphasised the importance of ascertaining the facts of each case rather than seeking to distil absolute rules from decided cases. They did so as follows by reference to an example: "It is vitally important in this class of case to ascertain the precise facts of each case which is said to be a case for the application of some such supposed sub-rule, whether the case be one of solicitor and client or not. If a client is pleased with the way a solicitor has carried out his duties of forming a company and setting up some trusts for the client, and gives the solicitor a gift of a house property, of course the presumption applies. But suppose that this very solicitor offers, in rebuttal, proof not only that he was at the time the 25-year-old son of the client, and that at the time there was a strong bond of affection between them, but that the client was also a very successful and experienced Queen's Counsel at the height of his powers. In such a case common sense rebels at the notion that the solicitor fails to rebut the presumption, and loses the house, unless he proves also that he solemnly advised his father to take the advice of another solicitor upon the matter generally and upon the value of houses in particular; and it is not surprising to find that the law in the twentieth century provides little support for this notion. Prima facie the position would be the same even if the Queen's Counsel was not the father of the solicitor." 68 On the particular facts before them, the members of the Full Court found that, because the principals of the client company had "more expertise in commerce and finance than most solicitors would have", the solicitor had no duty to advise that they obtain independent legal advice. Their Honours also said: "But once the Court is satisfied, as the learned trial Judge was, that the solicitors dealt fairly and honestly and openly with a sophisticated and well-informed corporate client, and that the client in fact was in no way relying upon any confidence or expectation of legal advice of that character or of any character, then the Court is entitled to conclude that there was no duty to advise further." 69 Several factors combine, in my opinion, to justify a similar view of matters in this case. Solomon was in no sense a beneficiary of the transaction centred upon the May 1998 deed. In terms of natural persons, the person who benefited most was Dunkley. The additional $1,000,000 provided by Portland/CVC relieved severe financial pressure on the Broadway project. Some $400,000 of the proceeds was paid to St Helens. The remaining $600,000 was paid, via Solomon's trust account, to Abigroup, the builders at Broadway. An attempt was made, on behalf of the plaintiffs, to suggest that Solomon somehow benefited indirectly because he had business interests with Dunkley. While Solomon conceded that he and Dunkley had gone into unrelated business ventures together (he referred to two "small residential townhouse developments"), there was nothing in the evidence to suggest that Solomon stood to gain in any shape or form from the May 1998 deed. This removes immediately one of the main pillars supporting the undue influence principle. 70 It is important to record that Lovrinovic, Rasic and Komadina also benefited in a real and tangible way from the transaction centred upon the May 1998 deed. They too, through Malenia, were effectively joint venturers in the Broadway project and had a very distinct interest in seeing it rescued from a financial predicament. Thus, while they were in a sense burdened from the Wollstonecraft perspective, they accepted the burden in order that they might benefit from the Broadway perspective. 71 It is true that Solomon's firm had a specific and confined solicitor-client relationship with Multi No 1 at the time the April 1998 deed was executed. The firm was acting on "off the plan" sales of units in the Wollstonecraft development. There is no evidence that Solomon's firm was at that time acting for any of Lovrinovic, Komadina and Rasic: to the contrary, there is evidence that they were accustomed to use other solicitors and were in fact using other solicitors in unrelated matters which were then current. Furthermore, Komadina's evidence as to his supposed conversation with Solomon on 30 April 1998 (to be examined more closely later) was to the effect that Solomon had made it clear that he was not acting for any of the individuals in the May 1998 transaction. As will be seen presently, I do not accept that this conversation took place, but Komadina's version may nevertheless be accepted as the most he would wish to have the court believe on the question of who Solomon's client was in the particular matter. 72 As to the transaction involving the April 1998 deed itself, an important question is whether the content of what became clause 6.3 came to the notice of the two Multi No 1 directors to whom was left the task of dealing with the matter, namely, Komadina and Lovrinovic. In the case of Komadina, I am satisfied that he read the document. He must have read and understood it in draft because he knew from a relatively early stage that Kasalo would not consent to be part of it - obviously, because Kasalo, in contrast to Lovrinovic, Komadina and Rasic who were interested in Broadway, had nothing to gain from it. And by reading any of the drafts, he would of necessity have seen what became clause 6.3 so that, despite whatever he may have said to the contrary afterwards, he was aware that Solomon's firm would not be acting for Multi No 1 and its directors in relation to the deed. Furthermore, because Komadina knew that Solomon had created the draft document, he must have known that the statements in that clause about counselling and independent advice were effectively statements by Solomon. 73 All this is borne out and reinforced in relation to Komadina by evidence of Ibrahim as to what passed between her and Komadina on 30 April 1998: "Q. You say in this that you showed Mr Komadina a copy of the deed or the original, or indeed exhibit C. You showed him that, is that right. A. Yes. Q. And you say that he said he knew all about it as Mr Lovrinovic had faxed a copy to him yesterday. Is that right? A. Yes. Q. did you ascertain or ask if that occurred, which copy got faxed to him? A. No. I don't remember asking it. ….. Q. You go on in your file note, 'I pointed out clause 6.3 by which he confirms that SGP acts only for St Helens/Dunkley. He is happy with that clause.' Is that right? A. That's correct. Q. What did you do to point out clause 6.3? A. As with clause 5, I would have directed him to that particular clause and just explained in my own words what that clause meant. Q. You see what 6.3 said, just turn it up in one of those copies that you have got there. You see 6.3, the second sentence commencing, 'The parties further acknowledge' and the word 'and' is there, which presumably shouldn't be there, 'The parties further acknowledge and that they each have been counselled by Solomon Garland Partners and have sought and received independent legal advice in relation to their individual and joint legal position in relation to the negotiation, drafting and execution of this deed.' That's what it says, isn't it? A. Yes. Q. You were familiar with that clause at that time, is that right? A. Yes. Q. Did you counsel Mr Komadina or had you counselled Mr Komadina, Mr Lovrinovic or anybody from Multi-Span Constructions No. 1 in relation to any of those matters? A. I can't remember. Q. Well, if you had, you would remember that, wouldn't you? A. Not necessarily. Q. Miss Ibrahim, you knew full well that neither Mr Komadina nor Mr Lovrinovic nor Multi-Span Constructions had received any legal advice from anybody in relation to this matter, other than your own firm, if any advice was so given as at the time this document was executed, didn't you? A. I didn't turn my mind to it. Q. So the bit that you pointed out to them was the first sentence, was it, 'The parties acknowledge and agree that Solomon Garland Partners have prepared this deed and that they only act for St Helens and Dunkley'. That was the passage that you emphasised; is that right? A. Possibly, but I did direct them to the whole clause. Q. That's what your file note suggests, doesn't it? A. Yes. Q. So you were anxious for them to acknowledge that your firm was only acting for St Helen's and Dunkley; they are the two matters set forth in the deed, is that right? A. Yes. Q. You weren't anxious to point out to them the other matters in there, were you? A. I can't remember." 74 In the case of Lovrinovic, it is clear that he had the same appreciation of Kasalo's position. He said in cross-examination that, some time around 23 April 1998, he "flagged" to Dunkley "the problem that, that Mr Kasalo would probably not, not agree to it or Mark was going to be contacting Mr Kasalo". There follows almost two pages of further cross-examination in which Lovrinovic goes to the extent of making the quite implausible statement that, by becoming party to the May 1998 deed, he was "just doing Mr Dunkley a favour". The reality was eventually extracted: "Q. What was the difference between you and Mr Kasalo? A. There is actually quite a lot of difference. Dunkley and I have been working, or Dunkley and I were more intimate than Mr Kasalo and Mr Dunkley and the other reason is, Mr Kasalo was only involved with one project with Mr Dunkley, whereas I was involved with several projects with Mr Dunkley. Q. And one of those was the Broadway project? A. One of those was the Broadway project. Q. You believed you stood to gain millions of dollars from the Broadway project? A. No, I think, I think about $1.2 million was the absolute - if the project had gone to schedule, which was very, very rare and if the project had returned Mr Dunkley's figures, which was very rare, we would have made a maximum $1.2 million." 75 There was thus an eventual acknowledgment that Lovrinovic himself had an incentive to procure the transaction effected by the May 1998 deed because of his interest in the Broadway project, whereas Kasalo had no equivalent interest. Lovrinovic's appreciation of the effect of the transaction also emerged upon cross-examination: "Q. So when Mr Dunkley said to you: I want a guarantee from Multi-Span Constructions No.1, he told you, didn't he, that what was required was a mortgage that Multi-Span Constructions No.1 would have to give over the Wollstonecraft project? A. No. Q. You say that didn't happen? A. It he didn't say that. He didn't say what is required, what is required is that we give a mortgage here. He did mention there was a further facility, there was an allowance or facility or he was able to draw a million dollars from the Joe Ross facility and he needs Multi-Span and me and us to guarantee that. Q. Because you knew Multi-Span Constructions No.1 had already given a mortgage to Dr Ross? A. Yes. Q. And what Mr Dunkley told you was that Multi-Span could give a guarantee for the extra million dollars? A. Yes." 76 Also pertinent is a later exchange as follows as to a conversation with Dunkley some time before 30 April 1998: "Q. You rang him again? A. Based on, at this point bearing in mind at this point that though you are referring to it as, though you are referring to it as a deed of variation, at this instance or this moment in time, it wasn't a deed of variation, it was a guarantee, Mr Dunkley was the borrower and we were guaranteeing the loan for him, so that's what I agreed to do at this instance in time and there was no more and no less to that. Q. And he had told you that part of the proposal was security over Wollstonecraft? A. Yes. Q. A couple of days later you rang him back and you told him so far as you were concerned, you agreed? A. Yes." 77 There was also evidence from Lovrinovic as to whether he had read drafts of what became the May 1998 deed which he conceded with apparent reluctance had reached him by fax in the days before 30 April 1998: "Q. I suggest to you that on 24 April you got the fax cover sheet, together with five pages of the typescript deed of variation that appears as annexure D, the page starting with No. 29 without the handwriting? A. Okay, yes. Q. You accept that that happened? A. I accept that it is more than likely this was received. Q. Would you accept that you read the attachment, that is, the document at page 29 and following? A. I couldn't say it is likely that I read the document. Q. Is there any particular reason why you would not have read it? A. One particular reason may be, one particular reason was time, and another particular reason, which was my normal course of business, was to pick up any, pick up these matters when I am with my lawyer, to pick up these matters with my lawyer, when I am with my lawyer. I didn't spend any time scrutinising documents by myself. They would always be scrutinised with the appropriate legal person at the same instance. That was also a time issue as well as just a normal course of business for myself." 78 The implausibility of this is borne out by other evidence of Lovrinovic. Far from being a neophyte who did not scrutinise lending and financing documents by himself and needed a lawyer on hand to do so, he was an author of such documents. There was in evidence a document which Lovrinovic himself prepared, addressed to "Andrew and Linda" and dated 18 May 1998. It is on the letterhead of Multi Group and bears an impression of the common seal of that company next to Lovrinovic's signature and the words, "Steve Lovrinovic, Managing Director". The content is as follows: " Re: $20,000 LOAN TO MULTI-SPAN GROUP P/L Dear Andrew & Linda This letter is an acknowledgment of a loan arranged by me (Steve Lovrinovic) on behalf of Multi-Span Group P/L. We had agreed on: (1) A $20,000 loan (2) 50% interest (3) At this point a maximum term of 12 mths. As promised I personally take responsibility for this transaction & promise to return the money & interest safely."

79 It may readily be inferred from this that Lovrinovic's confidence in writing documents giving effect to financing transactions would have carried over into his reading of such documents. Indeed, there is also evidence that he received, reviewed and commented upon certain letters of demand prepared by other solicitors in another connection at around the same time. 80 In the light of the whole of the evidence on this part of the case, the claim against Solomon based on a presumption of undue influence cannot be sustained. It is true that a limited solicitor-client relationship existed between Solomon's firm and Multi No 1 in the April/May period of 1998. In light of the evidence that other unrelated transactions being pursued by Lovrinovic, Rasic and Komadina at that time were being handled by other solicitors and the absence of evidence of any then subsisting retainer by them of Solomon's firm, the solicitor-client relationship cannot be seen to have extended beyond Multi No 1. Furthermore, I am satisfied that Komadina, a director, was aware of the content of clause 6.3 and of the significance of that content. Lovrinovic, another director, was probably likewise aware. Both had, at the time, solicitors of their own and were reasonably sophisticated operators in the relevant field. Fundamentally, there is no evidence from which any inference may be drawn that Solomon benefited from the May 1998 deed. Those who benefit included Lovrinovic, Rasic and Komadina. Finally, the essential element of the presumed undue influence case based on knowledge of the solicitor-client relationship on the part of the party benefited, being the Portland/CVC/BDL interests, is not made out. Accordingly there is no basis on which I can or should conclude that a presumption of undue influence on the part of Solomon vitiated the May 1998 deed.

The May 1998 deed - actual undue influence and misrepresentation cases 81 The plaintiffs say that their execution of and assent to the May 1998 deed were procured by representations by Solomon that the May 1998 deed was only required for six weeks at which time the Broadway joint venture would be reformulated and that the only property being encumbered under the May 1998 deed was Dunkley's profit share in the Wollstonecraft joint venture. 82 On that basis, the plaintiffs assert against Solomon that he exercised actual undue influence over the plaintiffs and unconscientiously took advantage of their disadvantageous position; also that those representations constituted misleading and deceptive conduct on the part of Solomon for the purpose of s.42 of the Fair Trading Act 1987. The misrepresentation allegation centred upon s.42 of the Fair Trading Act is also levelled at Dunkley and St Helens on the footing that Solomon's supposed representations were made by him as their agent. 83 The statements allegedly made by Solomon which are the foundation of this part of the case against him are said to have been made to Lovrinovic and Komadina at Solomon's office on 30 April 1998, the day on which each of them signed the deed. Four persons were involved in relevant events of that day, disregarding persons whose activities on the day may be relevant to questions as to the whereabouts and movements of the four. The four are Lovrinovic, Komadina, Solomon and Ibrahim. It is necessary to look at their respective accounts in some detail. 84 There is no dispute that one part of the May 1998 deed was signed by Lovrinovic and by Komadina at Solomon's office on 30 April 1998, having previously been signed by Dunkley. Lovrinovic and Komadina signed for themselves as parties and also as officers of Multi No 1, the common seal of which was affixed. Lovrinovic also signed as Rasic's attorney, Rasic having departed for Africa on 24 April 1998. The power of attorney was prepared by Shailer's firm (Atkinson & Vinden) and left by Rasic with them and it was they who faxed it to Ibrahim at Lovrinovic's request for the purpose of the signing. The part of the May 1998 deed thus executed was in due course exchanged for a part executed by each of the other parties, the two being dated 5 May 1998. 85 There is, however, substantial dispute as to who was where at various times on 30 April 1998 and, in particular, as to whether Solomon spoke to either or both of Lovrinovic and Komadina. They say that he spoke to them at his office and that, in the course of so doing, he made the representations upon which their case of actual undue influence and s.42 contravention against Solomon is founded. Solomon denies this, saying that he did not see them at his office on that day. It is therefore necessary to address in some detail the evidence of each of Solomon, Ibrahim, Lovrinovic and Komadina about the events of that day.

30 April 1998 - Lovrinovic's account 86 Lovrinovic's evidence about the events of 30 April 1998 was preceded by statements about having signed an earlier version of the same document at the reception desk in Solomon's office a few days beforehand. This was not mentioned in either of his affidavits and only came up in the witness box. He said that a woman had been present. She gave him the document which he "scrolled through". She saw him sign, there being some suggestion that she may have witnessed his signature. He identified her as a woman who was sitting in court. That woman, Ms Jurd, later gave evidence. She was at the relevant time, and still is, an employee of Solomon's firm. She said she had never seen Lovrinovic sign anything at the reception desk and had never witnessed his signature. She said it was not the firm's practice to have people sign documents in the reception area. 87 Lovrinovic next said that he went back to the office of Solomon's firm a few days later to sign again. He identified the date as 30 April 1998. He said that, on that day, he arrived at 2 pm: "Q. And when do you say it was on 30 April, what time? A. I know that I had arrived at Mr Solomon's office at 2.00pm. Q. How do you know that? A. Because I had a, because I had looked at my watch when I arrived there and I already pre-decided to be there at 2.00pm." 88 There is thus an explicit statement by Lovrinovic that he looked at his watch when he arrived at Solomon's office on 30 April and saw that the time was 2 pm. Later, however, the certainty engendered by a recollection of having looked at his watch evaporated: "Q. Looking back on it now, you can't say with any confidence that it was 2 o'clock rather than 3 or 3.30, can you? A. I can gauge certain occurrences to the best of my ability throughout the day of what occurred. By those gaugeings (as said) I swore to the best of my recollection." 89 Lovrinovic gave evidence of a telephone conversation he said he had with Komadina beforehand arranging for Komadina to go to Solomon's office at the same time as Lovrinovic was to be there. He said that Komadina arrived shortly after he did and that they were then shown by the receptionist to the boardroom where they were joined by Ibrahim. Lovrinovic gave the following evidence about Solomon's supposed attendance at and involvement in the meeting: "The agreement was, at some point during the, at some point during me and Mark being in the room, Mr Gavin Solomon arrived. He was standing at the entrance discussing - Mr Solomon mentioned that, Mr Solomon actually mentioned that the agreement had been altered to allow, the agreement had been altered and that he, he believes that the agreement would be, will be accepted without Mr Kasalo's signature. Mark had asked where Mr Dunkley was. Mr Solomon said he was busy or at a meeting or something like that, and then Mark had, and then Mark had said, 'It would be good or it would be nice if you would explain how this agreement, how this is all supposed to work', and Mr Solomon had explained the funding, the funding arrangements and what the situation was at present with the project and that it was a short, a short period. Then Mr Solomon also then explained that he actually made nothing of this particular sentence, though he was, he was saying it, he said that, he said Mark, 'We will use our best endeavours to get Steve to sign' but in the same, in his manner and in his tone he was implying that that was not really necessary or that Mark was to be seen to be doing this or something like that, and Mr Solomon had left. To the best of my recollection I think he was off to another meeting or another matter. Then the agreement was executed and following that there were contracts for - there were contracts to be exchanged, which were also executed at the meeting. That was -- MEAGHER: Q. Do you say, as you sit in the witness box now, that is your best recollection of the sequence of events? A. Yes. Q. Is there anything you want to add to it in relation to what you say Mr Solomon said or Mr Komadina said? I don't want you to look at your affidavit, Mr Lovrinovic. A. No, to the best of my recollection that is the meeting which occurred." 90 Lovrinovic also said that Solomon had, during the meeting, instructed Ibrahim to make what were referred to at the hearing as "the Kasalo amendments", that is, amendments to exclude Kasalo as a guarantor and to provide that the deed should be operative whether or not executed by Kasalo. He was very firm in his evidence: "Q. You didn't see Mr Solomon on 30 April at all, did you? A. I absolutely did see Mr Solomon on 30 April. Q. And you didn't see Mr Solomon with Mr Komadina and Miss Ibrahim in the conference room on 30 April? A. I definitely did see Mr Solomon on that day and he definitely did originate making changes to the document to suit the removal of Mr Kasalo. Q. You say he definitely made those changes on the 30th? A. Yes, the changes were presented to us on that day." 91 Later in cross-examination, by contrast, Lovrinovic acknowledged having received a draft of the previous day in which the Kasalo amendments had already been made. The cross-examination continued: "Q. Mr Lovrinovic, earlier today you said your recollection was that in the afternoon of 30 April, in the conference room -- A. Yes. Q. - in your presence, Mr Solomon asked Miss Ibrahim to make what were in effect the Kasalo amendments to the deed, didn't you? A. Yes. Q. That was your evidence earlier this morning? A. Yes. Q. Do you accept that that evidence cannot be correct in the light of this document which you received on 29 April? A. Yes, it does seem like the amendment was prepared the day prior." 92 This, coupled with the other inconsistencies identified, casts significant doubt on Lovrinovic's account of events on 30 April and, in particular, those concerning statements as to Solomon's presence and involvement in events of that day. This is compounded by the evidence about telephone calls. 93 A great deal of time was spent in evidence on telephone calls made on 30 April 1998. So far as Lovrinovic was concerned, the evidence concentrated on calls recorded as made from the phone service installed at premises in Castlereagh Street which were Rasic's home and doubled as an office. Lovrinovic used those premises as his working base. There was evidence that other persons also worked from the premises in April 1998. One of them was Monassa who gave evidence. 94 It would be dangerous to conclude that, even though Rasic was then in Africa, all calls made from the Castlereagh Street address during the middle part of 30 April 1998 were made by Lovrinovic or even that all to persons with whom he had an association were made by him. Monassa testified that he also had dealings with some of those persons. Even so, there is one call (important, in terms of its timing) which I am prepared to find was made by Lovrinovic. This is a call made at 2.13 pm to the office phone number of the solicitor Brown and lasting 919 seconds (15 minutes and 19 seconds). Brown gave evidence consistent with his having received a call from Lovrinovic at that time and with its being of that duration. I am also prepared to find that two other calls, one at 2.48 pm (92 seconds) and the other at 3.41 pm (24 seconds) were made by Lovrinovic, given the absence of any evidence of a reason for Monassa (the only other person shown to have been present) to have phoned the destination numbers being, respectively, that of Shailer's firm and that of the sales agent for the Wollstonecraft units. 95 Lovrinovic testified that it took 10 minutes or more to walk from Rasic's Castlereagh Street premises at which he worked to Solomon's office at Skygarden, also in Castlereagh Street. On the balance of probabilities, therefore, I find that Lovrinovic did not arrive at Solomon's office until 3 pm at the earliest, following the phone call of 92 seconds made at 2.48 pm.

30 April 1998 - Komadina's account 96 In the period before and after 30 April 1998, Komadina was working at the GPO site in Martin Place where his company, SM, had a contract relevant to the redevelopment and refurbishment project at that location. He says that when he went to Solomon's office on that day, he expected to sign nothing beyond what he called "exchange papers", that is, a contract for the sale of one of the Wollstonecraft units in respect of which exchange of contracts was approaching. For some time in cross-examination, Komadina maintained that he was generally unaware of the variation transaction and had not seen any draft of the deed. There is, however, evidence of its having been faxed to him and, despite his non-committal replies in cross-examination, I am satisfied that he knew that the purpose of his visit to Solomon's office on 30 April was to execute, as a director of Multi No 1 and personally, a document to obtain for the Dunkley interests and Broadway a further $1 million against Wollstonecraft. 97 Komadina accounted for his movements on 30 April by saying that, as was his normal procedure, he left home and caught a train from Waverton to Wynyard at about 6.30 am and, after buying a coffee, went to his office on the second floor of the GPO site in Martin Place. He says he may have gone down to Martin Place for a few minutes during the day to buy fruit or cigarettes but was otherwise in his office throughout until leaving to go straight to Solomon's office. When he arrived, Lovrinovic was already in the reception area. Ibrahim appeared and took them to the boardroom next door. Solomon appeared in the room within a minute or two. All four persons were then present when the document was signed by Lovrinovic and Komadina. After giving that evidence, Komadina said in cross-examination: "Q. Did Miss Ibrahim talk to you about the deed of variation before you signed it? A. No. Q. Do you say she said nothing to you about that document before you signed it? A. Not to me, no. Q. Did she say anything, to your observation, to Mr Lovrinovic about the document, before you signed it? A. I don't know if she said anything to him. Q. Do you say that the only person who spoke to you about the document, before you signed it, was Mr Solomon? A. No. Q. Who else spoke to you about the document on that occasion, before you signed it? A. Mr Lovrinovic. Q. He spoke about the document in Mr Solomon's presence, did he? A. Yes. Q. What did he say? A. He said something similar to what has been said this morning in regards to Gavin - sorry, Mr Dunkley is trying to raise some more money which will go to the Broadway project. Q. What else do you say he said? A. And I said, 'Well, what's that got to do with us?' and Mr Lovrinovic said something to do with Mr Ross and Mr Dunkley, with their joint venture position, where Dunkley is trying to take Dr Joe Ross out of the joint venture on Broadway and he is going to need some funds to help him do that. Q. Did Mr Lovrinovic say anything else? A. Well, I have sort of questioned him for a while and I said, 'Why are we asked to do this?' Q. And what did he say? A. Well, I think at that stage Gavin Solomon walked in. Then I started questioning Gavin instead of Steve." 98 The statements attributed to Lovrinovic and said to have been made in Solomon's presence are thus seen to be followed by a statement that Solomon walked in subsequently. 99 Komadina also gave evidence that it had originally been planned to go to Solomon's office at 3 pm or 3.30 pm but that he had asked that the appointment be brought forward to 2 pm as it was a pay day and he had to be back at the GPO site to pay his workers as they finished work. He placed his arrival at Solomon's office at 2 pm. Yet there was evidence that his mobile phone, which he said it was his practice to keep with him, was used to make calls from the Chatswood area at 1.30 pm and 1.35 pm. His response, when asked what he had to say about that, was, "I can't recall, I can't remember". Given the distance between Chatswood and the Skygarden in Castlereagh Street Sydney, there is necessarily a significant doubt that Komadina reached Solomon's office as early as 2 pm. 100 Komadina's evidence about the representations made by Solomon on 30 April 1998 was as follows: "Q. You say in your affidavit that Mr Solomon made some statement about the repayment of the money being guaranteed from Mr Dunkley's share of the profits, don't you, or do you say Mr Solomon didn't say something like that? A. He didn't use those terms. He pointed out -- Q. Please. Do you say that he did or didn't say that a million dollars was being guaranteed only against Mr Dunkley's share? A. No. Q. He didn't say that? A. I don't recall that in that detail. Q. Did he say that Mr Dunkley, according to you, needed short term security for only about six weeks? A. Yes. Q. Did he say to you that he wasn't acting for you? A. Yes. Q. Did he say to you he wasn't acting for Mr Lovrinovic, according to you? A. Yes. Q. Did he say to you he wasn't acting for Multi-Span No 1? A. No. Q. Did he say to you that he wasn't acting for Mr Kasalo? A. Yes. Q. Did he say to you he wasn't acting for Mr Rasic? A. Yes."

30 April 1998 - Solomon's account 101 Solomon says he did not see Lovrinovic or Komadina on 30 April 1998. He denies having made the statements on which the actual undue influence and misrepresentation cases are based. His evidence is that he attended a meeting at Bondi Junction on the morning of 30 April 1998 and reached his office at the Skygarden in Castlereagh Street at about noon. Before going out for lunch at about 1 pm (as was his usual practice), he had a conversation with Dunkley and Ibrahim and they all had a conference call with Lovrinovic. After returning from lunch some time before 2 pm, he left his office again to go to a meeting at Ultimo. He remembers the meeting well as it occurred on a day of great commercial significance for the company he was visiting and with which he had a connection. The meeting was fixed for 2.30 pm. In accordance with his usual practice, Solomon diverted his mobile phone to voicemail at the start of the meeting. The phone records show such a diversion at 2.20 pm. Solomon drove to Ultimo, using his car which was parked in the basement of the Skygarden and leaving by the King Street vehicle exit. As the Supreme Court building is at the end of King Street, I think I am entitled to know that that street is (and was in 1998) a one-way street running east. I am also entitled to know that Ultimo is to the west of the Skygarden and that there was a need, therefore, for Solomon to go by a somewhat indirect route. Solomon made that trip frequently by car, he said, and it took about 15 or 20 minutes at that time of day, with about 5 minutes spent in leaving the Skygarden car park, emerging into King Street and then turning into Castlereagh Street before making another turn to head west. By a process of deduction, therefore, Solomon says that he must have left his office to go down to the car park before 2 o'clock, having diverted his mobile phone inside the Ultimo premises at 2.20 pm after arriving there, parking and going to the meeting venue. There is nothing improbable in this account. Solomon's electronic diary record for 30 April 1998 was in evidence. It contains an entry for the meeting at Ultimo, showing it to be followed by another meeting at 4 pm. 102 On the more general question whether he made the alleged representations, the following part of Solomon's cross-examination should be quoted (the period referred to in the first question is the period 23 to 30 April 1998): "Q. Could you answer my question, please? Did you, by word or deed, say or infer to any of the plaintiffs, during that period, that this proposed agreement wouldn't adversely affect their interests? A. No, I didn't say that. Q. You sure? A. No, I didn't say that. Q. Did you ever say to any of the plaintiffs that the loan would only be for a short period or six weeks or something along those lines? A. No. Q. Did Mr Dunkley ever tell you that he told the plaintiffs that it would only be for a short period, six weeks or something along those lines? A. Dunkley expressed to me, I think, in the meeting of 23rd April that we went to before, of his hope that some form of refinancing, be it the GIO loan or whatever, would take place in a very short term. Q. That doesn't answer the question, does it? A. I thought it did. ………. Q. But answer my question, if you wouldn't mind. Had Ron Dunkley told you that as well, that is, it would be for a period of six weeks? A. I have no recollection."

30 April 1998 - Ibrahim's account 103 I turn next to the evidence of Ibrahim as to the events of 30 April 1998. Mr Meagher SC, who appeared for Solomon, put some questions to Ibrahim before she was cross-examined. In the course of doing so, he showed her Solomon's firm's file relevant to the transaction and drew her attention to a post-it note inside the cover saying "Highlight clause 4.3 to Stipo etc". She identified the writing as her own. When asked if she had any recollection of why she had written this, she said: "No. Probably to remind myself to do something."

I have already quoted part of Ibrahim's oral testimony as to what passed between her and Komadina in relation to clause 6.3.

104 Ibrahim testified that, in the morning of 30 April 1998, she made arrangements by telephone separately with Lovrinovic and Komadina for them to come to the Solomon Garland office to sign. The original arrangements, as she recalled them from her file notes, were that Komadina would come at 2 pm and Lovrinovic at 3 or 3.30 pm. 105 Ibrahim could not remember the time at which Lovrinovic and Komadina called at the office or whether they arrived together. Her best recollection is that Komadina arrived first and Lovrinovic afterwards but that they coincided there for a period and that they signed at the same time. Her affidavit also said that Solomon was not present when Komadina signed and that she believed Solomon was not present when Lovrinovic signed; also that "Mr Solomon's only role in that day was in the meeting with myself and Mr Dunkley and the telephone call to Mr Lovrinovic in the morning". It became clear in cross-examination that Ibrahim's first hand recollection of events of 30 April 1998 was not good and that she had relied heavily on her quite detailed file notes in preparing her affidavit.

Observations on credit 106 In view of the differences in the evidence about issues of fact central to events on 30 April 1998, it is appropriate that I record my impressions of the four witnesses whose testimony is important to those issues. 107 Lovrinovic was, to my mind, evasive. He tended to avoid giving answers which were responsive to the questions asked. On several occasions he had to be brought almost by the force of inevitable logic to answers which he had originally sought to avoid. I instance the exchange about why Kasalo was not to be involved in the May 1998 deed, where he began by speaking of lack of personal connection between Dunkley and Kasalo and was brought only with difficulty to the obvious point that Kasalo's lack of ownership in the Broadway project meant that there was a divergence of interests between Kasalo on the one hand and Lovrinovic, Rasic and Komadina on the other. I have already referred to instances in which Lovrinovic changed his evidence. The evidence about telephone calls undermines the credibility of Lovrinovic's account. 108 Komadina had a tendency to remember those things he considered advantageous to his case and to forget others. Significant doubt is thrown over the whole of Komadina's testimony by two matters. The first is his clear and definite evidence as to his movements and whereabouts on 30 April 1998 and his complete inability to account for calls at 1.30 pm and 1.35 pm from the Chatswood area on his mobile phone which he said he took everywhere with him. The second is his admission that when, during 2000, he set up a meeting with Solomon to discuss the subject matter of these proceedings and, without Solomon's knowledge or consent, made both a sound recording and a video recording of the conversation, he was, for his own selfish purposes, deliberately untruthful in some of the things he said to Solomon. Komadina is thus, on his own admission, a person who will resort to untruthfulness if it suits him to do so. 109 Solomon gave evidence in a generally straightforward way. He mentioned on several occasions that he is a solicitor of 23 years' standing. There was nothing in his demeanour or in what he said to suggest that he did not, in general, take seriously his duties as a solicitor. In particular, he was astute to recognise that the May 1998 transaction involved conflict between the interests of Dunkley/St Helens and those of Multi No 1 and its principals and that his firm could not act for both. There is, however, one aspect of Solomon's evidence which caused me some concern. It relates to the question whether solicitors acted for Multi No 1 and its principals in relation to the May 1998 deed and, if so, who. In cross-examination, he began by adhering to an assertion in his affidavit that Atkinson & Vinden, Shailer's firm, acted for those parties. He first made that assertion on 16 May 2000 and based it apparently on a letter in his file from Atkinson & Vinden with a heading "Wollstonecraft Variation, Rasic". This was a belief he had not held on 30 April 1998, having formed it after subsequent perusal of the file. The letter concerned was one with which Atkinson & Vinden had faxed a copy of the power of attorney executed by Rasic in favour of Lovrinovic. His belief in April 1998 was that Donovan was acting: "Q. So, who, if anybody, did you think was acting for Multi-Span Constructions No. 1 as at 30 April 1998? A. Mr Donovan. Q. What did you base that on, please? A. A conversation I had with Mr Komadina on 27th April. Q. To what effect? A. To the effect that the discussion in relation to the Kasalo clause, if I can call it that, and in that conversation, the last part of my conversation with Mr Komadina, was that I confirmed to him that myself - sorry, my firm, Solomon Garland Partners, only acted for Mr Dunkley and his company in relation to the proposed deed of variation, to which Mr Komadina advised me that he always uses Mr Donovan as his personal solicitor and he would continue to. Q. So, your view as to who was acting for Multi-Span Constructions changed between April 1998 and 16 May 2000, is that right? A. That's correct, yes. Q. Have you a paragraph in your affidavit relating to this conversation that you allege? A. I don't understand the question. Q. The conversation that you alleged occurred, by which you formed the view that Mr Donovan was acting, is that referred to in any of your affidavits? A. Yes, it is in my affidavit. Q. Could you turn it up please? A. Yes, page 34, paragraph - it is at the end of 131. Q. This is the paragraph where you say, in a conversation that you say that occurred with Mr Komadina on 27 April, you said: 'I will get Ron to take this up directly with Joe Ross. You should also know that I can only act for Ron Dunkley on this deal. It is not like the original loan from Joe Ross last year. You and Stipo and the boys will need to get your own lawyers involved.' You say Mr Komadina said, 'I understand. I still use Michael Donovan for all my person work'; is that right? A. Yes. Q. You say, do you, that following this alleged conversation you thought that Mr Donovan was acting for Multi-Span Constructions in relation to this so called deed of variation; is that right? A. Yes." 110 Solomon was then cross-examined at some length as to why, if he believed Donovan was acting, he had not sent the draft documents to Donovan and as to the consistency of his firm's direct approaches to Multi No 1 with the conduct rule under the Legal Profession Act 1987 precluding direct communication by a solicitor with the client of another solicitor. Solomon was unable to deal satisfactorily with these points and the likelihood, in my mind, is that in April 1998 he did not really turn his mind at all to the question whether other solicitors were acting for Multi No 1 and its principals, his main concern being the purely negative one of making it clear that his firm was not acting for them and that it was their responsibility to obtain advice elsewhere if they wished to obtain it at all. 111 Ibrahim gave evidence in a frank way. She now has no connection with Solomon or with the plaintiffs (or, for that matter, with anyone else connected with these proceedings), having left Solomon's firm and now occupying an in-house legal position with a communications company. She accordingly has no interest in the outcome of the proceedings from any perspective. Ibrahim had little first-hand recollection of the events of 30 April 1998 which was for her, I think, just another busy day of legal practice. She was, however, able to state conclusions of fact by reference to her contemporary file notes which were methodically prepared and reasonably detailed. She was careful in her evidence and gave considered answers. I have no reservations at all about her credit. 112 Inconsistencies in evidence should be resolved on the footing that Ibrahim's contemporary file notes are very reliable and that her supplementing of them, where she was able to do so, should be accepted; and that the evidence of Ibrahim and Solomon should be preferred to that of Lovrinovic and Komadina.

Findings on events of 30 April 1998 113 I accept that Lovrinovic and Komadina went to Solomon's office on the afternoon of 30 April 1998. It is more probable than not that they were there together, with each having arrived separately. It is also more probable than not that their respective arrivals were after 2 pm rather than at 2 pm. This is because of the evidence on telephone calls involving Komadina's mobile phone and the phone at Lovrinovic's Castlereagh Street premises. I am also satisfied that Ibrahim attended upon both of them, tabled the final form of deed and pointed out to them clause 6.3 and the provision about Kasalo; also that she said something about the general intent and effect of clause 6.3 and the Kasalo provision. These matters are confirmed by her contemporary file note and her statements in cross-examination that she had referred to the Kasalo provision by "pointing and by explaining in my own words what the clause was about" and, in relation to clause 6.3 that "I would have directed him to that particular clause and just explained in my own words what that clause meant". Finally, I find on the balance of probabilities that Solomon was not in the office when Lovrinovic and Komadina arrived there some time after 2 pm, he having left at 2 pm or shortly beforehand to drive to Ultimo where he started a meeting (or a pre-meeting discussion) at 2.20 p.m; that Lovrinovic and Komadina were attended to by Ibrahim alone; and that Solomon did not see them on that afternoon. 114 I therefore conclude that Solomon did not make to Lovrinovic and Komadina the oral statements upon which the actual undue influence and s.42 of the Fair Trading Act cases are based.

The Contracts Review Act case 115 This aspect of the plaintiffs' case was not elaborated in argument. It was merely said that, having regard to the matters in s.9(2) of the Act, the May 1998 deed was unjust and should be set aside; and that s.6 does not apply. 116 It may be said at once that Multi No 1 cannot rely on the Contracts Review Act. It is a corporation to which s.4(2) does not apply, with the result that, by force of s.6(2), it may not be granted relief under the Act. As for Lovrinovic, Rasic and Komadina, there is a threshold question whether s.6(2) denies the availability of relief. That question turns upon whether each of them entered into the May 1998 deed "in the course of or for the purpose of a trade, business or profession carried on by" him, not being a farming undertaking. 117 It may well be the case that an isolated act of a shareholder or director of a company in guaranteeing obligations of the company is not within s.6(2), so far as contracting by the individual is concerned, even though the obligations of the company itself are referable to its trade, business or profession: Australian Bank Ltd v Stokes (1985) 3 NSWLR 174. But that is not the position here. Lovrinovic, Rasic and Komadina were investors and businessmen. They engaged in a number of business activities through a variety of companies of which Multi No 1 was only one. It was a common theme of those activities that they would give personal guarantees, no doubt to enhance the creditworthiness of their corporate vehicles and therefore their prospects of favourable returns from the ventures. There are various instances of this in the evidence. The combination of sustained activity and repetition of transactions justifies a conclusion that the guarantees they gave were given in the course of or for the purpose of their own respective businesses of profitable investment. 118 In any event, a consideration of the factors identified in s.9(2) of the Act as indicative (but by no means conclusive) on the question whether a contract is "unjust" leads me to conclude that, from the perspective of Lovrinovic, Rasic and Komadina, it was not unjust in the sense relevant to the operation of s.7(1). The factors material to my conclusions on presumed undue influence, actual undue influence and s.42 of the Fair Trading Act contribute to this view. Added to that is the telling point, mentioned more than once already, that Lovrinovic, Rasic and Komadina stood to benefit from a resolution of the funding problems holding up progress on the Broadway project. 119 The plaintiffs' case based on the Contracts Review Act is not made out.

The case against Dunkley and St Helens 120 Little has been said to this point about the role of Dunkley. The reality is that it was Dunkley who conceived the idea that the further funding needed for Broadway should be obtained through the existing security over Wollstonecraft. According to Lovrinovic, Dunkley "put on the table" on or about 20 April 1998 a plan to that effect. Dunkley did not give evidence. But if, as Lovrinovic confirmed, the general idea was discussed, it is likely that Lovrinovic and, therefore, Rasic and Komadina understood in an overall way how the security would be structured. 121 The case against Dunkley and St Helens is that, in making the representations upon which the actual undue influence case and the s.42 case are founded, Solomon acted as the agent of Dunkley. In view of my finding that those representations were not made by Solomon, that claim against Dunkley and St Helens cannot succeed. 122 There is, however, an additional matter. The plaintiffs claim an order that they be indemnified by Dunkley and St Helens for any liability or exposure to Portland, CVC and/or BDL in respect of the further advance referred to in the May 1998 deed (including any interest costs and damages). Such indemnity is expressly provided for in clause 2.2(d) "subject to any and all other agreements and arrangements between the Borrower, the Guarantors and any related or associated parties thereto". 123 As no other agreement or arrangement has been asserted, the plaintiffs are entitled to this order.

The Zdrilic aspect 124 The issues concerning Zdrilic are, first, whether Zdrilic has a caveatable interest in the Wollstonecraft property by virtue of the deed of 19 August 1997 between Zdrilic and Multi No 1 (which I shall call the "Zdrilic deed") or associated documentation; second, whether Zdrilic has a caveatable interest independently of the Zdrilic deed; and, third, as to the amount recoverable by Zdrilic in respect of his loan. A caveat in which Zdrilic claimed an estate or interest by virtue of the Zdrilic deed (or, more precisely, the option to purchase given under it) was lodged on or about 27 May 1999 and has not been withdrawn. The plaintiffs seek an order that Zdrilic withdraw that caveat and claim compensation by reason of his failure to do so earlier. The issue of compensation, if it becomes relevant, is to be separately determined in accordance with orders previously made by Bergin J but the question of the propriety of Zdrilic's maintaining his caveat is to be decided by me now. 125 As envisaged by recital B(ii) to the Zdrilic deed, Multi No 1 granted Zdrilic an option to purchase lots 50, 52, 67 and 68 in the Wollstonecraft project, exercisable during the period of 90 days after registration of the strata plan. The option was granted by a separate deed also dated 14 August 1997. Registration of the plan occurred on 23 June 1999. It is not disputed that Zdrilic did not exercise the option within the stipulated period of 90 days. Zdrilic's caveat was based solely upon the option. He claimed "A legal or equitable estate or interest as grantee of an option over the Land". In the space reserved for a description of the facts or instrument giving rise to the estate or interest, there is reference to a deed of 14 August 1997 and its parties followed by a statement that pursuant to the deed "The Registered Proprietor granted to the Caveator certain options over units to be constructed on the Land". The property in respect of which the caveat was lodged was the whole of the Wollstonecraft site. 126 In Forder v Cemcorp Pty Ltd [2001] NSW ConvR 55-966, I had occasion to consider the question whether a person holding an option to purchase a lot in an unregistered strata plan had an estate or interest in the development site as a whole capable of supporting a caveat. I answered that question in the affirmative by particular reference to the decisions in Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140, Re Henderson's Caveat [1998] 1 QdR 632 and Kuper v Keywest Constructions Pty Ltd [1993] WAR 419. There is no need to repeat here the processes of reasoning which led me to that result. It is sufficient to say that the same processes hold good in this case and that Zdrilic should be regarded as having acquired a caveatable interest in the Wollstonecraft site as a whole when he was granted the option to purchase the particular lots which had not then come into existence as distinct items of property. But that interest did not subsist beyond the point where the period available for exercise of the option expired without steps to exercise having been taken. Zdrilic then ceased to hold the estate or interest upon which the caveat was founded. 127 A caveat is not an ambulatory or flexible means of maintaining a blocking position in aid of whatever interest, if any, the caveator may have from time to time. Central to s.74F of the Real Property Act 1900 is the notion that the party lodging a caveat asserts an entitlement to a particular estate or interest and that the caveat prohibits "the recording of any dealing affecting the estate or interest to which the person claims to be entitled". The prohibition is effected through s.74H. The ineffectiveness of a caveat to do more than provide protection, by way of notice, commensurate with the extent of the notified estate or interest is emphasised in decided cases many of which are of long standing and are discussed by John Baalman in "The Drafting of Caveats", (1957) 31 ALJ 17. It is beside the point that the caveator may have some estate or interest capable of supporting a caveat which is not itself claimed in the caveat. This is borne out by the following statement in Ruptash v Zawick (1956) 2 DLR 145 quoted by Baalman: "The purpose of filing a caveat is to give notice of what is claimed by the caveat against the land described. If an unregistered document in fact gives a party thereto more rights than one in a parcel of land and such a party sees fit to file a caveat claiming one only of such rights, it appears to me that any person proposing to deal with the land is entitled to assume that the claim expressed is the only one made. Expressio unius est exclusio alterius ." 128 In In the Marriage of Stevens (1991) 15 FamLR 51, Cohen J of the Family Court of Australia reviewed the provisions of the Real Property Act with respect to caveats and concluded that where some additional interest exists a caveat "can, in effect, be amended by the court". This conclusion followed his Honour's statement as to the general effect of the provisions: "The scheme of the Real property Act 1900, created by the relevant part, which was introduced by the amendments made in 1986, is that it is no longer the case that a caveat will be struck down for technical fault if the caveator has any caveatable interest. The court has power to extend the operation of any caveat lodged, and this extension can be in relation to both time and substance. The wife's case in support of the caveat is not only that she has an equitable interest through her contributions to the property, it also involves a claim that she is the legal titleholder because the husband became the registered proprietor by lodging a transfer on which her signature as transferor was either forged or obtained by duress." 129 To the extent that, by referring to "any" caveatable interest, Cohen J intended to hold that the court may determine that a caveat is properly supported by an interest other than that claimed on its face, he was referring to the way in which he perceived s.74K(2) to operate: "The words 'extend the operation' probably give power to extend the caveat by amendment to permit it to claim any caveatable interest which the court is satisfied the caveator holds." 130 I regret that I am unable to share this view. The jurisdiction under s.74K(2) to extend the operation of a caveat is activated, according to s.74K(1), by service on the caveator of a notice prepared under s.74I(1), s.74I(2) or s.74J(1). The concept of "extending the operation of the caveat" with which those provisions are concerned is identified in s.74I(3)(a) and s.74J(2)(a), that is, extension "for such further period" as the court orders or "until the further order of the Court". The concept is wholly concerned with timing, that is to say the duration of the caveat's operation as distinct from delineation of the field to which the prohibition it produces is to apply or the description of the estate or interest claimed by the caveator. It is true that, in proceedings for the extension of a caveat's operation, any defect in the form of the caveat will be disregarded under s.74L. But that does not mean that some wholly new substratum can be substituted by reference to some estate or interest simply not contemplated by the caveat, whatever its deficiencies of form may be. 131 Having said that, I should refer also to the recent decision of Roberts-Smith J of the Supreme Court of Western Australia in Hayes v O'Sullivan (2001) 27 FamLR 462, where the operation of the very similar provisions of s.138C(2) of the Transfer of Land Act 1893 (WA) was considered. That section sets out the powers of the court upon application made by a caveator following the service of a lapsing notice. His Honour said that s.138C(2) "clearly contemplates the Court extending the operation of a caveat in ways other than merely by extending time" and is "sufficiently wide to enable the Court to extend a caveat on the basis of an arguable interest which is raised on the materials even though the particular interest is not expressly claimed in terms". Section 138C(2)(a)(i) ("may make an order extending the operation of the caveat for such period as is specified in the order") was seen as expressly authorising extension of time while s.138C(2)(a)(ii) was regarded as having "some further and different operation" - an observation I find myself unable to accept in light of the words of s.138C(2)(a)(ii) itself: "may make an order extending the operation of the caveat until the further order of the Court". The word "until" seems to make this, like the New South Wales provision, a wholly time-based provision. In any event, his Honour refused the application to extend the caveat and his observations were obiter. 132 The view of these matters I prefer is that stated by McLelland J in Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) ANZ Conv Rep 334, by reference to Re Spencer (1904) 4 SR (NSW) 471 and Midwarren Estates Pty Ltd v Retek & Stivic [1975] VR 575, that the court has no jurisdiction to make an order for the amendment of the provisions of a caveat defining the interest claimed. If a person who has lodged a caveat claiming a particular estate or interest afterwards comes to enjoy (or, for that matter, already enjoys) some new or different estate or interest in the same land, that person may simply lodge a new caveat based on the separate estate or interest. The effective prohibition upon successive caveats arising under s.74O only operates if the later caveat is in respect of the same estate or interest as is claimed in the earlier caveat and purports to be based on the same facts as that earlier caveat. The conditions are cumulative. 133 Zdrilic ceased to have any entitlement to maintain his caveat after the options on which it was based expired, even if he then had some other interest in the land. It is therefore beside the point for Zdrilic, in attempting to justify his caveat, to seek to eke out from the Zdrilic deed and associated documents some other interest in the land. But even if it were not, Zdrilic's attempts would fail, given their basis. That basis is threefold. First, Zdrilic points to clause 7 of the Zdrilic deed by which Multi No 1 covenanted "not to do any material act which may adversely affect the lender's interest in the property". Second, Zdrilic relies on clause 8 which prescribes an order in which "moneys on the building" are to be repaid. Third, Zdrilic draws attention to the negative provision in clause 10 that the lender "shall not have a right to place a caveat on the title until after registration of the strata". 134 None of these aspects of the Zdrilic deed gives rise to an estate or interest which may properly be the subject of a caveat. Clause 7 does not purport to create "the lender's interest in the property". It is referring, clearly enough, to some interest which exists independently of clause 7 itself. The interest created by the option to purchase granted in conformity with the Zdrilic deed is such an interest and clause 7 makes perfect sense if regarded as referring to that interest. Nor does clause 8 support Zdrilic's contention. A clause stating the order in which different debts representing "outstanding moneys on the building" are to be repaid does not, by any stretch of the imagination, itself cause repayment of any of those debts to be secured upon "the building". Finally, clause 10, like clause 7, is explicable by reference to the estate or interest arising from the option. 135 Zdrilic's claim that the Zdrilic deed, as distinct from the now lapsed purchase option granted pursuant to it, is the continuing source of an estate or interest capable of supporting the particular caveat or, for that matter, any caveat therefore cannot be sustained. 136 The question posed by s.74P of the Real Property Act is whether, when Zdrilic insisted upon maintaining the caveat founded on the option after that option had lapsed, he acted "wrongfully and without reasonable cause". That phrase was considered by the Court of Appeal in Beca Developments Pty Ltd v Idamenco (No 92) Pty Ltd (1990) 21 NSWLR 459 where there was some difference between the approach taken by Clarke JA (with whom Kirby P agreed on this aspect) and that taken by Waddell AJA. The most favourable test, from the caveator's viewpoint, was that preferred by Clarke JA, namely, that, to sustain a claim under s.74P(1)(a) that a caveat has been entered "wrongfully and without reasonable cause", three elements must be established: first, that the caveator did not have a caveatable interest; second, that he did not have an honest belief based on reasonable grounds that he had a caveatable interest; and, third, that the caveator lodged the caveat deliberately to infringe the interest of the registered proprietor or interested person. Translated to the present situation within s.74P(1)(c), the inquiry becomes whether, when withdrawal of the caveat was demanded by Multi No 1, Zdrilic had a caveatable interest, whether he had an honest belief based on reasonable grounds that he had such an interest and whether he maintained the caveat deliberately to infringe the interest of Multi No 1 as registered proprietor. 137 The first question must be answered in the affirmative as to requests for withdrawal made after the expiration of 90 days from 23 June 1999. As to the other two questions, reference should be made to the cross-examination of Zdrilic's solicitor, Brown (the references to "the deed" being references to the Zdrilic deed): "Q. You considered, did you, honestly, that the deed provided that the lender could place a caveat over the title, after perusing the deed, did you? A. I don't know whether the deed itself made specific reference to the lodging of the caveat, but I considered all the matters in the circumstances. Q. Did you consider, whether the deed was operative or no, paragraph 10 of the deed of loan, where it says 'The lender shall not have a right to place a caveat on the title' - did you consider that? A. Until after the strata plan - is that what it says? Q. Yes. A. It also contains a provision saying that Multi-Span won't do anything to detrimentally affect my client's interest. Q. Did you consider paragraph 10 of the deed of loan before advising your client to place a caveat over the title of the whole of the Wollstonecraft loan? A. Yes, I did. Q. And it was your honest belief, you tell this Court, that you thought that a caveat could be placed. Is that what you say? A. In the circumstances, yes. Q. In what circumstances, Mr Brown? A. In the circumstances where we became aware of the fact that Multi-Span had taken, in fact, deposits, which had been taken on sales and used them for their own purposes where they had increased the amount borrowed under the second mortgage to Dr Ross's interests in contravention of the deed of loan; where they had in fact sold at least four units to parties under circumstances which meant that my client's equity, whatever he might have been promised, had been severely eroded and initially the sale to Mr Leven, a Westpac gentleman, had been sold for $83,000, when clearly, when we became aware of it, was also in extra contravention of the promises that had been made to my client under the loan. Q. So you didn't rely on anything in the clause, did you? A. I relied on the circumstances at that time including that -- Q. You didn't rely on anything in that clause, did you? A. I referred to the circumstances. Q. And you see when the caveat was lodged, I am referring to 'the registered proprietor granted to the caveator certain options over the units to be constructed on the land', you knew that that wasn't the reason for placing the caveat over the title, the legal reason, didn't you? A. It was one of the reasons." 138 The message here is twofold: first that the caveat was maintained on the footing that the Zdrilic deed provided some basis for its retention, apart altogether from the estate or interest arising from the options asserted in the caveat (a position which, on any interpretation of the Zdrilic deed, was untenable) and, second, that various actions of Multi No 1 which Zdrilic (or, at least, Brown, the solicitor advising and acting for him) considered to be breaches of the Zdrilic deed or otherwise inimical to the interests of Zdrilic somehow justified a continuing hold over Multi No 1's property as a pressure tactic. And this was so in the face of provisions in both the Zdrilic deed and the separate option deed of the same date by which Zdrilic undertook not to lodge a caveat. In these circumstances, I consider that the second and third elements arising from the analysis made by Clarke JA are present in this case. It follows that, if Multi No 1 has suffered any pecuniary loss that is attributable to Zdrilic's failure to remove the caveat after request, Zdrilic is liable to pay it compensation with respect to that loss. 139 Zdrilic's alternative claim is that, apart altogether from the Zdrilic deed, Multi No 1 agreed to grant him a third ranking mortgage of the Wollstonecraft property or, at all events, is estopped from denying such an agreement. The alleged agreement is said to be constituted both by documents and by oral statements. To the extent that it is in writing and may be susceptible to the effect of s.23C of the Conveyancing Act 1919, the agreement is said to be protected by the principle that lack of writing must be pleaded if the defence is to be raised and that this cannot be done after the conclusion of evidence at the trial: May v Gibson (1970) 92 WN (NSW) 904; Currie v Kennedy (1896) 17 LR (NSW) Eq 28 and Part 15 rule 3 of the Supreme Court Rules. The plaintiffs did not dispute this and I shall proceed on the footing that no issue of lack of writing arises. 140 The occasion of the alleged agreement was provided by the imminence of the originally scheduled repayment date for the Zdrilic loan, namely, 19 February 1999. Initially Lovrinovic and afterwards Komadina took up with Zdrilic the question whether he would grant an extension. There was something of a falling out between Lovrinovic and Zdrilic who made it clear that he was only prepared to speak with Komadina. At that point, Komadina became the main Multi No 1 negotiator with Zdrilic, they having been friends for some thirty five years. 141 It is clear that Zdrilic began pressing for his money in January and February 1999 and went to the extent of serving formal demands and threatening legal action. It is also clear that Multi No 1 could not (or would not) pay and decided to engage Zdrilic in discussion. Zdrilic eventually indicated his willingness to extend the loan term and to accept interest at the rate of 30% rather than 40% per annum. It appears from a letter of 11 February 1999 from Brown to Lovrinovic that the latter may have told the former on the telephone that Multi No 1 would grant a registered third mortgage to Zdrilic to secure borrowings under the Zdrilic deed, and that thus made Zdrilic willing to make those concessions. Further correspondence between them reinforces this. In early April, Brown sent to Hayter (who, Lovrinovic said, was acting for him) and to Donovan (solicitor for Komadina) both a document to create a third ranking mortgage and other security documents, as well as forms of guarantee and a form of deed to amend the Zdrilic deed. 142 On 30 April 1999, Komadina went to Zdrilic's office. While there, he placed his signature on the form of mortgage Brown had prepared. He did so in the space marked for the signature of the secretary of Multi No 1 in the section in which provision was made for the affixing of the common seal of Multi No 1 and for the signatures of a director and secretary. On 4 June 1999, Komadina signed an endorsement "I agree with the above" on a letter from Zdrilic to him dated 3 June 1999. That letter traversed a number of matters relevant to the relationship between Zdrilic and Multi No 1. After referring to the state of the indebtedness of both Multi No 1 and Multi Group to Zdrilic alone and Zdrilic and his wife respectively, the letter said: "Both loans in 1 & 2 above are secured by 'Bristol on Sinclair' Wollstonecraft property (13-17 Sinclair Street)." 143 Later, the letter said: "It should also be noted that some months ago it was agreed that Zdrilic would get a 3rd mortgage over the Wollstonecraft property for all the money owed as per 1 and 2 above. However because Stipo Kasalo was not a guarantor on the Zdrilic loans and because of concerns about Westpac's reaction - nothing happened. Then it was agreed that a 3rd mortgage would be given to at least secure the loan as per No 1 above. That has not been done as most felt it was not necessary due to there being enough value in the project to cover all the money owing as per 1 and 2 above. Some did not like the 40% p.a. interest rate, which Zdrilic later agreed to reduce to 30% p.a. to be in accordance with the existing agreement." 144 By 19 July 1999, however, correspondence between Brown for Zdrilic and Solomon's firm for Multi No 1 (in which the latter sought to negotiate partial withdrawals of the former's caveat to allow sales of units to be completed) had reached a point where Brown outlined certain requirements of Zdrilic and continued: "Our client is prepared to consider a proposal containing the following:- 1. Zdrilic takes a third mortgage behind Westpac and CVC for the full amount owing to him in respect to both Wollstonecraft and World Square. 2 . All units be placed on the market for sale immediately. 3. Zdrilic rank third in priority for the full amount of his loans. 4. Zdrilic be entitled to retain Caveats over units with a market value of at least $4,000,000.00. 5. As an alternative to 3 above, Zdrilic takes a third mortgage for the full debt of approximately $3.1m behind the first to Westpac and the second to CVC for $3.8 mil but to rank in order of priority as follows: 1. Westpac. 2. CVC ($2.5m). 3. Zdrilic ($3.133m approx). 4. CVC ($1.4m)." 145 It is noteworthy that Brown did not assert here an existing agreement by Multi No 1 to give a third mortgage or an existing entitlement of Zdrilic to receive such a mortgage. On the contrary, the taking of such a mortgage was but one element of a series of steps put forward by Brown as a "proposal" his client was "prepared to consider". 146 The letter of 19 July 1999 referred also to a meeting to be held the following day. A letter of 20 July 1999 from Solomon's firm to Brown referred to "our meeting of earlier today" and stated a number of matters as being confirmed. It then concluded: "Please deliver to us the withdrawal of caveat within 24 hours and we will then attend to lodgment of same." 147 There was no reference in that letter of 20 July 1999 to the question of a third mortgage but that question was raised in a response by Brown dated 21 July 1999 which, after dealing with matters concerning withdrawal of caveat, expressed the view that "the meeting held at your office on 20 July was most unsatisfactory" and concluded: "We again repeat our request to let us have a draft agreement dealing with the issues concerning our clients security, as discussed at our recent meeting, as a matter of urgency." 148 By 9 November 1999, however, matters had reached a point where Brown wrote to Solomon's firm complaining of application of funds by Multi No 1 "in total contravention of the agreement of 19 August 1997" and referring to particular aspects. Brown then said: "Our client will agree to the matters set out in paragraph B below provided your clients agree to the matters listed below under paragraph A."

Neither paragraph A nor paragraph B referred to the security question or to any third ranking mortgage. 149 My assessment of these events is that there was never any enforceable agreement by Multi No 1 to grant a third ranking mortgage of Wollstonecraft to Zdrilic and that the conduct of officers and representatives of Multi No 1 was not sufficient to engender in the mind of Zdrilic the kind of expectation necessary to found an estoppel. I am satisfied that both Lovrinovic and Komadina made generally encouraging statements to Zdrilic, the latter even going to the extent of signing the endorsement of agreement on Zdrilic's letter of 3 June 1999 and placing his signature on the form of mortgage. But the letter did not, on my reading, evidence a subsisting contractual promise by Multi No 1 to grant a third ranking mortgage. Rather, as the extract quoted above shows, it related the history of discussions and negotiations, including "nothing happened" and that, at a later stage, a mortgage was not given "as most felt it was not necessary due to there being enough value in the project". The statement in the letter that the two loans to which it refers "are secured by" the Wollstonecraft project cannot of itself operate as a contract to create a mortgage, given the continued presence on the title of Zdrilic's caveat, whether or not he was entitled to maintain it. 150 Nor, I think, can Komadina's signature on the form of mortgage be construed as a contract to create a mortgage in that form. The placing thereon of Komadina's signature in the area for execution under common seal amounted, at best, to an incomplete and imperfect execution not binding upon the company. In addition and more fundamentally, it is clear from the correspondence that a process of negotiation began after the due date of payment of the Zdrilic loan passed and Multi No 1 did not pay. The evidence establishes, in my view, that that process never reached any point of finality. By 21 July 1999, for example, Brown on behalf of Zdrilic was not seeking execution of the loan extension and security documents he had prepared and submitted to the solicitors for Lovrinovic and Komadina in April. Rather, he was following up on a request that Solomon's firm provide a draft agreement "concerning our clients security". 151 This view of the events of 1999 works both ways. Just as I do not think that Multi No 1 agreed to give a mortgage to Zdrilic, so too I consider that Zdrilic never agreed to an extension of the Multi No 1 loan or to a revised interest rate of 30% per annum. Those aspects were part of the incomplete and inconclusive negotiations. I should only add that I do not consider anything which occurred in those negotiations to have amounted to misleading or deceptive conduct, as distinct from negotiating ploys engaged in by sophisticated property and money lending operators working, with the assistance of solicitors, in an environment of property development financing at very high rates of interest to which they were all accustomed. 152 As to the debt undoubtedly owing by Multi No 1 to Zdrilic, the governing instrument remains the Zdrilic deed of 19 August 1997, unaffected by any subsequent revision or compromise. Zdrilic is entitled to judgment for principal and interest payable in accordance with that deed. 153 It remains to consider Zdrilic's contention that he is entitled to recover certain legal costs from Multi No 1. Zdrilic's affidavit of 16 May 2001 said that, as of that date, "legal expenses incurred as a consequence of the default of [Multi No 1] in failing to pay the amount due to me under the Deed of Loan made 19 August 1997 amounted to $264,191.36". In an affidavit of 25 June 2001, he explained that part of that total related to claims against Lovrinovic, Rasic, Komadina and Kasalo under their guarantees being pursued in separate proceedings, with an updated total of $256,002.45 being referable to the claim against Multi No 1. 154 The Zdrilic deed is the only possible source of any present obligation for Multi No 1 to meet any legal costs of Zdrilic. The only potentially relevant provision is clause 6: "The Borrower shall pay all legal Costs and Disbursements associated with the loan including stamp duty and registration fees and the security documentation in relation thereto, together with the cost of any further documentation which may be required prior to the repayment of the loan." 155 I read this clause as covering costs and disbursements directly referable to the establishment and documentation of the loan. The clause refers specifically to four items as included within its general specification, namely, stamp duty, registration fees, security documentation and the cost of any further documentation which may be required prior to the repayment of the loan. All but the last are clearly referable to loan establishment. The last is concerned with perfecting of the loan and recognises that repayment of the loan stands on a different footing from the loan itself. The whole tenor of the clause is thus concerned with the making, securing and perfecting of the advance. Unlike a great many loan documents, this one does not address in contractual terms responsibility for expenses the lender may choose to incur in attempts to recover the moneys lent or in relation to renegotiation of the loan arrangement. 156 Zdrilic is, as I have said, entitled, as against Multi No 1, to recover his loan under and pursuant to the Zdrilic deed. He is not entitled, under the Zdrilic deed, to recover legal costs of and incidental to his attempts to renegotiate and obtain repayment. Nor is he entitled to maintain his caveat. The question of compensation, if any, to which Multi No 1 may be entitled under s.74P of the Real Property Act is one which will now have to be separately determined in accordance with the order in that respect made by Bergin J before the hearing before me began. 157 Both Zdrilic and the plaintiffs have asked that I not address the question of costs as between those parties without hearing further submissions. It will be convenient if those submissions also address the quantification of the sum which Zdrilic is entitled to recover under the Zdrilic deed so that appropriate orders in that respect may be formulated.

Conclusion and orders 158 The plaintiffs are entitled to relief to the effect claimed in paragraphs 17, 22 and 23 of the Statement of Claim. I therefore make the following orders and declaration: 1. Order that the fourth and fifth defendants indemnify the plaintiffs for all liability and exposure to all or any of the first defendant, the second defendant and the third defendant in respect of the further advance referred to in the May 1998 deed (including interest costs and damages). 2. Declare that the sixth defendant does not have the caveatable interest claimed in caveat number 586777S. 3. Order that the sixth defendant forthwith withdraw the caveat having dealing number 586777S. 159 The plaintiffs' remaining claims against the fourth and fifth defendants and the whole of the plaintiffs' claims against the first, second, third and seventh defendants are dismissed. 160 Turning to the sixth defendant's cross-claim, the claims in paragraphs 1 to 8 inclusive are dismissed. As for paragraph 9, the sixth defendant is entitled to a judgment for debt and interest against the first plaintiff on the basis outlined at paragraph 152 of these reasons. The proceedings will be listed for further submissions on the amount for which judgment should be entered. 161 As the plaintiffs' claims against the first, second, third and seventh defendants have not been upheld, I order that the costs of each of those defendants be paid by the plaintiffs. The question of costs as between the plaintiffs and the sixth defendant will be listed for further submissions as those parties have requested. I do not intend making any order with respect to costs of the fourth and fifth defendants. **********

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