Nick Kardiasmenos v Pioneer Management Pty Limited & 3 Ors

Supreme Court of NSW|2004-11-20|Before: Smart AJ

CITATION : Nick Kardiasmenos v Pioneer Management Pty Limited & 3 Ors [2005] NSWSC 778

HEARING DATE(S) : 20 November 2004, 1, 2 & 3 December 2004

DECISION : Publication of Reasons. No orders made.

Bankruptcy Act 1966 LEGISLATION CITED : Partnership Act Real Property Act 1974

Abigail v Lapin (1934) 51 CLR 58 Birtchnell v Equity Trustees & Agency Co Ltd (1929) 42 CLR 384 Butler v Fairclough (1917) 23 CLR 78 Canny Gabriel Castle Jackson Advertising v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 Calverley v Green (1984) 155 CLR 242 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 365 CASES CITED : Daemar v Industrial Commission of NSW No 2 (1990) 22 NSWLR 178 Foyster v ANZ Banking [1999] NSWSC 300 - BC 99 02230 Lapin v Abigail (1930) 44 CLR 166 Moffitt v Dillon [1992] 2 VR 480 Pegler v Dale 1975 1 NSWLR 265 Platzer v Commonwealth Bank of Australia 1997 1 Qd R 266 UDC Ltd v Brian Pty Ltd (1985) 59 ALJR 676

PARTIES : Nick Kardiasmenos v Pioneer Management Pty Limited & 3 Ors

R Sofroniou (P) M B Duncan (2nd & 4th defts) COUNSEL : Mr Vescio in person No appearance for 1st deft

Verekers for 1st deft SOLICITORS : No other solicitor.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5469/02: NICK KARDIASMENOS v PIONEER MANAGEMENT PTY LTD PETER ROBERT LEE, MICHAEL VESCIO and SAI MENG LEE

PUBLICATION OF REASONS

These proceedings arise out of the proposed development of Lot 10 Whitechapel Road, Ambervale ("the larger block") and Lot 42 Whitechapel Road Ambervale ("the smaller block"). The project included the purchase of these two Lots in the name of a corporate vehicle now known as Pioneer Management Pty Limited ("Pioneer"), a subdivision of these lots and the construction of townhouses and villas consequent upon obtaining development consent from Campbelltown City Council, the sale of the strata lots and the subsequent division of the anticipated profits after the discharge of all liabilities.

Pioneer filed a Notice of Appearance in November and a defence on 16 June 2003. In February 2004 its solicitor filed a Notice of Ceasing to Act, having first given the company the requisite notice. Although the company was subsequently informed of the progress of this suit including various interlocutory orders and duly notified of the hearing dates, the company did not appear or participate in the hearing. Since the hearing and after the Court notified that judgment was being given today, the Court was notified that Pioneer was wound up on 2 May 2005. These reasons are therefore being delivered on a provisional basis to enable the liquidator to consider them and make any application he may be advised. No orders will be made nor judgment entered pending further hearing. Peter Robert Lee (PRL) and Sai Meng Lee (SML) appeared and were represented by the same counsel. Michael Vescio (MV) represented himself at all stages of the proceedings .

The plaintiff alleged that in about March 2001, he, together with PRL and MV agreed to form a partnership to carry out a development project in respect of the larger and smaller blocks. They allegedly agreed that: (a) the properties would be purchased by a company to be acquired for the purpose of the project; and (b) PRL would arrange for the financing of the purchase and development of the property; and (c) the plaintiff would provide "top up security" if required, should the project not be able to be entirely funded by the provision of security over the properties; and (d) nett profits from the project were to be divided on completion by the plaintiff, PRL and MV in equal shares.

PRL disputes that there was a partnership but MV asserts that there was a partnership as alleged. Pioneer was utilised from about March 2001 to carry out the project. It was undisputed that PRL was appointed a director and the secretary of Pioneer about 19 March 2001 and the plaintiff was appointed a director of Pioneer on or about 21 April 2001. MV could not be appointed as a director.

In about April 2001 the plaintiff obtained finance of $200,000 from HSBC Bank Australia Ltd (HSBC) by an overdraft facility (the "HSBC facility") applied to a new HSBC cheque account No 011-188810-031 opened in his name about 17 May 2001 for that purpose (the "HSBC account"). The funds provided pursuant to the HSBC facility were secured by a registered first mortgage over the plaintiff's property, 31 Lackey Street, Summer Hill.

About 6 May 2001 the plaintiff borrowed a further amount of $200,000 from Perpetual Trustees Victoria Ltd (the "Perpetual funds"). These funds were secured by a registered first mortgage over the plaintiff's property, 78 Batt Street, Sefton.

In about late May 2001 the plaintiff deposited the Perpetual funds into his "Everyday Cheque" account No 041353718 held in his name with St George Bank (the "St George account").

The facts in paragraphs 5, 6 and 7 were undisputed.

About 8 June 2001 the plaintiff purchased both the properties for a total price of $310,000 in the name of Pioneer as purchaser. The purchase of the properties and associated costs were all paid for by the plaintiff as Pioneer, PRL and MV well knew. Such purchase price and costs were funded entirely from funds drawn by the plaintiff from the HSBC account and from the St George account. PRL and MV did not contribute any funds to the purchase of either property. Pioneer did not contribute any funds of its own to the purchase of either property.

Thus, at all material times from the purchase of the properties on 8 June 2001 the plaintiff claimed an equitable interest in each of the properties and that Pioneer held each of the properties in trust as a bare trustee for the plaintiff under a resulting trust with no beneficial interest in either of them.

In the alternative, the plaintiff claimed that by reason of the purchase of the properties and payment of all associated costs entirely with the plaintiff's funds: (a) Pioneer held each of the properties in trust as a bare trustee for each of PRL, MV and the plaintiff. (b) to the extent that PRL and MV did not contribute moneys towards the purchase of the properties any beneficial interest they held in the properties was itself held subject to a resulting trust in favour of the plaintiff. Claims Involving Pioneer and SML

About 8 August 2001 the plaintiff agreed to resign as a director of Pioneer and SML was appointed as a director of Pioneer. PRL remained a director of Pioneer at that time. This is not disputed.

About 27 August 2002 the plaintiff lodged caveat number 8901807A over the larger block and also lodged a caveat over the smaller block. This was not disputed. About 11 September 2002 at the demand of PRL and SML, the plaintiff agreed to the withdrawal of his caveat over the smaller block. The plaintiff has never been reimbursed as to any of the moneys provided by him for the purchase of the properties and associated costs.

About 11 September 2002 the smaller block was transferred by Pioneer to Ngoc Ly on the apparent instructions of PRL and/or SML.

About 19 September 2002 Pioneer purported to enter into a contract for the sale of the larger block to Long Gin Mo and Ken Lu for $625,000. The contract provided for completion 35 days after exchange. The plaintiff asserts he has an equitable interest in the larger block by virtue of the resulting trust existing in respect of the properties to his benefit or by reason of the charge arising from the facts and circumstances mentioned earlier. While Pioneer remained the registered proprietor of the larger block the plaintiff feared that either PRL or SML or both would cause Pioneer to sell the larger block.

The plaintiff alleged, in the alternative, that at a meeting held about 24 April 2001, the plaintiff, PRL and MV orally agreed that any and all moneys provided by the plaintiff for the purchase of the properties would be reimbursed to him first, in priority to other payments, together with an additional two per cent above the purchase moneys contributed by him, and in addition to his one-third share of any nett profits earned by the project.

The plaintiff further alleged, and in the alternative, that the purchase moneys were provided by the plaintiff upon the basis of the express representation and agreement of MV and PRL, that such moneys would be reimbursed to the plaintiff, as an expense of the project and prior to the distribution of the nett profits of the project among each of the partners. In the circumstances it was alleged the purchase of the properties for the benefit of the partnership amounted to a capital contribution made to the partnership by the plaintiff. The plaintiff asserted that as the object and purpose of the partnership being the Project, had failed it was just and equitable that the partnership be dissolved. About 10 April 2003, the plaintiff served notices on PRL and MV dissolving the partnership as from that day.

Claim against SML 18. SML has lodged a caveat (registered number 96669133) over the larger block, claiming this equitable interest in it: "Deposit of Certificate of Title by Pioneer .. to Sai Meng Lee and signature by directors of the said company of six payment vouchers each dated 9 August 2001". This was not disputed.

SML has asserted that Pioneer gave an unregistered mortgage over the larger block by executing an agreement dated 8 August 2001 ("the loan agreement") and depositing the certificate of title to the properties with SML. It was not disputed that the plaintiff had signed the loan agreement. The circumstances and intention surrounding the deposit of the certificate of title are disputed.

The plaintiff asserts that the loan agreement is not capable of and does not constitute a mortgage or convey any equitable interest to SML. Alternatively, the plaintiff alleges that any such interest is conditional upon the loan the subject of the loan agreement being made to Pioneer. The plaintiff denies the claim of SML that he made a loan of $600,000 to Pioneer or that any funds were received by Pioneer from SML.

The plaintiff alleges that SML served a purported Notice pursuant to s 111(2)(b) of the Conveyancing Act 1919 on Pioneer prior to 6 June 2003 and has claimed to be entitled to sell the larger block if Pioneer fails to comply with the notice. This was not disputed.

The plaintiff claims that SML has no interest in the larger block, Pioneer is not indebted to SM Lee and that SML has no power or right to sell the larger block or to recover any moneys from the sale of the larger block.

The plaintiff sought the following substantive relief: 1. A declaration that the larger block is held on trust by Pioneer for the plaintiff. 2. An injunction restraining Pioneer from selling, transferring, encumbering or otherwise dealing with the larger block other than with the plaintiff's authority or pursuant to the order of the Court. 3. An order that Pioneer execute a transfer of the larger block in favour of the plaintiff. 4. An order pursuant to s 72MA of the Real Property Act 1974 that the caveat lodged over the larger block by SML be withdrawn. 5. Equitable damages in respect of the sale of the smaller block. 6. An account of profits of any sale of the smaller block. 7. Damages.

Alternatively to 1, 3 above the plaintiff sought: 8. A declaration that the larger block is held on trust by Pioneer for the partnership.

A declaration that the partnership between the plaintiff, PRL and MV was dissolved as from the date of filing the statement of claim (30 March 2004).

An order appointing Receivers and Managers of the Partnership and that they be empowered to sell the larger block and account for the proceeds to the partnership.

An order that an enquiry be held as to the assets and liabilities of the partnership, the respective interests of the partners in any such assets and all the dealings and transactions of the partnership and of the said partners or any of them in relation thereto.

An order that the partnership assets be realised and the proceeds thereof be applied in due course of administration.

A declaration that SML has no interest in the larger block.

A declaration that Pioneer is not indebted to SML for any sum.

An order that the caveat lodged by SML on the larger block be removed.

An injunction restraining SML from selling, transferring, encumbering or otherwise dealing with the larger block.
Other ancillary relief was sought.

The Amended Defence filed on behalf of PRL admitted that the plaintiff MV and he agreed that the properties would be purchased by a company to be acquired for the purpose of the project and that he (PRL) was to arrange for financing of the purchase and development of the project.

PRL denied that the partnership alleged existed or came into existence. He asserted that the profits of the development were to be shared in equal shares among the shareholders of the company acquired to own the land. PRL asserted that the true legal characterisation of the arrangement between him and the plaintiff was a joint venture whereby a company of which they were already shareholders and directors, Ocean Park Financial Holdings Pty Ltd was to raise the finance to construct the development project on land to be acquired by another company (Pioneer).

PRL denied the existence of any partnership involving MV. At all material times from about February 2001 to about at least October 2001 MV was an undischarged bankrupt.

PRL denied that Pioneer was the corporate vehicle utilised by the partnership from about March 2001 to carry out the project. PRL asserted that Pioneer was acquired as the vehicle to be the registered proprietor of the parcels of land the subject of the joint venture and that Ocean Park was to be the vehicle to acquire the finance to build and develop the project on the land.

PRL denied that about 8 June 2001 the plaintiff purchased each of the properties as vendor in the name of Pioneer as purchaser and that Pioneer, PRL and MV well knew that the purchase of the property and the associated costs were all paid for by the plaintiff. PRL denied that Pioneer held each of the properties as a bare trustee for each of himself, MV and the plaintiff and that to the extent that PRL and MV did not contribute moneys towards the purchase of the properties any beneficial interest they held in the properties was itself held subject to a resulting trust in favour of the plaintiff.

PRL denied that the plaintiff had an equitable interest in the smaller block or in the larger block by virtue of the resulting trust to his benefit or by reason of the alleged charge. (The circumstances were said, in the alternative, to give rise to a charge).

PRL asserted that he remained liable as a contributory of Pioneer.

PRL also asserted that any funds contributed by the plaintiff were investment funds provided to Pioneer for the purpose of it purchasing the land and becoming its registered proprietor in furtherance of the terms of the joint venture.

PRL asserted that the plaintiff had no greater interest in the land than him, i.e., the interest of an equal shareholder subject to an accounting adjustment at the completion of the joint venture for the true value of the contributions of the joint venturers (including a cash value attributable to PRL for his efforts in securing the development finance).

PRL asserted that in pursuance of the joint venture, he expended time, effort and money in securing finance for the development of the land and on 8 August 2001 the plaintiff, PRL and SML entered into an agreement whereby SML advanced the sum ($600,000) on terms acknowledged and accepted by the plaintiff and PRL. By way of particulars PRL relied on the written agreement of 8 August 2001 between Pioneer and SML. The plaintiff and PRL signed as directors of Pioneer.

PRL relied on the moneys being paid into an account of Ocean Park in pursuance of the joint venture, inter alia, because it operated a cheque account and Pioneer did not. PRL denied that the plaintiff had any right, entitlement or interest and particularly a caveatable interest in the land. PRL contended that the plaintiff was estopped by certain Local Court proceedings which he instituted.

PRL asserted that by reason of the plaintiff agreeing at the demand of PRL and SML to the withdrawal of the plaintiff's caveat over the smaller block, that block being transferred by Pioneer to Ngoc Ly and the plaintiff's consent to the sale of the smaller block the plaintiff is estopped from asserting an equitable interest in the land.

PRL asserted that because the plaintiff had agreed voluntarily to release his caveat to allow the transfer of the smaller block to a third party, any equitable interest which the plaintiff may have had was defeated by the registration of the purchaser, who was a bona fide purchaser for value without notice.

PRL further, and in the alternative, asserted that the release of the caveat by the plaintiff constituted an election on his part not to assert an equitable interest in the land.

As to the contract for sale of the larger block and the plaintiff's alleged equitable interest therein, PRL asserted that a further agreement was reached between the parties about 2 December 2002 that, in return for the payment of a sum certain, the plaintiff would release his caveat over the larger parcel of land and allow it to be transferred to a purchaser under an exchanged contract for sale, but this agreement was frustrated by the purchaser failing to complete. Save for the frustration of the agreement, PRL repeated the assertions and particulars supplied as to the smaller block (summarised earlier).

PRL relied on the proceedings initiated by the plaintiff in the Local Court (1771/02) on 17 December 2002 against PRL, for $21,815.45 and interest claimed as the balance due in respect of various amounts allegedly lent by the plaintiff to the defendant, on a personal basis, totalling $99,953.45 after repayments of $78,138. PRL alleged that the moneys had been lent to him in pursuance, inter alia, of his obligation to secure development finance under the joint venture. PRL asserted that the Local Court proceedings were brought at a time when the plaintiff's allegation of a partnership subsisting between the plaintiff and PRL was still on foot but unresolved in this Court and at a time when the Local Court had jurisdiction under the Partnership Act to adjudicate matters between the parties inter se if they were partners.

PRL asserted that the causes of action available to the plaintiff that were within the jurisdiction of the Local Court merged into judgment on 11 November 2003 and that the plaintiff was either estopped from raising any such matters and particularly the question of the existence of a partnership under the principle Port of Melbourne Authority v Anshun or was issue estopped from raising or continuing such a claim by reason of the judgment in his favour in the Local Court.

There were major issues whether the amounts claimed by the plaintiff in the Local Court were related to the development project and who had to bear the costs of endeavours to secure development finance.

In his statement of defence, some of which was incorrect as to form, MV admitted the agreement to form a partnership and the terms alleged by the plaintiff. MV asserted that he provided the shelf company (Pioneer) and that the two directors were to be the plaintiff and PRL. MV asserted that he was unaware of the plaintiff obtaining finance of $200,000 from HSBC with the overdraft facility being secured by a registered first mortgage over 31 Lackey Street, Summer Hill and of the plaintiff borrowing a further $200,000 from Perpetual Trustees Victoria Ltd secured over 78 Batt Street, Sefton. MV asserted that the larger and the smaller blocks were to have been used as security for the loan and the plaintiff was to use his properties only as "top-up" if required. MV accepted that the larger and smaller blocks were purchased for $310,000 with funds raised by the plaintiff.

MV denied that he did not contribute funds to the purchase of either of the properties. He asserted that he contributed to the partnership by negotiating the purchase price of the properties down from $375,000 to 310,000 thereby making a contribution of $65,000. MV accepted that Pioneer did not contribute funds of its own to the purchase of either of the properties. The three men were bound to use their best endeavours to advance the project. MV's skills in negotiating a reduced price is not the equivalent of a cash contribution. This reduction probably indicates that the initial asking price was too high.

MV agreed that Pioneer held each of the properties in trust as a bare trustee for each of the partners (the plaintiff, PRL and himself).

MV asserted that it was agreed that the plaintiff would be reimbursed first in priority to other payments together with an additional two per cent above the purchase moneys contributed by him, and in addition to his one-third share of any nett profits.

MV accepted that the purchase moneys were provided by the plaintiff upon the basis of the express representation and agreement of MV and PRL that such moneys would be reimbursed to the plaintiff as an expense of the project and prior to the distribution of the nett profits of the project among each of the partners and that the purchase of the properties for the benefit of the partnership amounted to a capital; contribution made to the partnership by the plaintiff.

MV asserted that the partnership agreement had been complied with by the plaintiff and MV, but PRL had not fulfilled his part of the agreement and actually hindered the partnership by diverting into other ventures and introducing other parties and causing the plaintiff to withdraw as a director so PRL could have full control.

MV sought wide ranging relief which need not be summarised now and some of which could not be granted even assuming that part of the defence was treated as a cross-claim.

SML admitted that Pioneer executed a transfer of the smaller block to Ngoc Ly but did not admit that the transfer was executed on his instructions.

SML denied that the loan agreement was not capable of and does not constitute a mortgage or convey any equitable interest to him. He denied, in the alternative, that any such interest is conditional upon the loan the subject of the loan agreement being made to Pioneer. SML asserted that he had made a loan of $600,000 to Pioneer and that funds were received by Pioneer from SML. He denied the plaintiff's claims that he (SML) had no interest in the larger block, that Pioneer is not indebted to SML and that he has no power or right to sell the larger block or to recover any moneys from the sale of the larger block.

SML denied that the plaintiff has any interest in the land which would give him priority over his (SML's) interest. SML denied that the plaintiff was entitled to any relief. SML asserted that he had an equitable set-off against any claim by the plaintiff.

PRL, by his cross-claim repeated the facts and circumstances set out in his Defence to the Further Amended Statement of Claim the substance of which has been mentioned earlier and sought these declarations against the plaintiff (the cross-defendant). (a) that the cross-defendant is estopped from pursuing any claim arising out of a cause of action relating to a partnership between the cross-claimant and the cross-defendant (b) that Pioneer is solely legally and beneficially entitled to the land (c) that the cross-claimant (PRL) and the cross-defendant (the plaintiff) are the sole shareholders of Pioneer.

SML has lodged a second cross-claim nominating the plaintiff as first cross-defendant and Pioneer as the second cross-defendant, seeking the following declarations: 1. "…that pursuant to an agreement between the First ('Kardiasmenos') and Second ('Pioneer') Cross-Defendants to the Second Cross claim and the Cross-claimant to the Second Cross-claim ('SML') dated 8 August 2001, SML advanced and Kardiosmenos and Pioneer acknowledged receipt of and accepted the sum of $600,000being an advance for development finance to develop the land comprised in Lot 10/DP700704 and Lot 42/DP700701 at Ambervale in the state of New South Wales on the terms and conditions set out in the said agreement." 2. "… that the said advance was secured by the deposit of the title deeds for the said land by way of mortgage on deposit." 3. "… that in the circumstances, SML has and/or had an equitable interest in the said land giving rise to a caveatable interest." 4. "… that SML has a caveatable interest over so much of the said land that remains unsold." 5. "… that SML's interest is in priority to any interest of Kardiasmenos or Pioneer." 6. "… that, pursuant to the agreement, Pioneer owes SML the sum of $900,000 together with accrued interest less any amount received to date by SML on Pioneer's behalf ('the mortgage debt')." 7. "… that the mortgage debt is secured over so much of the land as remains unsold by way of an equitable mortgage by deposit of title deeds." The Background And Early Meetings

As at March 2001 the plaintiff owned four properties. He lived at 78 Batt Street, Sefton, which he acquired in about 1977. It was unencumbered. 31 Lackey Street, Summer Hill, an investment property was acquired in about 1983 and was also unencumbered. 80 Batt Street, acquired in about 2001 or a little earlier, was an investment property. PRL assisted the plaintiff by doing the bidding on the plaintiff's instructions. This property was and is subject to a mortgage which was obtained to finance the purchase. The fourth property, 92 Columbine Avenue, Punchbowl, was transferred to the plaintiff as a result of a divorce settlement. It was unencumbered. PRL had known the plaintiff since about 1985, being former brothers-in-law. Despite divorces they had remained friends and business associates.

In about either late 2000 or early 2001 MV approached PRL with a development proposal for the purchase of land at Ambervale, the construction of townhouses and villas and their subsequent sale. MV said that he asked PRL if he had any source of finance., PRL replied that he had a good source of funds.

About late February-early March 2001 PRL introduced MV to the plaintiff at his home. At one stage PRL and MV had a discussion in which the plaintiff was not involved. He asserted that PRL had used the plaintiff's home for business meetings in the past and that he (the plaintiff) was happy for PRL to use his home in this way. On an occasion in early March 2001, PRL, with his family, arrived at the plaintiff's home. PRL: said, "I have Michael the builder coming to discuss some business with me". PRL and the plaintiff talked socially pending MV's arrival. The plaintiff stated that a conversation to the following effect followed: MV : (To PRL) How are we going with the loan? Are we going to get some money to do the project? PRL: I am going to get some money but only if Nick is involved in it. I want Nick to be in the project and I want us to split the profits equally in three ways. MV: That will be fine.
The plaintiff stated that this was a complete surprise but that he was immediately interested. The plaintiff stated that the conversation continued: MV: It's a great project, Nick. There's a lot of money to be made here.. Pltf: How much money is to be made. MV: (after a pause for consideration by himself and PRL): We're going to do X buildings (the plaintiff's best recollection was 26 but he was not sure), it's going to cost us about $80,000 to do each building, we'll buy the land for $375,000 and sell for $4 million and so we'll make about $1.2 million after the other expenses. PRL: I estimate a bit less than that but I think $1 million would be quite easily achieved. We will split the profits three ways. Each of us stand to make at least $350,000 profit. MV: Sure. Pltf: How long is it going to take to be finished? MV: It can be done in six months. PRL: Let's call it one year. In one year we'll have $1-1.2 million profit, Michael. MV: We have to move quickly. I've got the contracts here and they're at a really good price. Pltf How much? MV: $375,000.
The plaintiff said that MV handed him the front page of two contracts. The plaintiff noted that they involved vacant land at Ambervale in two parcels. The conversation continued: MV: We need to do this with two companies, one to buy the land and one to do the construction. Pltf: Why do you want to do it that way?
The plaintiff said that MV gave a lengthy explanation for proposing two companies, which he did not fully understand. The plaintiff said that he understood the effect to be that if the construction company went broke then the other company could still hold the land and that during MV's explanation PRL did not have much to say. MV said, amongst other things, "I've had so much trouble with construction in the past. So many things can go wrong. This is the safe way to do it."

At MV's suggestion the three men went to Ambervale and inspected the land with care. They went to the Campbelltown Shopping Centre and looked at the windows of real estate agents to obtain an idea of property values in the area. After returning to the plaintiff's home there was a further conversation to the following effect: MV: We should get all the finance by mortgaging the big lot but we should leave the small lot free. That way when we do the construction on the larger block we can use some of the construction finance to build on the small block so the bank can't get to it. Pltf: The project sounds very good. We should go ahead with it. Howe hard will it be to get the construction loan? PRL: That's no problem at all. MV: Yes it's not difficult to get construction finance. I've done so many projects before. Now if we're going to keep a lot free the bank's not going to lend us all the money so we'll need 'top up' security. Who's going to provide the 'top up' security? I can't put in anything because I haven't got any funds to put in. Pltf: There will be no problem with that (The plaintiff believed he had sufficient property to provide 'top up' security if necessary) MV: So you're putting the money in. That money will come out of the project first. I have a company which I haven't used and we can use that company to buy the land. We can get another company to do the construction. Don't let this go. This is a good opportunity. We can't afford not to do it So, you're going to get the finance (speaking to PRL) and Nick, you're going to do the top up security. Pltf: Yes, no problem. PRL: I'll get the money for it. MV left. The plaintiff and PRL had a conversation to the following effect:

PRL: We'll buy the land ourselves Pltf: How are we going to do that? PRL: I'll ring Mary tomorrow at HSBC and we'll apply for a loan. We'll have to use our own personal property as security for the loan and that way the land will have a clear title so it can be used to get the construction finance. 63. In about mid-April 2001 by an arrangement made by PRL, he and the plaintiff saw Mary Mak, at the HSBC. She was an Account Manager, Personal Financial Services. PRL and the plaintiff in each other's presence, filled out individual applications for finance. At her request the plaintiff supplied her with a number of documents.

Shortly thereafter Ms Mak telephoned the plaintiff and advised that HSBC was prepared to lend him a maximum of $200,000 subject to a satisfactory valuation on the Lackey Street property and the plaintiff paying the Bank $1100 for arranging the valuation. Within a few minutes of that call Ms Mak telephoned PRL who reported to the plaintiff "She's not going to give me any money. They've rejected my application." PRL said that he would check with BMC (a mortgage broker for whom PRL had once worked as an agent) and see if he could "get some more money on this house" (that is 78 Batt Street).

The circumstances surrounding the obtaining of the loan of $200,000 from Perpetual Trustees Victoria Ltd raise serious queries as to the actions of PRL. The plaintiff did not recall completing any application for finance to BMC. He believes that the application was completed by PRL. There is an application bearing date 20 April 2001, purporting to be signed by the plaintiff, to BMC which the plaintiff said that he had not seen until late in 2002 when he contacted BMC and an officer of BMC said he would send the plaintiff a copy of his original application and did so to assist the plaintiff with a further application which he wished to make.

It is possible that PRL had the plaintiff sign the original application without him appreciating what was involved at the time. By letter bearing date 23 April 2001 and addressed to the plaintiff at 78 Batt Street, Sefton, BMC Mortgage Corporation Pty Limited thanked him for completing his application for a secured loan facility and confirmed its intention to arrange a loan for him for $200,000. He was asked to sign an acknowledgment, initial a copy of the letter and attached schedule (setting out the terms) and return them along with his cheque for $850, the application fee.

The plaintiff said that about 23 April 2001 PRL came to his house and requested a cheque for $850 for the application fee for BMC for the loan. PRL made out the cheque drawn on the plaintiff's account with the St George Bank and the plaintiff signed it. The cheque bears date 23 April 2001 as does the receipt issued by BMC for $850.

The plaintiff recalled initialling a copy of the letter from BMC and giving it to PRL. That may have been on the day he signed the cheque. If the dates on the document are a reliable guide it would seem that about 23 April 2001 PRL handed or produced to the plaintiff the letter of 23 April 2001 from BMC and had the plaintiff initial a copy, sign a cheque for $850 and hand them to him and that PRL took them to BMC.

The plaintiff said that he next heard from PRL on 2 May 2001 when he telephoned and said that he had the approval from BMC for the plaintiff for $200,000. On 3 May 2001 the plaintiff received by post a letter from BMC of 2 May 2001 that a satisfactory valuation report had been received for 78 Batt Street, The plaintiff was somewhat surprised to receive the approval without having filled out any documents or having had an interview. However, he was happy to accept the loan.

In the meantime there had been efforts to acquire the properties. About 19 March 2001 PRL telephoned the plaintiff and advised "Michael's given me the company. It's called Pioneer Management Pty Limited. I'm now on it as a director" and "I'm very pleased we now have a company to use in order to go ahead with the project."

The plaintiff said that on 23 April 2001 PRL advised that MV had negotiated a new price of $310,000 for both blocks and arranged a meeting with the real estate agent for the following day. MV had advised that the vendor required a $1500 goodwill deposit straight away. The plaintiff advocated going ahead.

Later that evening MV telephoned the plaintiff and verified that he was going to the meeting. On 24 April 2001 the plaintiff and PRL went to the estate agent's office at Kellyville As soon as MV arrived they went into the agent's office and MV introduced PRL and the plaintiff, describing them "as my two partners". After some discussion about the proposed development, it was noted that MV was going to do the building. The plaintiff directed the agent to put the name of Pioneer Management Pty Ltd as the purchaser on the contracts for sale and gave the agent the plaintiff's personal cheque for $1500, drawn on his St George personal cheque account, to secure the land. Later that day a further meeting was held at MV's home. A conversation to this effect took place: MV: How are we going with the finance? Pltf: Everything seems to be okay. There's not going to be any problem with it. MV: So you've got the construction finance ready? Pltf: No that's Peter's job, I'm only talking about buying the properties. MV: (specifically to Pltf but in PRL's presence) Any money that you put in, you get out first, with a couple of percent on top.

On leaving MV's house the plaintiff told PRL that he (the plaintiff) needed to be a director of Pioneer because he was putting all the money in. PRL agreed. About 19 May 2001 PRL advised that MV also wanted the plaintiff to be a director of Pioneer. The forms were signed on 21 May 2001 and the plaintiff became a director.

The plaintiff did not believe that he had lent money to Pioneer but expected to recover his money from the sale of the townhouses.

About 1 June 2001 MV dropped into the plaintiff's letterbox a draft agreement which he wanted the plaintiff and PRL to sign. That recapitulated the original arrangement with some variations, but it provided for extensive remuneration for MV. Neither PRL nor the plaintiff (acting at least partly on PRL's advice) signed it. The matter kept on being postponed.

The plaintiff said that on 14 June 2001 he and MV lodged preliminary development applications with Campbelltown Council. On 12 July 2001 the Council requested further information and on 13 July 2001 the plaintiff and MV met with the Council's Town Planner.

By FAX of 17 July 2001 the Council advised of its preliminary assessment of the proposed development. Some of the issues raised appear to be substantial. MV telephoned the plaintiff, advised of the faxes and arranged to come to the plaintiff's house from where they would proceed to the Campbelltown Council together. MV said that he provided the Council with more information in response to its queries.

On arriving at the plaintiff's house MV handed the plaintiff a document and said that this was what they agreed in March 2001. The plaintiff read the document and signed it. PRL never signed it. Broadly, this document followed the terms of the agreement alleged by the plaintiff and set out earlier. PRL did not attend any of the Council meetings and told the plaintiff that he (PRL) could not work with MV and that the plaintiff would have to look after satisfying the Council's requirements. The plaintiff said that throughout June and July MV regularly raised with him the question of obtaining construction finance, there existing some friction between MV and PRL.

The plaintiff stated that following the purchase of the properties PRL made no attempts of which the plaintiff was aware to obtain finance. In July 2001 on an occasion when PRL was visiting the plaintiff's home he mentioned MV's view they had to hurry up with the finance. PRL replied to tell MV to look after the Council and that he (PRL) would worry about the construction finance. The plaintiff said that he raised the topic with PRL in July 2001 who responded, "We'll use our own money to build. I'll get money from overseas." The plaintiff said that as at the time PRL was travelling extensively overseas, he (the plaintiff) believed that PRL was capable of raising such funds.

In cross-examination by counsel for PRL, the plaintiff insisted that the land was to remain in the name of Pioneer, which was to develop the land.

As to Ocean Park Financial Holdings the plaintiff said that PRL asked him to assist PRL and Count Albert Shih Chiang to establish a company in Australia which would be a vehicle for overseas investors wishing to invest in property in Australia. The plaintiff said that although he did not know much about what was proposed he thought that he had nothing to lose and that as a shareholder he might make some money if the company made some money. On that basis he agreed to become a director and shareholder and did so in June 2000 as did PRL.

Count Albert, who was a distant relation of PRL became a director in October 2000. There were four directors of the company, namely Count Albert Chiang and Phoebe Yuen, his de facto wife, both of whom lived overseas, PRL and himself. Count Albert was the Chairman. Phoebe Yuen became a director in March 2001. Count Albert gave a Singapore address and Phoebe Yuen one in Hong Kong. PRL was the company secretary. He supplied the address of 78 Batt Street, Sefton, the home of the plaintiff.

Between the company's incorporation and 9 August 2001 the plaintiff had not been called upon to do anything except to attend a few meetings about proposals which did not eventuate.

The plaintiff found out long after he joined Ocean Park, probably later in 2001, that PRL had opened an account in the company's name without consulting him .

The plaintiff said he was told that PRL was using the Ocean Park account to transact his business. The plaintiff stated that he told PRL that he should not be using this account. PRL told the plaintiff that there was no money in the account and stopped using the company's bank account.

The evidence reveals that PRL and Count Albert used Ocean Park as the vehicle to do their bidding and that the plaintiff was left on the sidelines.

The plaintiff accepted that MV suggested that one way of proceeding was to have one company purchase the land, and another company develop it. MV said that if one company ran into trouble the other one would not necessarily be in trouble. The plaintiff said that he did not pay too much attention to this discussion as he did not understand what MV was talking about. The plaintiff said that in the course of the conversation no mention was made of Ocean Park and that it was never mentioned in relation to the project. MV was never involved in or with Ocean Park.

The plaintiff said that the proposal to have one company own the land and another do the development was never agreed. It was his understanding that Pioneer was going to do the lot. The plaintiff said that the agreement was that MV would provide the company and that they would use the company for everything. The plaintiff agreed that for this to happen Pioneer would need to have a bank account in the future. It did not have a bank account because it had no money. The plaintiff did not want a second company. He agreed to the land being purchased in the name of one company and that company doing the development.

MV deposed to PRL in March 2001 introducing him to the plaintiff at the latter's home and continued: "We made a simple verbal agreement that I would introduce the property for the benefit of the partnership being 1. Myself 2. Nick Kardiasmenos and 3. Peter Lee and that the primary roles for Peter was to arrange financial for Stage 1 to purchase the properties lot 10 and lot 42 Stage 2 to provide construction finance for the project Nick Kardiasmenos was to provide TOP UP security The proceeds would be distributed equally after all loan costs would be paid."

At the urging of PRL there was a departure from these arrangements in that the purchase moneys for the properties was provided solely out of the funds provided by the plaintiff from mortgage facilities secured over his two properties. This left the Ambervale properties unencumbered so that finance for the construction of the project could more readily be obtained on the security of these properties.

PRL confirmed that there was an initial approach by MV to him with a development proposal as to land at Campbelltown (Ambervale) and that he introduced MV to the plaintiff as he owned land and might be interested. PRL said that he did not have any money himself.

PRL deposed to a meeting shortly after inspection of the land in which MV told him and the plaintiff that he could obtain the land for $320,000. PRL said that shortly afterwards he became aware that MV was an undischarged bankrupt. [MV became bankrupt about 20 May 1999. His bankruptcy ended on 17 July 2002].

In his affidavit of 11 November 2004 PRL said that he and the plaintiff discussed various options for the acquisition and development of the land. PRL stated that ultimately MV proposed that the plaintiff and PRL should acquire a shelf company.

In his oral evidence PRL stated that he told the plaintiff that MV had a shelf company and was prepared to use that company to acquire the properties.

Difficulty was experienced with PRL when giving evidence. He tended to give what he believed were the conclusions reached in various conversations rather than tell the Court what was said. Some of his answers were unresponsive to the questions asked. At times he preferred not to answer the question but to tell the Court what he wished.

PRL said that at an early meeting the plaintiff stated that if PRL could not get the finance to purchase the property he was willing to provide the security (to obtain the money) for the purchase of the land upon the condition that Pioneer owned the property. PRL said that he was to be responsible for sourcing the development finance but no other finance. That does not accord with the initial agreement reached with the plaintiff and MV.

PRL said that the plaintiff stated that he would try and secure $400,000 on 31 Lackey Street to finance the purchase of the land. PRL said that there was no discussion about what his contribution would be and no discussion about development finance at that stage (April 2001). The attention was on having the ability to purchase the land.

According to PRL, subsequently he and the plaintiff discussed various means of obtaining development finance and he (PRL) said that he would try to source development funds from overseas as Count Albert Chiang was capable of helping them out with finance and was a very capable man.

In cross-examination by MV, PRL gave a version of events substantially similar to that given by the plaintiff of the first part of the first meeting between the plaintiff, himself and MV although at that stage the purchase price of the land had not been determined. PRL said that after returning from the inspection of the land both he and the plaintiff indicated that they were interested in proceeding with the development, and that MV said that he had a shelf company he could provide for the development of the land. MV said that he could put in the development application and do the building. PRL said that he stated that he and the plaintiff would do their part in promoting the development. PRL said that his role would be to source finance and to promote the selling of the units when completed and that the plaintiff's role would be to assist in the search for capital to purchase the land.

PRL said that it was very clear when the meeting concluded that the project and MV's part in it was dependent on MV's ability to procure development approval and finish the construction of the project. MV was to be paid accordingly a percentage of profit. PRL was to organise finance and to attend to resale (of the units). There was a need to know where the full purchase price of the land was to be obtained. PRL confirmed that MV's role was on the construction side and the application to the Council. PRL agreed that the plaintiff complied with his obligations under the agreement by providing the security and helping with the finance.

PRL insisted that MV still had to obtain development approval to discharge his obligations, that he (PRL) had sourced $600,000 from SML and that was the first stage of the finance which he had organised. The overall construction cost of the buildings was about $2.5 million. I understood PRL to be asserting that financing was contingent on development approval being obtained. As Pioneer did not have a bank account, $600,000 was deposited into the account of Ocean Park.

In answer to counsel for the plaintiff in cross-examination PRL stated that Count Albert Chiang arranged for the plaintiff and PRL to give Count Albert Chiang a power of attorney over Ocean Park. A Corporate Resolution of Ocean Park Financial Holdings Pty Limited signed by Count Albert Chiang, PRL and the plaintiff on 1 January 2001 provided that the Count Albert Chiang: "is authorised and empowered for on and behalf (sic) of this Corporation to commit cash funds for the purpose of investing the said amount in bank and secured Private Placements for profit. B. Said officer or his legally empowered representative is hereby granted the fullest authority (to) act on behalf of the Corporation with respect to said Private Placement including authority … for 1. To fully represent this Corporation and grant Powers of Attorney to carry out the Private Placement … 2. To give … instructions to the holder of the Power of Attorney and to Banks with respect to the matter referred to above …"
The Corporate Resolution conferred wide-ranging powers on Count Albert Chiang. Attached to that resolution was a document on the letterhead of Ocean Park Financial Holdings Pty Ltd headed Power of Attorney executed under the seal of that company and signed by PRL and the plaintiff as directors. By that document the company appointed and authorised Count Albert S C Chiang; "for and on behalf of our name, we do hereby appoint and grant Power of Attorney to Count Albert S. C. Chiang and do thereupon constitute and appoint said individual as Our Attorney-in-fact and our Trustee".

Wide powers were conferred on the Attorney In Fact. The document further provided, amongst other things: "Investment profits from all transactions should be transferred to the Bank Account provided by Count Albert S.C. Chiang in his name, and for its distributions …"

When PRL swore his affidavit of 15 November 2002 he described the arrangement between himself, the plaintiff and MV as a partnership. (He now contends that this is an incorrect description of their relationship). He also said that he understood that there was an arrangement between the three of them. PRL agreed that the plaintiff paid for both the properties and the expenses associated with the purchase.

PRL maintained he had played his part by obtaining $600,000 from SML and that this sum was for the Ambervale development

Over the time the plaintiff had known PRL, he had often spoken of his friend SML. About early August 2001 PRL telephoned the plaintiff and advised that SML had found some available money in Malaysia and that he was going to send SML the contract. PRL added, "He's got $500,000 but I asked him to push for more." The plaintiff said that the next morning PRL telephoned and advised that SML was here, having arrived that morning, and that he had the contract with him. When the plaintiff asked PRL what was in the contract PRL replied in a raised voice, "Do you want me to read all this over the phone?"

The plaintiff said that about an hour later PRL, SML and Johnathong Song (whom he had not previously met) came to his house and that on being introduced to Jonathong, PRL said, "Get ready - we're going to Parramatta". The plaintiff asked PRL what was in the contract and that PRL took a contract document from SML's hands and gave it to him saying, "Don't take too long, we've got to go soon".

The plaintiff started reading the contract. SML said, "Can I have your driver's licence? I need to make a copy of it. Yours too Peter." Both men handed over their licences. SML went over to the plaintiff's computer. PRL said to the plaintiff, "he (SML) needs to make a copy of the licences for the people in Malaysia. Can I also have the title deeds? They want a copy of them as well."

The plaintiff said that he handed the title deeds to PRL and that this was the last time he had them in his possession. He continued to read the contract. SML asked him for an ink cartridge for the computer but when the plaintiff did not know where it was SML used his.

As the plaintiff resumed reading the contract, he noticed SML printing copies of the driving licences of the plaintiff and PRL. SML handed a number of copies of a document with copies of the driver's licences at the top and signature blocks for PRL, the plaintiff and SML. Between the driver's licences and the signature blocks there was no writing. SML said, "Put your signature here" (indicating the place). The plaintiff said that he signed the documents thinking that he was merely acknowledging that it was a copy of his driver's licence.

SML's solicitors produced seven copy documents apparently bearing his signature. The plaintiff asserted that the table and writing appearing between his driver's licence and the signatures were not on the documents which he signed and that he has never signed documents in the form produced. On the first of the documents there are, at the top of the page photocopies of the driving licences of the plaintiff and PRL. Next these words appear: "We the undersigned and identities as shown above acknowledged that we have received the sum of Australian dollar: Six Hundred Thousand Only (A$600,000.00) as per the payment voucher No SL/PM 001-006 dated 9/8/2001."

Underneath these words are: ( Pltf's signature ) ( PRL's signature ) Acknowledged By Acknowledged By Nick Kardiasmos (sic) Robert Lee DL No 7912 SN (NSW) DL No 4332 W.J (NSW)
The name (and apparent signature) of "Erin Bleasdale", International Officer appear as witness. Beside Mr Bleasdale's signature is the stamp of the National Australia Bank Limited, Marrickville BBC NSW, No 082-357.

There are then six "payment vouchers" each for $100,000. At the top of each payment voucher is a photocopy of the driving licence of each of the plaintiff and PRL. Underneath these the following appears "Payment Voucher No SL/PM 001 (or 002, 003, 004, 005 or 006) To: Pioneer Management Pty Ltd Date 9/8/01

No Particulars Amount 1 Friendly Loan Using Lot 10 AUD 100,00.00 and Lot 42 Whitechapel Close Ambervale NSW 2560 as collateral

Amount in words: AU$ One Hundred Thousand Only <Cheque No Cash (SML's signature) (Pltff's signature) (PRL's signature) Approved By Acknowledged By Acknowledged By

Sai Meng Lee Nick Kardiasmos (sic) Robert Lee DL No 9929AH (NSW) DL No 7912 SN (NSW) DLNo4332WJ (NSW) 116. The plaintiff said that from his brief reading of the contract he noticed that Pioneer was the borrower, the loan was for $600,000 for the purpose of construction, he was to resign as a director immediately and SML was to take his place. PRL was to resign as a director in three months time. The plaintiff noticed that the land would be returned to himself and PRL once the loan was repaid. The plaintiff said that he did not understand a lot of things in the contract. He trusted PRL and as PRL had spoken highly of SML he (the plaintiff) was not wary of him. At SML's request the plaintiff returned the contract to SML. PRL, SML and the plaintiff then travelled to Parramatta and went to the Court house. There a Justice of the Peace witnessed PRL and the plaintiff sign the agreement as directors of Pioneer, its Common Seal being affixed and SML sign it as lender.

The agreement between Pioneer and SML recited that "by friendly loan of the amount (AUD 600,000) dated the 8th day of August 2001 handed" from SML to Pioneer, one of the directors of Pioneer would relinquish his post immediately and be replaced by SML, while another director would do so three months later and be replaced by a nominated director and Pioneer would hand over the land to SML "which shall be collateral for friendly loan (original copy of land title to be kept by the lender)." The agreement gave effect to the recitals. The agreement provided: "1. Upon the execution of this Agreement [SML] shall be deemed to have taken control over the land for collateral until the amount of friendly loan is refunded within three months in full plus the profit."

Under the definition clause " 'the Profit' means the actual amount multiply by 1.5," That is a very generous profit.

Further generous benefits were to accrue to the lender as cl 3.1 provided: "The parties hereto shall agreed (sic) to involve in the Project Development or any other development and guarantee [SML] the Bonus Amount within two years from the agreement and the mode of payment to be negotiated."

Under the definition clause: "the Project Development means the development of Macquarie Tower or Cinema Village whichever apply. The Bonus Amount means the sum of … AUD 2.50 million after taxation."

After the agreement had been signed SML and PRL took the plaintiff to the Office of State Revenue where SML attempted to stamp the agreement. After reading the agreement the Supervisor advised SML that as it was for development and no land was to be used for security under the contract, it was not liable for stamp duty. The Office of State Revenue issued a note that the document did not require stamping or marking by that office.

During the afternoon when SML was temporarily absent, the plaintiff alleged that this conversation occurred: Pltf: "I don't like all of this business, why are we doing all these things" PRL: "Don't worry, this is just to fool the other side. Simon has to send all of this to Malaysia". (after a pause) "If you worry about it, take my house. All of this is too much pressure, but don't worry everything will be all right."
The plaintiff stated that at that point SML rejoined them. The three men returned to the plaintiff's house. SML and PRL had a short conversation in the plaintiff's presence, but he could not recall its terms. PRL produced a form and asked the plaintiff to sign it. According to the plaintiff this conversation ensued: Pltf: What is this for? PRL: He has to send this with the other papers to Malaysia. SML: All this is just for them.
The plaintiff looked at the document. It was his resignation as a director of Pioneer. After signing it the plaintiff handed it back to PRL and SML. The plaintiff said that this conversation occurred: Pltf: What is going to happen with Michael [MV] I can't explain this to him. I won't explain this to him. SML: [to PRL] Who is Michael PRL: Michael is the builder. I will explain it to him. Sml: [To PRL] He has to wait. RL: We'll come again tomorrow. Pltf: No, I won't be here tomorrow. I have to be at Summer Hill. I have made an ap[pointment with the surveyor. PRL: All right.
The plaintiff said that PRL and SML left without leaving him either a copy of his resignation or the agreement.

The plaintiff stated that on 9 August 2001 while at his Summer Hill property with his son, Apostolis and a surveyor, PRL and SML pulled up in PRL's car and PRL requested the plaintiff to come with them. PRL opened up a sportsbag on the backseat of the car. It was full of money. The plaintiff asked, "What is this?" PRL replied, "We're taking it to the bank."

The plaintiff got in the car which was driven to the Marrickville branch of the National Australia Bank. PRL led the way and they went into a private room where SML put the bag on the table; four officers counted the money. After a period one officer said "That makes $…." Naming an amount which was nearly $600,000. SML handed some money ($300) to the bank officer who said, "That makes $600,000". One of the officers took the money away. The bank issued a receipt for $600,000 as being received from Ocean Park Finance. PRL, SML and the plaintiff were directed to the upstairs offices, being the international banking area. They went into a large room with a number of desks. The plaintiff sat off to the side, while PRL and SML stood in front of a desk at which a bank officer was seated. The plaintiff did not fully hear their conversation. The officer typed some documents. Part of the way through the conversation PRL went to another desk, filled out a document and asked the plaintiff to sign it. PRL also signed it. That document seeks a telegraphic transfer of $48,000. Under the heading of Payment instructions it states: "Advice & Credit Ocean Park Financial Holdings Pty Ltd to AUD A/C 2356 488125746 Rate: 0 5346 AUD $89,786.76 App: 403 COD 138 COCD BAL $60,702.68"
The form contains a Bank stamp with no date and no officer's initials. The plaintiff has stated that the document just mentioned was not actually used or submitted to the bank on that day.

On 9 August 2001 at the National Bank, Marrickville BBC, PRL signed a Telegraphic Transfer Application on behalf of Ocean Park Financial Holdings Pty Ltd, Marrickville, requesting the transfer of USD $309,600 (AUD equivalent $600,000) to the account of Ocean Park Financial Holdings Pty Ltd OFF HOUS DO1, National Australia Bank, 1SC SYDNEY NSW Australia." That application bears the bank's stamp and an officer's signature.

Concurrently, on 9 August 2001, PRL signed a Telegraphic Transfer Application on behalf of Ocean Park Financial Holdings Pty Limited, Marrickville requesting the transfer of USD $204,000 to: Account No 003 3112032838 6 Name Chiang Shih Shieh Albert Bank Standard Chartered Bank Sceneway Plaza Lamtin Kowloon Hong Kong

Thus, on 9 August 2001, SML took AUD$600,0000 in cash to the National Bank, Marrickville, BBC, it was deposited in the account of Ocean Park Financial Holdings Pty Limited and PRL immediately arranged for most of that sum to be transferred to the account of Count Albert Chiang in Hong Kong. A further USD$45,000 was transferred to a London account of Chiang. This was all part of a carefully planned manoeuvre and throws light on the agreement of the previous day.

On 11 March 2002 the plaintiff paid $2526.85, being fees for the development application out of his HSBC account. On 13 May 2002 the Council wrote to MV a letter containing significant adverse criticism of the development application. Amongst other things it raised these objections: · Repetition of uniform dwelling design · Street front dominated by driveways · Dwelling designs being of minimal architectural merit · Overall density being excessive
It requested that the dwelling designs be upgraded and suggested a reduction in the number of dwellings. MV stated that all the requirements of the Council could have been satisfied.

The plaintiff said that shortly after 13 May 2002 PRL telephoned and that this was said: PRL: "I wrote a letter to Council directing them not to deal with Michael (MV) anymore Pltf: Why PRL: Michael doesn't know what he's doing. I'll take it off his hands and I'll get the plans done myself. Remember Mr Koh? He is coming to see me. I will get him to draw the plans."
The plaintiff was not happy with this arrangement and suggested the name of various architects to PRL who replied repeatedly: " Mr Koh is the best, His plans are number one and he can talk to Council."

PRL engaged Mr Koh, a Singaporean Structural Engineer to draw up another set of plans to submit to Council. The plaintiff was worried because Mr Koh had never worked in Australia previously and was unlikely to be familiar with the local building regulations. Subsequently the Council refused the development application. Its letter of refusal of 17 September 2002 set out substantial reasons for doing so. It is obvious from the strong reasons given that the development application needed to be recast substantially.

In the meantime "For Sale" signs had appeared on the land. On 26 August 2002 MV telephoned the plaintiff , accused him of trying to sell the land without his knowledge and advised him of the erection of the "For Sale" signs. The plaintiff immediately telephoned PRL and stated that MV had just telephoned and stated that he had seen For Sale signs. The plaintiff asked "What's going on?" This followed: PRL: I don't know anything about it. It must be Simon (SML) doing something. Pltf: I don't care who's doing it, I'm putting a caveat on the properties tomorrow. PRL: Ah good,. That will bring everything out in the open.

On 27 August 2002 the plaintiff placed a caveat on the title of the properties.

On 10 September 2002 PRL came to the plaintiff's house and this conversation was held: PRL: Everything seems to be okay, we can still go ahead with construction Pltf: What do you mean? PRL: Simon's family like him so much they are selling two of their houses and they're going to help Simon by giving him the money to pay back the people in Cabramatta because they are giving Simon too much trouble Pltf: How is that going to help us PRL: That will allow us to do the construction this time on the big block. But Simon promised his family they could have the small block. This will make them feel good. I think we should give them the small block for a while until Simon returns the money. Pltf: If they sell both their houses, where are they going to live? How many houses do they have? PRL: They're going to buy a smaller house because this is too big for them. All you have to do is withdraw the caveat on the small block so he can put it in his family's name and make everybody happy. Pltf: How is Simon going to repay the money to his family? PRL: … his company had a tender to build a road in Malaysia and it is just a matter of signing the contract now because they won the tender and he will be able to pay back his family, assist us with the construction and help me to pay my debts as well. As soon as his family gets the money back … the small block will come back to us.
On 11 September 2002 PRL and SML came to the plaintiff's house about 11pm and a conversation to the following effect was had: SML: Nick you have to sign to withdraw the caveat Pltf: No way PRL: Remember what I told you yesterday? Just sign the small one only. SML: No, you have to sign both of them. PRL: Leave it Simon. I'll talk to him. PRL: (To pltf) Just sign the small one only SML: At any rate, the land is going to come back to you.
The plaintiff said that after a protracted debate he signed a withdrawal of caveat as to the small block.

On 6 October 2002 MV visited the plaintiff at his house and insisted that they take control of the land and complete the project and that they could do that by changing the directors of Pioneer. While the plaintiff had his doubts whether they could change the directors he and MV completed forms in the hope of achieving that end.

In cross examination by counsel for PRL and SML the plaintiff said that he did not understand that the $600,000 was money PRL had arranged by way of development finance for the Campbelltown project. He did not know what the money was for. He went to the bank because PRL and SML asked him to do so. The plaintiff accepted that he signed the document acknowledging the receipt of $600,000. He did not think that the bank stamp was placed on the document in his presence but, as earlier stated, it was not in its present form.

The plaintiff said that PRL told him that he had financial contacts in Australia and overseas which the plaintiff believed. The plaintiff said that PRL asked him for money to buy tickets to go overseas and that he (the plaintiff) lent PRL the money. The plaintiff said that PRL never told him that part of his purpose in going overseas was to raise finance for the Campbelltown development. It was up to PRL how he obtained finance which he was to do at his own expense. He could make the arrangements by FAX, telephone or any way he liked. The plaintiff said that PRL promised to repay him out of his (PRL's) own funds and did so.

The plaintiff said that after 9 August 2001 PRL told him that he had sent the $600,000 overseas. The plaintiff said that when he saw the $600,000 being counted he did not know where it was going. When he went upstairs at the bank and forms were filled out he realised that the money was going to Ocean Park.

The plaintiff said that he did not put investment funds into Pioneer. He got a loan and paid for the land. He "wanted to inject funds into the start-up of the land development project." The plaintiff gave this evidence: "Q. 'I would never have purchased the properties with my own monies or with monies borrowed and secured by myself alone.' A. If I didn't get my money back.

Q. But you couldn't know you were going to get your money back? A. Of course I know I was going to get my money back.

Q. How? A. If you develop you divide the land.

Q. What if the development falls over? A. How will it fall over?

Q. If the same company that owned the land borrowed the money for the development finance and something went wrong with the building and the development financier called in the loan, you wouldn't get your money back, would you? A. I didn't see that happening.

Q. No, you didn't think of it, did you? A. I didn't see that happening." 147. When cross-examined about the telegraphic transfer forms the plaintiff said that PRL filled out such a form and brought it to him to sign. The bank officer did not accept that form and typed out another one which only PRL signed. The plaintiff said he had a glance at the forms and saw the name of Ocean Park. He did not recall whether the amount of money was specified on the form.

The plaintiff said that he did not see the document transferring $600,000 on 9 August 2001 nor the one transferring money to Hong Kong (to Count Albert Chiang).

The plaintiff said that he did not speak to either PRL or SML about changing the directors of Pioneer because they were selling his land and this seemed to be one way to stop them. The plaintiff agreed that the change of directors had been reversed, PRL had filed some documents.

The plaintiff agreed that he had found out that the smaller block had been sold. The plaintiff said that he did not agree to lift the caveat so that Ngoc Ly could buy the smaller block. He reiterated the explanation earlier summarised as to why he withdrew the caveat over the smaller block.

The plaintiff agreed that when he lodged the caveat he inserted these particulars under the sub-heading Estate or Interest Claimed: "The Properti (sic) Were Purchased With The Proceeds of A Loan Wich (sic) Was Taken Out With My Own Property Being Used as Security."

The plaintiff said that he meant that "the properties were purchased with the proceeds of the land after I go the land, when I got to security my own property to buy them." As recorded in the transcript this answer is hard to follow.

The plaintiff said that when he agreed to withdraw the caveat he believed that they (PRL and SML) "were capable of bringing more financing." He thought that up to that point they had contributed nothing.

The plaintiff agreed that the reason he was prepared to resign as a director of Pioneer and allow SML to become a director in his place was that he believed that loan funds would be advanced for the development of the properties.

Counsel for PRL and SML pressed the plaintiff to agree that he had signed the form of resignation as a director on 9 August 2001 after he had seen $600,000 advanced but the plaintiff was adamant that he had signed the document at his home on 8 August 2001 after returning from Parramatta. He had noted that the form of resignation was dated 9 August 2001.

In cross-examination by counsel for PRL and SML the plaintiff asserted that it was agreed between the plaintiff, PRL and himself that Pioneer would own the land. The development application was submitted to the Council on behalf of Pioneer.

In cross-examination by counsel for the plaintiff MV said that none of the plaintiff, PRL and himself ever nominated a company to be in charge of the development of the property at Ambervale. MV said that he was not consulted as to whether Pioneer should enter into the agreement of 8 August 2001. Throughout 2001 and 2002 MV (and the plaintiff) were hoping the development would continue.

PRL said that he set about enquiries to secure finance to enable the development of the land. PRL said that his efforts required him to travel overseas and some of those trips were financed by the plaintiff. PRL said that he eventually managed to secure an agreement from SML to inject $500,000 which later became $600,000, for development finance. PRL said that he was keen to raise as much money as possible to maximise the profit on the project and that it was his intention to use SML's contribution as "seed capital" to raise further finance.

SML required the execution of the loan agreement of 8 August 2001. PRL said that after execution of that agreement by Pioneer SML paid over $600,000 in cash at the Marrickville branch of the National Australia Bank on 9 August 2001. PRL said that an acknowledgment of the receipt of those funds was executed by him and the plaintiff in the presence of Erin Bleasdale, an officer of that bank. PRL stated that as Pioneer did not have a bank account the funds were deposited into Ocean Park's account and from there telegraphically transferred. At SML's request the title deeds to the two parcels of land were provided to him by the plaintiff. PRL said that the $600,000 had not been repaid although the smaller block had been sold with the plaintiff withdrawing the caveat over it. PRL denied that he said to the plaintiff the matters attributed to him by the plaintiff as having been said on 10 September 2002 as to the smaller block and withdrawal of the caveat (and summarised earlier) and asserted that he had no power to bind SML.

In para 11 of his affidavit of 15 November 2002 PRL stated that Council approval would not be forthcoming for the development. PRL said that he no longer holds that view as he now held hopes that the development application could be modified so as to meet Council's requirements and still deliver a project. He was also of the belief based on his knowledge of the market, the increase in Sydney property prices, the pressures on outlying areas of Sydney for housing development and lending conditions generally that the land has increased considerably in value since it was purchased.

PRL stated that some of the loans the plaintiff alleged and for which he has recovered judgment related to overseas trips for which he advanced money to PRL when the latter was short of funds. PRL asserted that those trips were taken in obtaining or attempting to obtain finance for the joint venture and that there never was a partnership intended between the plaintiff, him and MV. PRL continued: "To the extent that my affidavit of 15 November 2002 mentions a partnership, I say that affidavit was drafted for me by my then legal adviser and the word partnership was not being used by me in a technical legal sense. I do not understand involvement in a company to be the same as a partnership."

In cross-examination by MV, PRL agreed that on 5 August 2001 he had a conversation with SML in which the question was canvassed as to what was a fair return to SML for lending or finding a loan of $500,000 for three months. SML replied that he wanted 1½ times what he lent plus some additional amount if things went smoothly and the development took off. SML said that he would take the Ambervale property as collateral, pay in cash and see if he could find an extra $100,000. SML also said that he prepared an agreement based on one a Malaysian lawyer had previously prepared.

PRL said that the $900,000 to be paid to SML in three months was going to come from Count Albert Chiang. PRL said "We believed that we should invest this $600,000 in return for the $2.5 million full development fund for Campbelltown."

When PRL was asked what was the purpose of the transaction of 8 and 9 August 2001 he replied that MV had not made any attempt to obtain development approval. However, he (PRL) had to carry out his duty to obtain finance. The plaintiff and he knew that "$600,000 was for initial money to be sent to the Count to get a development approval for $2.5 million for the Campbelltown block of land."

PRL described the arrangement with Count Albert Chiang thus: "… we gave him an initial amount of money in return for him to get the full amount that is required for our purposes in Australia …".

PRL said that it was correct to say that he and the plaintiff were entering into a joint venture as shareholders of the corporate entity that owned the land and that MV was not part of the joint venture. He was to be engaged as the builder if he was able to perform. PRL said that he and the plaintiff as directors of Pioneer were under no obligation to consult with MV. In accordance with his understanding with the plaintiff MV was never allowed into any discussions about financing. PRL did not notify MV that Pioneer was going to give title deeds as security to SML. Nor was MV appraised of the agreement between Pioneer and SML or any of the dealings which occurred between Pioneer and SML.

PRL asserted that Pioneer received $600,000 from SML but agreed that that sum was paid into the bank account of, or went to Ocean Park. None of the $600,000 had been used to pay for any Council application costs or development costs as to the Ambervale land.

PRL was cross-examined as to the purported copy agreement of 8 August 2001 annexed to his affidavit of 15 November 2002. That copy did not contain the cover sheet and the first page. The agreement annexed referred to "the land" and the lender being deemed to have taken control over the land. As earlier mentioned, cl 3.1 of the agreement (on p 3 thereto) provides: "The parties hereto shall agreed (sic) to involve in the Project Development or any other development and guarantee the Lender (SML) the Bonus Amount within two years from this agreement …".

Page 1 of the agreement defines the Project Development as meaning "the development of Macquarie Tower or Cinema Village whichever apply" and the Bonus Amount as meaning AUD2.5 million. The affidavit was filed after the plaintiff had obtained urgent interlocutory relief on 13 November 2002 extending the plaintiff's caveat 8901807 over Lot 10 (the larger block) until further order of the Court. The matter was listed before a Registrar on 18 November 2002 and thereafter from time to time.

PRL denied that he had endeavoured to mislead by omitting the cover sheet and page 1, that is, he denied that he was trying to conceal that the true purpose of the payment of $600,000 was not to advance the Campbelltown development but the development of Macquarie Tower or Cinema Village and that Pioneer was providing unencumbered collateral security for a loan essentially for these other developments from which substantial profits were anticipated PRL said that the omission of the coversheet and page 1 was accidental. I doubt if this was so. PRL struck me as devious, deceitful and calculating. He was adept at taking advantage of the trust which the plaintiff placed in him and manipulating the plaintiff to his (PRL's) own advantage.

Examples of the manipulation included PRL arranging to collect one-third of the profits of the venture while putting no money of his own into the venture, but just undertaking to raise construction finance, the events of 8 and 9 August 2001, the reasons advanced by PRL for the plaintiff withdrawing his caveat over the smaller block and PRL, borrowing money from the plaintiff for expenses he was supposed to meet, agreeing to pay these moneys back and then suggesting that they should be paid as expenses of the partnership/joint venture. In effect that meant they would be paid by the plaintiff. PRL treated the plaintiff as a useful financial resource to be utilized for funds at his (PRL's) convenience.

PRL agreed that Ocean Park had two accounts with the National Australia Bank; the business cheque account and the US dollar account. The $600,000 produced by SML was transferred to the US dollar account of Ocean Park.

PRL agreed that the transfer of USD204,000 on 9 August 2001 to the account of Count Albert Chiang was part of the sum of $AUD600,000 provided by SML. PRL denied that Count Albert Chiang was not receiving those funds for anything in respect of the development of the Ambervale property. PRL said that Count Albert "received those funds knowing those were moneys deposit (sic) for Ambervale development loan." PRL agreed that there was no evidence in these proceedings that the transfer of $US204,000 to the Count was for any purpose associated with the Ambervale development. PRL also agreed that there was nothing to suggest in the statements he had made that $US204,000 sent to Count Albert Chiang had anything to do with the Ambervale development.

It should also be noted that on 9 August 2001 on the signed authorisation of PRL, USD 45,000 was sent by telegraphic transfer from the account of Ocean Park to Count Albert Chiang, A/C 0882603010, Overseas Chinese Banking Corporation, 111 Cannon Street, London.

By facsimile letter of 5 August 2001 addressed to PRL, Ocean Park Count Albert Chiang wrote:

"After our last telephone conversation, I phoned the Trustee concerning the possibility for us to 'ride on' their SLC this month. I told them that there is a possibility that we can get the full US$1 million soon, so they suggested that if I am 100% confident this could be done and the sum of US$250,000 could be obtained before 11th August morning, then they will include us in the SLC and give us time to get the funds of US$1 million before 25th August 2001.

What this means is that we still have a chance, so you do not need to rush on Tuesday, but please study the various options with Nick carefully to send me the following:-

US$205,000 to reach me in Hong Kong by 11 August morning (Saturday) US$45,000 to reach me in London by 11th August 2001 $US$300,000 to reach me in Hong Kong by 25th August 2001 US$200,000 to reach me in London by 25th August 2001. For your information, there is now a chance that my friends might pull out of their $US300,000, so in case they do this, then we will have to look for a total of US$1 million before 25 August 2001. They have waited rather a long time for us, but I am trying to convince them that we are definitely going through this month. This is the latest report so please do your best. Kindly phone me after you have read this fax." 176. PRL agreed that that letter required him to send certain amounts of money to reach Count Albert by various dates and that the purpose of that money was "Ride on", "SLC this month". The need was to get funding to pass on to some trustee by 11 August 2001.

There is correspondence between the amounts sent by telegraphic transfer on 9 August 2004 (US$204,000 and US$45,000), with those mentioned in the letter, namely US$205,000 to Hong Kong by 11 August morning and US$45,000 to London by 11 August 2001.

On 16 August 2001 USD48,000 was transferred from the US dollar account of Ocean Park into its business cheque account. The equivalent amount in Australian dollars was $89,786.76. PRL agreed that on 17 August 2001 he caused Ocean Park to pay $11,000 off his own personal Mastercard account. The sum of USD48,000 came from AUD600,000 provided by SML. PRL said that SML gave AUD600,000 to Pioneer.

PRL said that his Mastercard account was used for travelling purposes including buying aeroplane tickets and not (mainly) for his personal expenses. The one-page statement produced for the period 21 July 2001 to 20 August 2001 does not bear this out. There is no satisfactory documentary evidence as to how the balance of $10,290 from the previous statement is composed. PRL estimated that the majority of the expenses, 80 to 90 per cent incurred on his National Gold Mastercard account were business expenses. PRL produced a sheet from a notebook which was far from convincing. It did not help to establish that the expenses listed were incurred as to the Ambervale development.

The position which emerges is that Count Albert S C Chiang ended up receiving in his overseas bank accounts the bulk of the money (USD 204,000 and USD 45,000) provided by SML ostensibly to Pioneer but deposited in the USD account of Ocean Park and SML ended up with the title deeds to the Ambervale property. The Ambervale property had not been paid for by SML, but out of moneys raised by the plaintiff on his personal properties. According to PRL, he and the plaintiff agreed not to disclose this latter matter to SML.

It was evident that Count Albert Chiang had provided no security for the money (USD 249,000) he had received at the direction of PRL via Ocean Park and SML. PRL claimed that Count Albert Chiang knew that the money sent to him was "to be returned for $2.5 million for development of Campbelltown property." PRL also said, "The Count's duty is to receive money for lending, obtaining the money that he will for Ocean Park development of Campbelltown land." This was a specious answer.

PRL agreed that on his case the profits of the development were to be divided amongst Pioneer's shareholders. As at the hearing PRL was the only shareholder. PRL agreed that as at November 2002 he and the plaintiff each held one share in Pioneer. The Annual Return of Pioneer declared on 11 April 2003 and signed by PRL revealed that PRL had crossed out the plaintiff's holding of one share in Pioneer and changed his (PRL's)own shareholding from one to two. PRL agreed that he did not pay the plaintiff for his share or give him any other consideration. PRL claimed that the plaintiff had surrendered his share at a mediation. The settlement did not eventuate.

PRL said that the plaintiff was aware that all Pioneer's money was invested with Count Albert Chiang. PRL further said that the plaintiff's money will be returned to him "when we have successfully finished the development project. It will still be returned to him" and "He knew all along we were waiting for the money from the Count."

I do not accept this evidence of PRL. The plaintiff was not aware that all Pioneer's money was invested with Count Albert. Nor do I believe that the plaintiff's money will be returned to him. I do not accept that the plaintiff knew all along that they were waiting for the money from the Count. PRL and Count Albert were engaged in a project of their own, the details of which have not been disclosed to the Court.

In re-examination PRL, in answer to the question how was he going to use the money sent to Count Albert Chiang as seed capital, gave this explanation: "Myself as a finance consultant, if we need $2,5 million we need to have a deposit of at least 10 per cent or 20 per cent in order to raise $2.5 million. We have all along needed seed capital to kick off, to obtain development funds for Campbelltown. Very clearly my partner and I, we understood we needed to send money to the Count for him for whatever money he raised to come back quickly to us in order to proceed."
I do not accept that explanation. PRL caused the money to be remitted to Count Albert for the purposes of Count Albert and PRL. It had nothing to do with the Ambervale development. PRL was using the plaintiff and the money for his own purposes. However, I do accept PRL's use of the word "partner" when referring to the plaintiff.

SML said that he had known PRL since about 1990 and that they were not related. SML said that PRL re-established contact in 2000 and made several requests of him (SML) for finance for projects in which he was involved. SML said that in May 2001 he held a telephone conversation with PRL in which PRL stated that Pioneer was looking for USD1-million and would use its properties as collateral. 'SML said that he would make some enquiries".

SML said that about 13 July 2001 PRL telephoned and said that he was going to fax the valuations for the property that could be used as collateral for the loans. The properties belonged to Pioneer, the plaintiff and PRL. The latter said that they were worth millions and that the plaintiff was his backbone. SML received some valuations and after reading them, started to think about providing the finance himself.

SML said that he arrived in Sydney on 31 July 2001 on a social visit. On 1 August 2001 PRL showed him the Ambervale property, 78 Batt Street Sefton (and possibly 80 Batt Street) and a property at 92 Columbine Street, Punchbowl.

At a glance

Court

Decision date

Before

Source

Judgment (355 paragraphs)

Parties

Cases Cited (10)

Cited By (1)