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Category: Principal judgment

Parties: Philippa Jane Grasso and Alison Rose Manton as the Executors of the Estate of the Late David Daley (plaintiff)
Geoffrey Charles O’Connell (defendant)

Representation: Counsel:
M Maconachie (plaintiff)
M Davies (defendant)
Solicitors:
Kells the Lawyers (plaintiff)
Heard McEwan Legal (defendant)

File Number(s): 2024/00085856

Publication restriction: Nil

JUDGMENT

Introduction

1. These proceedings relate to a claim that Geoffrey O’Connell (‘the defendant’) has failed to repay money lent to him – $3.7M – by David Daley. There is no issue that that amount of money was – to express it neutrally at the present time – advanced by Mr Daley to, and received by, the defendant, through five tranches made over the course of approximately five years, and that the money advanced attracted interest at a prescribed rate. There is also no issue that, from time to time, the defendant paid interest on the principal amounts loaned by Mr Daley in accordance with these arrangements.

2. In late 2022, with the assistance of family members, in particular, his son-in-law, Mr Daley sought repayment of the principal amounts advanced to the defendant, but the defendant – ultimately – refused to do so, arguing that, “over lunch” in 2019, Mr Daley forgave repayment of the debt the subject of the advances made to him.

3. Resolving whether that event occurred as the defendant contends is a – if not the – central issue in the trial, and its resolution is complicated by the fact that Mr Daley passed away in late 2023.

Background facts

4. In what follows, I set out the background facts. They reflect my findings.

David Daley

5. Mr Daley was a practising chartered accountant, working in the Wollongong area for around 40 years. He retired from his accountancy practice – then known as Daley & Co – in 2000.

6. Mr Daley, who was born in 1936, passed away on 18 November 2023. He was 87 years of age. His death was communicated to the solicitor for the defendant on 28 November 2023, and the defendant accepted that he knew of Mr Daley’s passing “before December 2023” (T158.40).

7. Mr Daley’s wife pre-deceased him, and he is survived by his two daughters – Philippa Grasso and Alison Manton. They are the executors of his estate, which is the plaintiff.

The defendant

8. The defendant was a long-term friend of Mr Daley’s. At one point, they were in business together: they were shareholders in a motor dealership called the Kinghorn Motor Group (‘KMG’) for the period of approximately 1998 to 2014.

9. During this time, the dealer principal was the defendant, and it appears he was the person responsible for conducting the day-to-day business of the dealership.

10. In 2014, the defendant purchased Mr Daley’s shares in this business – becoming the sole director and shareholder of it. In doing so, he also purchased the land upon which the business operated for the sum of $4.5M.

The loans from Mr Daley to the defendant

11. As confirmed at the commencement of the hearing, it is not in issue, and I accept and find, that Mr Daley loaned the defendant $3.7M – as follows:

12. on 19 February 2013, Mr Daley loaned the sum of $600,000 to the defendant, carrying interest at the rate of 8% per annum;

13. on 29 April 2013, Mr Daley loaned the sum of $100,000 to the defendant, carrying interest at the rate of 8% per annum;

14. on 16 September 2014, Mr Daley loaned the sum of $100,000 to the defendant, carrying interest at the rate of 8% per annum;

15. on 17 March 2017, Mr Daley loaned the sum of $2,000,000 to the defendant, carrying interest at the rate of 6% per annum; and

16. on 23 March 2018, Mr Daley loaned the sum of $900,000 to the defendant, carrying interest at the rate of 6% per annum.

17. None of the principal amounts loaned to the defendant have been repaid by him (agreed facts at [14]).

18. Although the parties initially raised an issue about whether the money loaned by Mr Daley to the defendant was done so via one loan or five separate loans, the materiality of that issue ultimately fell away. The matter was argued on the footing that there was, in substance, a series of loans and, as earlier noted, the critical issue was whether the loans had been varied by Mr Daley and the defendant “over lunch” in September 2019.

The payments of interest

14. The defendant paid interest to Mr Daley on the principal sums up to, and beyond, Mr Daley’s death. The payments of interest were accepted to be at the rate prescribed in each of the loans.

15. All up, it is agreed that the interest paid by the defendant totals $1,858,620.00 – of which $77,108.99 was paid after Mr Daley’s death (defendant’s opening submissions at [37]).

16. It will be necessary to return to the payments of interest made by the defendant following Mr Daley’s death, given the plaintiff argues that the fact he did so was inconsistent with what the defendant alleges was agreed at lunch in September 2019: see further [139]ff, below.

Mr Daley’s health

17. In around 2020, Mr Daley began to experience some worsening of his health. Prior to that time, and despite any issues with his health, he remained independent and resided at his home in Mount Ousley, NSW. On 4 August 2020, however, he entered a rehabilitation facility where he stayed until 10 September 2020. At that time, because his mobility had worsened, he entered respite care at Greenhill Aged Care – an aged care facility in Figtree, NSW (‘Greenhill’).

18. Mr Daley began full-time residence at Greenhill on 1 October 2020.

19. In November 2023, Mr Daley’s health began to deteriorate, and he was diagnosed with pneumonia. That condition gradually worsened over a number of days, and on 2 November 2023, Mr Daley was transported from Greenhill to Wollongong Hospital – where he was admitted.

20. Ms Grasso’s evidence was that she or her sister, Ms Manton, visited Mr Daley every day whilst he was in hospital. Her evidence was that, at one point, Mr Daley began “making progress because he had started walking around and was eating thick liquids” (Philippa Grasso affidavit, par 41). Notwithstanding this progress, Ms Grasso’s evidence was that, “over the next couple of days”, Mr Daley’s condition rapidly deteriorated – “he became confused and agitated and eventually lost his ability to speak” and “started sleeping a lot and eventually lost consciousness”. I am satisfied, and find, that her evidence provides an accurate account of Mr Daley’s condition during November 2023.

21. In relation to Mr Daley’s deterioration and the rapidness of it, Ms Grasso’s evidence (which I accept) was that, prior to the “confusion and agitation setting in over his final days”, she had not observed any changes “whatsoever in [Mr Daley’s] mental capacity”, and that he appeared to her “to be as sharp as he always had been throughout [her] lifetime” (Philippa Grasso affidavit, par 43). I am also satisfied, and find, that this provides an accurate account of Mr Daley’s “mental capacity” during this time and, importantly, the timing and duration of its decline.

22. In this last respect, the defendant did not submit that, in the period before his hospitalisation, Mr Daley’s “mental capacity” was materially diminished. In fact, the cross-examination of Mr Grasso confirmed that Mr Daley was “in nursing care at [Greenhill] because he had mobility problems” and that, in his interactions with Mr Daley, Mr Grasso assessed him as being “of sound mind”, and there was no “mental or neurological reason” precluding him from having the capacity or ability to manage his own affairs (T25.33-25.50).

23. The defendant did, however, submit that, in the period of time following Mr Daley’s admission to Wollongong Hospital on 2 November 2023, not only did his health decline, but so too did his “state of mind”: the defendant essentially argued that, in this time period, it should be inferred that Mr Daley suffered cognitive decline, although precisely to what end that submission was directed was not made clear. In any event, I do not accept this submission. I find that, to the extent there was any material cognitive decline in Mr Daley, it was only as Ms Grasso said in her evidence.

The management of Mr Daley’s financial affairs

24. Although Mr Daley retired from his accountancy practice in 2000, he continued to have an office with Daley & Co – where he stored his records and where he continued to visit so that he could work on his own financial affairs. I am satisfied, and find, that he continued to manage his own financial affairs and attend the offices of Daley & Co each week until early 2020, when the COVID-19 pandemic prevented him from doing so.

25. Ms Grasso’s evidence was that Mr Daley’s financial records were collected by her and Mr Grasso from Daley & Co on 23 December 2020. That was also the evidence of Mr Grasso. I accept that they did so.

26. Ms Grasso’s evidence was that, shortly prior to that date, Mr Daley had suggested to her, during a visit to him at Greenhill, that this should happen “because he wanted to maintain control over his financial affairs, which he said had been neglected for some time” (Philippa Grasso affidavit, par 22). She also gave evidence that Mr Daley said words to the effect of:

“I haven’t been hearing from Andrew. Can you please go and take over my business papers and bring them in?”

27. The “Andrew” referred to is Andrew Stephenson – an accountant and partner in the firm Daley & Co. Ms Grasso, during her evidence, also gave the following context to the request that was made, which I accept, explaining (T44.25):

“--I went at least every week… and we used to go to the office to clear out his mail, because it always still delivered to… there and then there was things that were missed and we were getting fines and things. And that’s when it was - made the decision that we went down and cleared his office out and went through everything. And that happened to be in the December.”

28. In relation to this evidence, and Mr Daley’s desire that his financial records be collected from the offices of Daley & Co, I am satisfied that Mr Daley made that request in the terms described by Ms Grasso at [26], above. In this respect, I regard Ms Grasso’s account about this conversation to reflect the probabilities and the logic of the events at this time: Mr Daley, to this point in time, ordinarily would undertake the management of his own financial affairs but, given his decline in mobility and the existence of the pandemic (and the restrictions associated with it), he was simply unable to do so.

29. As to what Ms Grasso meant by “take over” (see [26], above), during her cross-examination, she said that this meant merely assisting Mr Daley with his financial affairs, in that they worked “like, a partnership” and involved him in “the decisions” about them (T47.27-47.49).

30. I add the following: the fact that Mr Daley involved his daughter in this way also fits with him expressly contemplating that, at some point, his affairs may need to be managed by his daughters. In this respect, he had executed a power of attorney on 11 August 2010 that appointed his wife (who passed away in 2011) and his daughters to be his attorneys (Philippa Grasso affidavit, par 7).

31. It is convenient, at this point, to deal with the evidence from Ms Manton. Her evidence was confined and, ultimately, was no more than, in around Christmas 2020, she was told by Ms Grasso that Mr Grasso was to be involved in collecting Mr Daley’s financial records (T75.50). Paragraph 15 of her affidavit, in contrast to this, suggested that she was involved, or present during, a conversation between Mr Daley and Mr Grasso about retrieving Mr Daley’s financial records from Daley & Co (Alison Manton affidavit affirmed 5 February 2025, par 15; Exhibit D). She accepted, however, that her affidavit was “incorrect”, and explained this on the basis that (T76.20): “…when I wrote Michael said, it was more that Philippa said to me that Michael had said that he would get them all together” and “… I took it as - most of my conversations with Michael were through Phillipa [sic]” (T76.50).

32. The defendant suggested that this was the mark of a dishonest witness. I do not accept that submission. The evidence in par 15 of her affidavit only sought to establish that Mr Daley was involved in the decision for his financial records to be retrieved from Daley & Co – something that plainly occurred and was something of a minor issue in the trial. That is an important consideration when evaluating the defendant’s submission. Further, her explanation that it was most likely something that was conveyed to her by Ms Grasso impresses me as being consistent with the circumstances at this time – namely, that assisting Mr Daley with collecting the records and with his financial affairs was something that Mr and Ms Grasso were dealing with, not Ms Manton.

33. My assessment is that Ms Manton was endeavouring to give her evidence in an honest and straightforward way. Her acceptance that her affidavit was incorrect, in that one respect (which, I add, was largely volunteered by her), does not lead me to doubt her evidence.

The collection and review of Mr Daley’s financial material from Daley & Co

34. Ms Grasso’s evidence was that the documents collected by her and Mr Grasso from Mr Daley’s office at Daley & Co on 23 December 2020 were reviewed by her and her husband over the Christmas and New Year period (Philippa Grasso affidavit, par 24). That was also the evidence from Mr Grasso, albeit that he said his review of Mr Daley’s financial records was undertaken “immediately” following their collection (Michael Grasso affidavit, par 8).

35. I accept this evidence and find that, having collected Mr Daley’s financial material from Daley & Co, it was reviewed in this time period by Mr and Ms Grasso – but, principally, by Mr Grasso, given he was an accountant and tax agent and, as Ms Grasso said in her evidence, she was “not an accountant” and she was “not into finance” (T47.12; T49.29).

36. In the course of his review of Mr Daley’s financial records, I accept that Mr Grasso identified each of the loans that Mr Daley had made to the defendant: the financial material collected from Daley & Co included “books containing payment ledgers written in handwriting” and an “acknowledgement” in the defendant’s handwriting and signed by him (defendant’s affidavit, par 22; Exhibit 1). I am satisfied, and find, that the payment ledgers record, in Mr Daley’s handwriting, each of the loans that were made by Mr Daley to the defendant. To be clear, the ledgers identified: the date each loan was made; the fact that a cash cheque was provided in the amount of each loan; and the interest rate attached to each loan. Those ledgers provided:

37. I am also satisfied, and find, that the “acknowledgement” that was discovered recorded the receipt of the money the subject of the loan on 19 February 2013 – namely, $600,000. That acknowledgement was in the following terms:

The discussion with Mr Daley about the loans made to the defendant

38. Ms Grasso’s evidence was that, in around early January 2021, on “dates” she could not “precisely recall”, she visited Mr Daley with Mr Grasso and took the documents that she and Mr Grasso had collected from Daley & Co (Philippa Grasso affidavit, par 25).

39. Her evidence was that, when she visited Mr Daley in or around early January 2021, the following discussion was had (Philippa Grasso affidavit, par 26):

“David [Daley]: Yes, this is what I wanted to show you. In February 2013 I loaned Geoff O’Connell $600,000 which he was supposed to pay back to me in February 2016. Over the next few years up until 2018 I loaned him more money which can be seen in the bank statements. The monthly deposits of $19,833 into my NAB account represent the agreed interest paid by Geoff on these outstanding loans. Andrew also knows about these loans. He handles Geoff’s affairs for him.

I trust Geoff though. He pays the interest on time, and he owns significant land in Nowra. Leave the loan for now because the interest rate is attractive. He was supposed to pay me back the principal years ago. I didn’t realise I had lent him that much money though.

[Philippa Grasso]: You should really do something about it, Dad. It is a long way overdue and a lot of money.

David [Daley]: Don’t worry about it for now. I trust that he will repay it.

[Michael Grasso]: I can contact Andrew and find out what the repayment intentions are if you like? He might know something.

David [Daley]: Yes ok, please do that. I haven’t seen or heard from Geoff for a long time, but he keeps making the interest repayments to me so I was not that worried. Here are the interest rates here. The last one for $900,000 is 6% too [he held up the documents which are at pages 25-27 of Exhibit PG-1].”

40. In relation to this evidence, the “Andrew” referred to is Andrew Stephenson. Further, the documents referred to “at pages 25-27 of Exhibit PG-1” are Mr Daley’s handwritten records of each of the loans made by him to the defendant – including the date, amount and interest rate: see [36], above.

41. The defendant submitted that Ms Grasso’s evidence about the above discussions she had with Mr Daley was a “fabrication” – a proposition that was put directly to her during her cross-examination.

42. In relation to the timing of the visit, specifically whether it was in January 2021, Ms Grasso was not certain: her evidence was that she did go, but that she was “just not sure about the dates and things” (T54.30). I regard the actual date of when she spoke further with Mr Daley about the records to be largely inconsequential, but it is likely to be around this time period given when the records were collected, what Mr and Ms Grasso did with those records over the Christmas and New Year period and the general frequency with which Ms Grasso would visit her father. To be clear, I do not accept that any imprecision with this date adversely reflects upon Ms Grasso’s reliability, less still her credibility.

43. Ms Grasso’s evidence was that the conversation she had with Mr Daley, as set out in par 26 of her affidavit (see [39], above), occurred when she visited with Mr Grasso.

44. Mr Grasso’s evidence was, however, different to her evidence. In his affidavit, Mr Grasso did not depose to attending, as Ms Grasso had said, upon Mr Daley at Greenhill in January 2021 (or broadly in that time) and being involved in a discussion about the loans between Mr Daley and the defendant. Rather, he gave evidence that, having discovered (amongst other matters) the five loans that Mr Daley made to the defendant, he showed those papers to Ms Grasso, and the following conversation occurred between them (Michael Grasso affidavit, par 12):

“[Michael Grasso]: Look, I’ve found it. This is what it is about. He loaned $3,700,000.00 to Geoff O’Connell. You’d better take this in to your father and show him.

[Philippa Grasso]: I’ll take these to Dad and ask him about them.”

45. In my view, the probabilities favour that Mr Grasso did not attend when the loans were discussed with Mr Daley, but otherwise I am satisfied that Ms Grasso did attend and raise the loans with Mr Daley in the course of one of her visits in 2021. In my view, that Ms Grasso attended on her own is consistent with her evidence about the frequency of her visits to Mr Daley at Greenhill, and Mr Grasso’s evidence about the infrequency of his. Thus, I do not accept Ms Grasso’s evidence about attending with Mr Grasso, but consider that this was an honest – yet mistaken – recollection by her.

46. Notwithstanding that I have found Ms Grasso’s evidence to be mistaken in that particular respect, I am satisfied that she had a conversation with Mr Daley in the terms she described in par 26 of her affidavit (see [39], above) – with the exception of the evidence of what Mr Grasso is alleged to have said, and the immediate response to that by Mr Daley (“[y]es ok, please do that”). In my view, that she did so is consistent with the logic of events and the probabilities: having reviewed, with the assistance of Mr Grasso, the financial records of Mr Daley; having discovered the existence of the five loans (and that they totalled $3.7M); and having been prompted (I accept) by Mr Grasso to draw this to Mr Daley’s attention, Ms Grasso did so.

47. Having raised the loans with Mr Daley, I am satisfied that he would have provided Ms Grasso with a response and explanation for the arrangement and why things were as they were, and that it was in the terms described by her in her evidence. The responses given by Mr Daley, I consider, fit with the probabilities and logic of events: Mr Daley was not unduly concerned about the loans because interest was being paid on them by the defendant; he trusted that the defendant would repay the principal amounts; and he considered that the rate of interest was “attractive” (and it was not, during submissions or evidence, suggested otherwise). Thus, based on Mr Daley’s wishes, the loans were “[left] for now”.

48. As I have earlier noted, in the course of cross-examining Ms Grasso, counsel for the defendant put to her that her evidence at pars 25 and 26 of her affidavit (see [38]-[39], above) was a “fabrication”. Her response, in relation to par 25, was that she “would have gone” but that she was “just not sure about the dates and things” (T54.23-54.30). Her response to the suggestion that the content of par 26 was a fabrication was a firm denial: she maintained “[n]o, it’s true” (T59.3).

49. It follows, from the findings that I have made in relation to each of those paragraphs, that I do not accept the defendant’s submission that Ms Grasso’s evidence across these two paragraphs (or more generally) was a “fabrication” – nor anything remotely approaching that. At its highest, her evidence contained some imprecision (in relation to a date which, as I have explained, I consider to be of no moment) and an inconsistency with an event (who was present during discussions with Mr Daley in around early 2021 which, as I have explained, I consider to be an honest – but mistaken – recollection by her). That is a far cry from amounting to a “fabrication”, as the defendant suggested.

50. Independently of those findings, I add the following. First, my assessment of Ms Grasso is that, at all times, she endeavoured to give honest evidence based upon her genuine recall of events that occurred a number of years ago. I formed a favourable view of her and her evidence, and I accept her evidence as I have earlier made clear – except in one respect, where I am satisfied that her evidence was an honest, but mistaken, recollection (see [45], above). Secondly, it is important to note, given the defendant’s submissions, that questions relating to the reliability of a witness and their evidence do not necessarily present a binary choice. That is because “[i]t is the ­everyday ­experience of the courts that honest witnesses are frequently in error about the details of events”: M v the Queen (1994) 181 CLR 487, 534; [1994] HCA 63; Cabot (a pseudonym) v R [2018] NSWCCA 265 at [60]. It is also for the reasons explained in Palmer v R [2018] NSWCCA 205 at [51]:

“At the most general level, a suggestion that a witness must be credible in relation to all aspects of her [or his] evidence, or none, defies common sense… it elides questions of unreliability and untruthfulness. Once those elements are separated, it will generally be accepted that even witnesses who lie do not lie about everything, and witnesses who are unreliable in one respect may be perfectly reliable in another...”

The steps taken to “follow-up” the loans

51. Mr Grasso’s evidence was that, in October 2022 (on a date that he could not precisely recall), Mr Daley telephoned him, and they had a conversation to the following effect (Michael Grasso affidavit, par 13):

“[David Daley]: Daleys aren’t looking after my affairs and I haven’t heard anything from them for a long time. Can you please take over for me and sort everything out?

[Michael Grasso]: I’ll write to Geoff O’Connell and ask what his intentions are in terms of repaying the loan.

[David Daley]: Ok, please do that.

[Michael Grasso]: Just to find out what he says his plan is about repaying the loan.”

52. Mr Grasso was cross-examined about this conversation, and he agreed that Mr Daley’s request to him “was to essentially take over the financial affairs” of Mr Daley, because “Daleys” was “not looking after” them (T28.39-28.42). The cross-examination, which was not altogether clear, then sought to suggest that the subject-matter of the conversation “[jumped]” to the repayment of the loans by the defendant, and that was “not in keeping with the concerns” that Mr Daley had expressed (T28.44-28.46; T31.45). Mr Grasso’s explanation (which I accept) was that the proposal to write to the defendant, in the terms suggested in par 13 of his affidavit, was driven by the fact that, whilst they otherwise had a clear picture of Mr Daley’s financial affairs, the loans were “an unknown”. He explained (T32.5):

“… Up until that point we had got a fairly sort of clear picture of David’s financial position, but that was not known to us. So I thought the sensible thing would be to write and find out what’s going on in relation to that loan or loans.”

53. Mr Grasso’s evidence (which I accept) was also that he spoke with Mr Daley and said (T32.40): “…do you know - have you, have you been in contact with this fellow and he said no. So that’s why we wrote - one of the reasons we wrote this letter”. The letter Mr Grasso referred to is the letter dated 13 October 2022 (see [56]ff, below).

54. The cross-examination then sought to establish that Mr Daley did not instruct Mr Grasso to recover the loans from the defendant – a proposition which Mr Grasso did not agree with (T32.15). It was also suggested to Mr Grasso during his cross-examination that, “[a]t its highest”, Mr Daley merely agreed with Mr Grasso’s suggestion to write to the defendant to make an “[e]nquiry as to those loans” – and his response was: “Yes, as to the existence of the loan and what his plan was to repay them” (T32.22).

55. I accept Mr Grasso’s evidence on this topic, and generally. I am satisfied and find that, in October 2022, he had the conversation referred to in his affidavit at par 13, during which Mr Daley acknowledged the existence of the loans he had made to the defendant and agreed to Mr Grasso’s suggestion that a letter be sent to the defendant to clarify the defendant’s plan to repay them. In my view, this is significant evidence demonstrative of the loans remaining upon the original terms – not varied, as the defendant has suggested.

56. Following this discussion, on 13 October 2022, Mr Grasso wrote a letter to the defendant headed “Status of your Loan account from David Daley” advising that he was “the current tax agent and accountant for Mr David Daley” and that he had been “asked by his family to clarify the status of [the defendant’s] loans from David”.

57. The letter contained the following table that “summarizes the current position of your loan account from records received”:

| Loan date:- | Loan Amount:- | Int rate pa:- | | 19-Feb-13 | 600,000 | 8% | | 29-Apr-13 | 100,000 | 8% | | 16-Sep-14 | 100,000 | 8% | | 17-Mar-17 | 2,000,000 | 6% | | 23-Mar-18 | 900,000 | 6% | | Total Balance:- | $3,700,000 | |

58. The letter also sought advice from the defendant in relation to two matters: first, that the “details of [the defendant’s] loan account” were correct; and, secondly, his “plans to repay the abovementioned loan account”.

59. Mr Grasso sent this letter by registered post to the defendant and the defendant accepted receiving it (Michael Grasso affidavit, par 14; defendant’s affidavit, par 63). The defendant’s evidence was that upon its receipt, he “scanned and sent [it] to [Mr Stephenson]” and he “said to [Mr Stephenson] ‘can you please deal with this[?]’” (defendant’s affidavit, par 64). Mr Stephenson, as earlier noted, is an accountant and partner in the accounting firm Daley & Co, and the defendant described him as – and I accept he is – “one of [his] best friends” (defendant’s affidavit, pars 20, 66).

60. The evidence did not permit a finding as to when the defendant provided the letter to Mr Stephenson but, given what occurred subsequently, plainly it was at some point after “mid-October 2022” and prior to 1 November 2022. Neither party submitted that anything turned upon precisely when the defendant provided the letter to Mr Stephenson.

61. On 1 November 2022, Mr Stephenson responded to the 13 October 2022 letter by email sent at 11:39am to Mr and Ms Grasso (‘1 November 2022 email’). That email was in the following terms:

“Michael and Philippa,

I am emailing you on behalf of Geoff O’Connell in response to the letter you sent him recently by registered post regarding his loans from David.

Geoff has been hospitalised for the last 3 weeks with blood clotting issues throughout his body and is unable to respond personally.

In relation to the loans Geoff’s plan is as follows:

1. Contracts have exchange [sic] for the sale of his South Nowra property with settlement to occur in September 2023. With the settlement monies from this sale Geoff will repay the $2,000,000 and the $900,000 loans. The $2,000,000 loans was for acquisition of this property.

2. Geoff is currently in the process of getting an occupation certificate for his former personal residence which, once acquired, will enable him to sell this property (as there is a party wishing to buy it). Once this property is sold he will payout the $800,000 from the other loans. It is estimated that this will happen before June 2023.

Let me know if you need any further detail around any of these transactions.”

62. As is apparent, the figures referred to by Mr Stephenson total the principal sum loaned by Mr Daley to the defendant – namely, $3.7M. It is also to be noted that the realisation of the defendant’s assets was communicated as occurring “in September 2023” and “before June 2023”.

63. Before continuing with the events surrounding the recall of the loans, it should be noted that the parties adopted opposing positions in relation to this email. For the defendant, it was argued that Mr Stephenson compiled the email without his instructions and sent it without his authority – in fact, the defendant claimed that he had never seen that email until he was cross-examined about it on the second day of the trial. For the plaintiff, it was argued that this account was untrue, and that the Court should accept that the defendant gave instructions to Mr Stephenson; that the email accurately recorded the instructions that the defendant gave to him; and, further, that he was authorised by the defendant to send the email to Mr Grasso. This issue is addressed, and resolved, later: see [108]ff, below.

64. The 1 November 2022 email was received by both recipients and, at 1:41pm that same day, Mr Grasso sent the following email response to Mr Stephenson:

“Hi Andrew,

Thank you for this update.

Regards,”

65. As earlier noted, the 1 November 2022 email advised that the first tranche of the plan for the defendant to repay these loans was scheduled to happen following the sale of the defendant’s “former personal residence”, which was expected to occur “before June 2023”.

66. On 22 June 2023 at 8:50am, Mr Grasso sent a follow-up email to Mr Stephenson, with the subject: “Loans from [sic] Geoffrey O’Connell”, in the following terms:

“Andrew,

With reference to your email of 1 November 2022 below, there has been no record (to date) of any repayment of the $3.7m in loans currently owed by your client. Please advise when we can expect repayment because it was indicated to us at 2. in your email that $800k would be available for repayment ‘before June 2023’?

Thank you.

Regards,”

67. Mr Stephenson sent an email response to Mr Grasso shortly after this – at 8:55am on 22 June 2023 – as follows:

“Michael,

On speaking with Geoff last week the sale of his personal residence is being held up by council and some of their requirements for occupancy. He is in the process of getting these issues sorted and then the sale can go through. I’m not sure of the timeframe for these issues to be sorted but believe them to [be] no more than a couple of months. Will try to get a more conclusive timeframe.

I believe the sale of [S]outh [N]owra is still on track.

Regards,”

68. On 6 September 2023 at 4:13pm, Mr Grasso sent a further email to Mr Stephenson – as follows:

“Hi Andrew,

Further to your email below and your earlier email of 1 November last year, the family looks forward to receiving repayment of $2.9m of the loans owed by Geoffrey O’Connell this month.

David’s bank a/c details are:

BSB:- 082-[###]

A/c:- 50-636-[####]

Please advise when repayment has occurred.

Thank you.

Regards,”

69. Mr Stephenson sent a response on 7 September 2023 at 10:29am, stating that he had “contacted Geoff and his solicitor to find out where it is at” and that he would “let [him] know when [he heard] from them”.

70. In the weeks that followed, no further contact was made by Mr Stephenson to Mr Grasso – who followed him up by email sent on 26 September 2023 at 7:55am:

“Andrew,

To date, no loan repayments have been deposited to David’s bank a/c (?)

Therefore, can we please receive a response to your email below?

Thank you.”

71. On 26 September 2023, at 7:59am, Mr Stephenson sent Mr Grasso an email response:

“Michael,

I have not heard anything back. I will forward your email on to Geoff and his solicitors and request they deal with you directly so you have a better picture.

Regards”

72. Having received that advice, Mr Grasso sent a letter, via email, to Mr N Heard from Heard McEwan Legal (the defendant’s solicitor) dated 4 October 2023. The letter was headed: “Your client:- Geoffrey O’Connell and the loans owed to David Daley”.

73. In that letter, Mr Grasso advised that he was “the current tax agent and accountant for Mr David Daley” (whom he referred to as his “client”) and, relevantly, set out the substance of the letter dated 13 October 2022 sent to the defendant and summarised the email communications he had with Mr Stephenson up to 26 September 2023. The letter concluded with the following:

“On behalf of my client, I therefore seek your advice as to when we can expect repayment of the outstanding loans owed by Mr O’Connell. As you can appreciate, the family expects to receive repayment of all loans as soon as practicable”.

74. On 30 October 2023 at 3:18pm, Mr Heard sent an email response to Mr Grasso. The subject of the email was: “RE: Mr Geoffrey O’Connell – status of loans owed to David Daley”, and the email provided:

“Dear Michael,

I’ve been away for the last two and [a] bit weeks. I’ll provide a response shortly.

Regards”

75. Not having been favoured with a response, Mr Grasso sent a further email to Mr Heard on 10 November 2023 at 10:28am as follows:

“Dear Nathan,

I refer to your email of 30 October 2023 (refer below) and ask when David can expect to receive a “response” on this matter?

David has received planned undertakings from your client (via his accountant) 12 months ago (and later reiterated in June of this year) on how Mr O’Connell intends to repay outstanding loans totalling $3.7m.

To date, no loan repayments have been received and furthermore, my client has not received an alternate repayment plan or any other commitment from your client as to when all the loans owed will be repaid.

As you can appreciate, my client’s patience on this matter has come to an end.

Mr O’Connell’s inaction has left David (and his family) no alternative but to seek instructions from counsel on what legal remedies are available to them to recover the outstanding loans from your client.

Yours faithfully”

76. No response was ever provided by Mr Heard or the defendant to this further communication from Mr Grasso.

77. As earlier noted, Mr Daley passed away on 18 November 2023.

78. The plaintiff commenced proceedings against the defendant, seeking to recover the money owed under the loans, by statement of claim filed in this Court on 6 March 2024.

The issues for determination

79. The parties prepared, and filed on 8 April 2026, a joint memorandum of agreed facts and contested issues. Despite 22 contested issues being identified in that document, the contested issues were, ultimately, narrowed, and confirmed to be as follows:

80. The parties agreed that, if the defendant fails to secure a favourable finding about whether, as the defendant alleged, there was a conversation in 2019 between Mr Daley and the defendant involving Mr Daley agreeing to vary the loan agreements, the plaintiff is entitled to judgment in its favour in the amount claimed, plus contractual interest (‘the variation issue’).

81. The variation issue was, however, subject to the defendant’s argument that the loans were only repayable upon demand and that no such demand had been made for the loans to be recalled (‘the demand issue’).

82. The parties agreed that, if the defendant secures a favourable finding on the variation issue, then it would be necessary to determine:

(a) whether that variation was effective (‘the variation efficacy issue’) – if it was, then the plaintiff’s claim fails; or (b) whether that variation was ineffective – if it was, then the defendant’s estoppel case requires determination (‘the estoppel issue’).

80. Although apparent from this agreed statement of issues, it should be noted that the defendant neither pleaded, nor raised, any limitation issue: in fact, in submissions, the defendant expressly conceded that the proceedings were not the subject of any time bar (defendant’s closing submissions at [28]).

Issue 1: the variation issue

Introduction

81. By way of introduction and short summary, the case for the defendant on this issue is that, during a lunch at the Harbourfront Restaurant in 2019, Mr Daley forgave repayment of the loans made to the defendant in the period 2013-2018, and that Mr Daley’s motivation for doing so derived from a debt of gratitude that he felt he owed to the defendant arising from events that occurred whilst they were operating KMG, and their ongoing friendship more generally.

82. According to the defendant, those events were that a former director of KMG had embezzled several million dollars from the business – which at that time was not trading profitably – and that Mr Daley was personally liable under a guarantee for those losses: the debt of gratitude is said to have arisen because the defendant, as the dealer principal of the business, “turned the company around”, and it was able to turn a profit of $400,000 in the 1999/2000 financial year, whereas KMG suffered a trading loss in the prior financial year.

83. Put simply, forgiving the loans to the defendant was Mr Daley’s way of repaying the debt of gratitude, and is essentially explicable on this footing.

84. The case for the plaintiff, by way of short summary, is that the account given by the defendant is implausible and untrue, and that the conduct of the defendant – what he did and did not do following the alleged conversation – undercuts, and is inconsistent with, his account. It followed, the plaintiff argued, that it is simply not possible for the Court to be satisfied that the conversation over lunch occurred as the defendant contended.

85. Before moving to address the competing arguments directed to the events in 2019 and the steps taken to recall the loans in the subsequent years, the following three matters about the approach to resolving the issues and the contested facts warrant emphasis.

86. First, the parties were in agreement that, consistent with the decision in White v Johnston (2015) 87 NSWLR 779; [2015] NSWCA 18 at [87]-[88], in relation to the variation issue, the legal onus of demonstrating that the loan agreements were varied in the way the defendant claimed was upon him.

87. Secondly, being civil proceedings, the standard of proof is as required by s 140(1) of the Evidence Act 1995 (NSW) – namely, “the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities” and “[w]ithout limiting the matters that the court may take into account in deciding whether it is so satisfied”, the court “is to take into account” the matters prescribed in ss 140(2)(a)-(c).

88. One such matter to be taken “into account” was explained in Willmot v Queensland [2024] HCA 42; (2024) 98 ALJR 1407 at [30] (‘Willmot’) – namely, “where a claim is based upon an interaction with a deceased person (or involving a deceased estate) the court will scrutinise the evidence very carefully”, citing, inter alia,­ Plunkett**­ v Bull**­ (1915) 19 CLR 544, 548-549; [1915] HCA 14 (‘Plunkett’). Earlier in Willmot at [29] (internal citations omitted) it was also said:

“…the courts have adopted a cautious approach, recognising it is ‘necessary to establish as reasonably clear a case as the facts will admit of to guard against the danger of false claims being brought against a person who is dead, and thus is not able to come forward and give an account for himself’. ­A related principle of evidence law is that, while corroboration will always assist in such cases, there is no rule of law that there can be no claim without corroboration.”

89. Thirdly, the process to determine facts ordinarily involves a consideration of “contemporary materials, objectively established facts and the apparent logic of events”: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31]. To a similar end, it has been described as an “orthodox and sensible approach” to place primary emphasis “on the objective factual surrounding material and the inherent… probabilities, together with the documentation tendered in evidence”: Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd [1999] HCA 15 at [16]; (1999) 161 ALR 599.

90. By way of summary, but explained in more detail in what follows, I am unpersuaded that the loans were forgiven, as the defendant contended. That is essentially for three broad reasons. First, I have doubts about, and remain unpersuaded on, a key plank in the defendant’s account – notably, the suggested embezzlement by Mr Kilner leading to the conversations with Mr Daley and the so-called “debt of gratitude” and, in turn, a motivation for Mr Daley to “forgive” the loans (see [92]-[99], below). Secondly, there are numerous factors that I consider are inconsistent with, and are destructive of, the defendant’s account (see [107]-[156], below). Two examples of these inconsistencies presently suffice. One is: despite receiving the 13 October 2022 letter from Mr Grasso that requested he confirm his plans to repay the loans, at no point prior to Mr Daley’s death did the defendant contact – or attempt to contact – Mr Daley so as to raise with him why he had, apparently, acted contrary to what they had supposedly “agreed” to over lunch in September 2019. Another is: despite suggesting that he and Mr Daley “agreed” to vary the loan agreements so as to only require the defendant to pay interest on the loans until Mr Daley passed away, and despite knowing by December 2023 that Mr Daley had passed away, the defendant did not cease to pay interest, but rather continued to do so until March 2024. And, thirdly, I do not accept the evidence of the defendant, and I explain, when dealing with the various inconsistencies in his account, why I have formed an adverse view about the credibility and reliability of him, and his evidence.

91. I now turn to address the detail of the respective cases, and the arguments advanced by the parties.

The defendant’s account: the debt of gratitude and the conversation over lunch in 2019

92. The defendant argued that the explanation, and justification, for why Mr Daley forgave each of the loans made to him had its genesis in events that occurred in around 1998, and following. The defendant’s evidence was that, as at September 1998, KMG owed Esanda Finance Company $2,148,000.00, and that he was told by Mr Daley that a former director of, and shareholder in, KMG (Rex Kilner) “had embezzled approximately $2,400,000 up to $3,000,000, a sum which was personally guaranteed” by Mr Daley. The defendant’s evidence was that Mr Daley said to him (defendant’s affidavit, par 9):

“I need your help. I have guaranteed these loans they could come after me for the $3,000,000. I need you to help turn us around”.

93. The defendant’s evidence was that, following that conversation, he agreed to buy a 52% shareholding in KMG and Mr Kilner “was removed as a shareholder”. His evidence was also that, although KMG suffered a $900,000 trading loss in the 1998 or 1999 financial year, in the year following, KMG “recorded a $400,000 trading profit”. The defendant’s evidence was that, when this profit was realised, Mr Daley said to him (defendant’s affidavit, par 12):

“If you didn’t step in and do what you did at Kinghorn’s the house of cards would have fallen down. You saved me, I will repay you for this Geoff”.

94. In relation to the “embezzlement” by Mr Kilner, this was explained by the defendant in his evidence as occurring as follows. Esanda paid for vehicles in advance to be held by KMG at their show room and, when those vehicles were sold, rather than remitting money to Esanda, as it was obliged to, Mr Kilner kept the money for himself (T117.25; 118.20).

95. Quite how Mr Kilner was able to perpetrate this was not explained in evidence, nor was there any other evidence adduced that was corroborative of the account that there had been any embezzlement by Mr Kilner, or its extent. Further, as the defendant also accepted during submissions (T219.5-219.30), no financial records were in evidence dealing with the financial position of KMG – including its apparently poor financial state at and around the time of the suggested embezzlement and its improvement in the year following – in the relevant financial years. Nor, more particularly, were there any documents that addressed the repayment of the money that KMG owed to Esanda in consequence of the fraud said to have been perpetrated by Mr Kilner upon it.

96. No explanation was provided by the defendant (who has continued to conduct the business since that time) for why none of this material was not in evidence – other than a somewhat faint suggestion, in the course of submissions, that it was not foreseen that this aspect of the defendant’s account was in issue. I do not accept that submission: an important step in the overall explanation for why Mr Daley agreed to the variation of the loans was the debt of gratitude arising from the above events and, independently of this, it was readily apparent, given Mr Maconachie squarely challenged the defendant about whether the embezzlement by Mr Kilner even occurred, that this aspect of his overall account was contested.

97. Thus, even on the defendant’s own evidence, I have reservations about his account – in particular, about the so-called “debt of gratitude” that was said to significantly inform Mr Daley’s apparent decision to forgive the loans in 2019. That is not simply because there is a lack of corroboration across this topic. Rather, it is also because, given the defendant relies upon the words he attributes to Mr Daley (which essentially acknowledge the debt of gratitude and an intent by him to return the favour at some point), there is a need to adopt a “cautious approach” in accepting evidence about statements made by persons now deceased: Plunkett at 548-549; Willmott at [29]. Further, having regard to my doubts as to the credibility and reliability of the defendant and his evidence (as detailed later in these reasons), I remain firmly unpersuaded about this particular aspect of the defendant’s version.

98. Separately, to the extent that there were any documents relevant to this general area of his evidence, it was confined to one document – namely, the annual company return for KMG lodged on 7 October 1999 (Exhibit K). The relevance of that document, in the context of this aspect of the defendant’s evidence, was that the defendant said that after September 1998, when he purchased his shareholding in KMG, “Mr Kilner was removed as a shareholder” (defendant’s affidavit, pars 9-10). However, as Mr Maconachie submitted, this document established that, approximately 13 months after when the embezzlement was said to have been communicated to the defendant, prompting Mr Kilner’s removal as a shareholder of KMG (according to the defendant), Mr Kilner remained a shareholder. The defendant did not, through evidence or submissions, seek to explain this discrepancy. It adds to the doubt (and lack of persuasion) that I have about this part of the defendant’s evidence.

99. The result of me being unpersuaded about the events giving rise to the “debt of gratitude”, and the conversations that were said to have occurred around this time (see [92]-[93], above), is that the defendant has failed to persuade me about a key explanation for why Mr Daley was likely to have acted as the defendant alleged. In my view, when that matter is taken out of the defendant’s explanation for why Mr Daley may have been motivated to act as alleged, it undermines the likelihood of the loans being varied in the way the defendant has argued.

100. The next step in the defendant’s case on the variation issue was his evidence that, in 2019, Mr Daley forgave repayment of the loans over lunch that they had at the Harbourfront Seafood Restaurant. The defendant’s evidence was (defendant’s affidavit, par 46):

“In or around September 2019, I had lunch with David at the Harbourfront Restaurant in Wollongong. During the lunch we had a conversation in words to the following effect:

[David Daley]: [‘H]ow is the business going[?’]

[The defendant]: [‘I]t’s going pretty well at the moment[.’]

[David Daley]: [‘T]hat’s really good. I want to talk to you about something[.’]

[The defendant]: [‘W]hat’s wrong[?’]

[David Daley]: [‘]Nothing is wrong. I don’t want you to worry about the money and paying it back. You don’t have to pay the loans back[.’]

[The defendant]: [‘Y]ou can’t do that it’s too much money[.’]

[David Daley]: [‘]I don’t want it back. You have done so much for me over the years[.’]

[The defendant]: [‘]I don’t know what to say. I can’t just take it, how about I keep paying you the interest at least[.’]

[David Daley]: [‘F]ine, just keep making the interest payments until I die and we are square[.’]

[The defendant]: [‘]I can’t believe it, you are too good to me[.’]

[David Daley]: [‘Y]ou are like a son to me. You saved me from ruin. Just whatever you do, don’t tell Andrew he is still repaying me monies[.’]

[The defendant]: [‘]I won’t tell Andrew[.’]

[David Daley]: [‘M]ake sure you don’t, as he will get very upset[.’]

[The defendant]: [‘]I promise you that I won’t[.’]

[David Daley]: [‘]That’s good enough for me[.’]”

101. The defendant’s essential submission is that his account of what occurred should be accepted, and, by extension, so should the broadly similar account of what he says occurred in October 2019 (defendant’s affidavit, par 48).

102. The defendant also submitted that the fact that he and Mr Daley regularly went to lunch and maintained their friendship beyond 2014 (being the time when the defendant bought out Mr Daley’s interest in KMG) were facts that should be accepted. Further, building upon this, the defendant submitted that the Court’s acceptance of such matters gives support to his overall version on the variation issue. Notwithstanding my adverse assessment of the defendant and his evidence (addressed later), I am prepared to accept each of these matters, and that they provide some limited evidence in support of the defendant’s version of events.

103. In relation to there being a lunch in September 2019 between the defendant and Mr Daley, the plaintiff challenged whether any lunch in fact occurred, pointing out that there was no corroboration of it. To the extent that there was no documentation relating to this lunch (thus corroborating its occurrence) – such as booking information, a receipt, or credit card details – the defendant explained why this was so: the decision to attend lunch at this restaurant was made once the defendant picked up Mr Daley, meaning no booking was made; and no credit card details (such as a statement) evidencing the attendance at the restaurant at this time were available because the defendant paid for lunch with cash. My assessment is that the absence of documents corroborating any lunch occurring in this period is neutral (Willmott at [29]).

104. The defendant also relied upon the fact that, during the lunch, he spoke with an individual named Michael Corban and that there was a booking made at the Harbourside Restaurant on 19 September 2019 in his name (Exhibit 2). The defendant submitted that this booking (and a single page entry recording the lunch bookings on that day) had “a tendency to corroborate the [d]efendant’s evidence of attending that restaurant on a day in September 2019” (defendant’s closing submissions at [36]). Precisely why it had that effect was not explained, nor was the submission – which I do not accept – developed in any other way. The document does no more than establish a booking in the name of Mr Corban (and the details of that booking). No other evidence was referred to in aid of this submission, nor was there any evidence (or suggested to be any) that established Mr Corban only attended that restaurant on, say, one occasion in 2019. Separately, given I am prepared to accept that the defendant and Mr Daley did have lunch together, from time to time (see [102], above), the fact that Mr Corban may have been at the restaurant is, I consider, of limited significance.

105. In addition to inviting the Court to accept and act upon the defendant’s evidence, the defendant made two further submissions that were argued to support the Court being satisfied that the key conversation between him and Mr Daley occurred in the way he said. First, the defendant argued that the fact that, following the lunch, he spoke with Michael Lees and told him what occurred, and that Mr Lees broadly confirmed they had such a conversation was supportive of his account. And, secondly, the defendant argued that the evidence given for the plaintiff (notably by Ms Grasso) was a fabrication, and that the Court should find, contrary to her evidence (and other evidence, including that of Mr Grasso), that Mr Daley never instructed them to pursue the money that was loaned to the defendant; rather, so the submission went, Mr and Ms Grasso, in effect, fabricated their dealings with Mr Daley, and they did so out of greed and in clear recognition of the fact that they would directly benefit if the money were recovered from the defendant.

106. In relation to the first argument, I accept that, on its own, the evidence from Mr Lees provides a measure of support for what the defendant argued. But, given I am firmly unpersuaded about his account (and by the defendant’s evidence generally), the materiality of Mr Lees’ evidence falls away. In relation to the second argument, as I have explained in other parts of these reasons, I do not accept any of the challenges to the evidence in the plaintiff’s case.

Matters that stand against the alleged variation

107. As I have noted above, I consider a number of matters stand against the probabilities of the defendant’s account. I deal with such matters in what follows.

The response to the 13 October 2022 letter: the email dated 1 November 2022

108. I have earlier set out the initial demand sent by Mr Grasso dated 13 October 2022 and the response to that letter by Mr Stephenson in the 1 November 2022 email (see [56]-[62], above).

109. The defendant, as I have earlier noted (see [63], above), argued that he did not provide instructions to Mr Stephenson about the matters contained within that email, nor authorise him to send the response that he did: the defendant’s evidence was that he “did not discuss with [Mr Stephenson] the contents prior” and that he “did not approve for [Mr Stephenson] to make statements in the email on [his] behalf” (defendant’s affidavit, par 65). Building upon this (and the first argument), the defendant also argued that, whilst the terms of that email were inconsistent with the defendant’s case on the variation issue, that inconsistency could not be laid at his feet given Mr Stephenson acted without instructions in preparing the email and did not have the authority to send it.

110. As to this argument, the defendant, it is to be noted, did not argue that, on the face of the email, it was not open to infer and find that it was prepared based upon instructions from the defendant and sent with his authority – it was acknowledged during submissions that, given the first paragraph of the email, it was an “open interpretation” that Mr Stephenson was “acting on instructions” (T248.20). Rather, his sole argument was that, based upon his evidence to that effect, he neither instructed Mr Stephenson about the content of the email, nor authorised it to be sent.

111. Further, possibly as an illustration of, or to emphasise, his lack of involvement in the preparation of that response and the unauthorised sending of the email by Mr Stephenson, the defendant claimed that he had never seen the email until it was shown to him during the course of his cross-examination on day two of the trial.

112. I will address this last suggestion at the outset. The defendant’s evidence was as follows (T145.45-146.35):

“Q. You subsequently became aware of an email that Mr­ Stephenson sent to Mr ­Grasso and Ms Grasso on 1 November 2022?

A. This is the first time I have ever seen that email.

Q. That’s a lie.

A. It was not sent to me.

Q. Answer my question.

A. I’m not CC’d into it. I didn’t authorise for it to be sent. I didn’t know the contents of it and it’s not a lie.

Q. Go to paragraph 65 in your affidavit?

A. Yep.

Q. [‘]On 1 November 2022 Andrew sent a response to Michael. I had not seen the email before it was sent[’]?

A. Correct. I hadn’t.

Q. Are you telling his Honour that you wrote this affidavit and referred to this email without looking at the email?

A. I’m telling you now that this is the first time I have ever seen that email.

Q. You are lying, aren’t you?

A. No, I’m not. I have never seen that email. It was never sent to me. It wasn’t - there wasn’t a draft sent to me to approve. This is the first time I have seen that email.

Q. At 65 you go on, [‘]I did not approve for Andrew to make statements in the email on my behalf[’]?

A. No, I didn’t.

Q. How could you possibly know that Andrew had made statements in the email on your behalf if you hadn’t read it before today?

A. I’ve never - I, I only know because I was told that an email was sent. I have never seen that email. It was never proofed by me. It was never authorised by me to be sent. And I wasn’t aware that it was sent.

Q. Go to page 423?

A. Yep.

Q. You see paragraph 66, [‘]Andrew sent me a copy of the email he sent to Michael[’]?

A. Well, I don’t know why that’s in there because I cannot recall ever seeing that email. But in the same time, I also did state there that my mental health was deteriorating pretty badly at that point, so maybe I did see it but I don’t--”

113. As is apparent from the cross-examination itself, despite asserting that he had never seen the 1 November 2022 email before his cross-examination, that evidence was plainly wrong: his affidavit sworn 7 April 2025, par 66 clearly established the contrary. That paragraph, relevant to the present issue, provides: “Andrew sent me a copy of the email he sent to Michael. I did not respond to Andrew”. It also follows, from the evidence in par 66, that the defendant’s evidence given during his cross-examination – that he was not “aware that [the 1 November 2022 email] was sent” – was also plainly wrong.

114. In relation to this part of defendant’s evidence, I am unable to accept that this was anything other than a misguided – but deliberate – attempt to deflect from the true position on what was, and I accept the defendant knew to be, an important issue in the trial. It reflects adversely upon his credibility, and the credibility of his evidence across this central trial issue.

115. In relation to the 1 November 2022 email, I do not accept the defendant’s evidence that he did not instruct Mr Stephenson about the detail of the response to be provided, nor do I accept that he did not authorise Mr Stephenson to send the response. I emphasise that my rejection of the defendant’s evidence on this topic is informed by my assessment of his evidence generally (and addressed elsewhere in these reasons), and not simply confined to the discussion, and my findings, about his evidence relating to when he claimed to have first seen the 1 November 2022 email (see [112]ff, above).

116. Further, I infer and find that he instructed Mr Stephenson as to the response to be provided and authorised it to be sent. That is for the following reasons.

117. First, the defendant accepted that, when he received the letter from Mr Grasso dated 13 October 2022, he “scanned and sent” it to Mr Stephenson and, when he did so, said to him: “can you please deal with this[?]” – which was confirmed during his evidence (T145.25).

118. Secondly, the 1 November 2022 email itself refers to: Mr Stephenson “emailing [Mr Grasso] on behalf of [the defendant]”; him doing so because the defendant was “unable to respond personally”; and that the defendant’s “plan” was to discharge the loans following the realisation of property, which was expected to settle in “September 2023” and “before June 2023”.

119. Thirdly, the defendant accepted, and the fact is, that the content of the demand accurately recorded the loan dates, amounts and interest rates and, correspondingly, the 1 November 2022 email provided a staged “plan” for the discharge of the liability under the loan agreements. Further, the “plan” to repay the loans was detailed and depended upon the realisation of property by the defendant (including explanations for when the property would be realised). No explanation was advanced during submissions as to how Mr Stephenson would have been placed to provide that information (including its detail) other than through instructions given by the defendant, nor was any explanation advanced for why Mr Stephenson would develop, on his own, a “plan” for the defendant. In this respect, I do not accept that the defendant’s generalised assertion that Mr Stephenson was “aware of the debts” provides a sufficient response, and that this somehow provides any plausible explanation for Mr Stephenson engaging in a suggested frolic of his own, less still formulating an email in these terms.

120. More generally, whilst no doubt, from time to time, professionals act in a way that is contrary to the instructions given or authority conferred (or both) by their clients, there is nothing in the evidence surrounding these events (other than the defendant’s evidence – which, to be clear, I do not accept) that provides any support for what the defendant asserted occurred. By way of example, the 13 October 2022 letter did not contain a threat that litigation would be commenced in a defined period of time absent some favourable response – thus, possibly, being some evidence that, with other evidence, might support an inference that a hurried (and unauthorised and uninstructed) response was provided by Mr Stephenson to stave off the threat of litigation. That, of course, is not this case. To the extent that the defendant sought to call in aid that, around this time, he had issues with his mental health, I do not accept that those issues wholly disabled him from engaging with Mr Stephenson in this general time period, or, in some unspecified way, led Mr Stephenson to go on a frolic of his own and provide the response that he did, absent instructions and authority.

121. Further, and independently of the above matters, the letter from the plaintiff’s solicitor to the defendant’s solicitor dated 3 February 2025 (Exhibit 6) – which, it should be emphasised, was tendered by the defendant and accepted to be based upon a conversation that the solicitor for the plaintiff had with Mr Stephenson (T324.5) – provides some evidence that the email was based and sent upon the defendant’s instructions.

122. Having inferred and found that the 1 November 2022 email was based upon the instructions of the defendant and sent with his authority, the immediate materiality of the email is the fact that it confirmed the existence of the loans – to be clear, unaltered by any suggested variation. In my view, the content of 1 November 2022 email is significant evidence contradictory of the existence of the alleged 2019 variation.

The follow-up emails in 2023 and the responses

123. As earlier set out, Mr Grasso sent Mr Stephenson “follow-up” emails: the first was on 22 June 2023 and the second was on 6 September 2023 (see [66] and [68], above). Mr Stephenson sent responses to each of them (see [67] and [69], above).

124. The plaintiff did not place any particular reliance upon any aspect of the responses that Mr Stephenson sent. The defendant did not address them in his evidence and, to the extent that they were referred to in submissions, it was that, in relation to the 22 June 2023 email (given it refers to a conversation the week prior), the inference that should be drawn is that Mr Stephenson was “not acting on instructions”.

125. I do not accept the defendant’s submission. In my view, to the extent any inferences should be drawn from the emails from Mr Stephenson, they tend to support that he was taking instructions from the defendant in relation to the issues raised by Mr Grasso. That, I consider, is evident from his expression in the emails sent on 22 June 2023 (that he “[w]ill try to get a more conclusive timeframe” from, I infer, the defendant) and 7 September 2023 (that he had “contacted” the defendant in order to provide a response to Mr Grasso’s recent enquiry). Notwithstanding, given the plaintiff did not seek to rely upon such inferences, I have put them to one side.

The absence of any step taken by the defendant, prior to the death of Mr Daley, to raise that the loans had been forgiven

126. The defendant’s evidence was that when he received the 13 October 2022 letter of demand, he was “shocked, bemused” and “bewildered” at having received it and by its content (T144.50; T145.35). Yet, despite having that reaction to the letter, the defendant did not – at any time prior to the death of Mr Daley – make, or attempt to make, contact with Mr Daley to discuss why he was, in effect, making a demand for the repayment of the loans contrary to what had apparently occurred “over lunch” in 2019.

127. The defendant, during his cross-examination on this topic, advanced a number of explanations for why he did not do so.

128. First, the defendant suggested that he did not visit Mr Daley once he had moved into Greenhill because he wanted to keep only positive memories of him, rather than observe him in potential decline (T167.20). I do not accept the defendant’s evidence, which I regard as unconvincing and highly improbable, particularly given what was clearly at stake. In any event, even accepting the defendant’s suggested reluctance to visit Mr Daley, it does not explain why the defendant could not write to him, or even telephone him, about the demand for the repayment of the loans.

129. In this last respect, insofar as the defendant sought to imply from his evidence that, even if contact had been made with Mr Daley, it was unlikely that he would have provided any written confirmation – given Mr Daley had to be requested on three occasions to provide a letter to the defendant for use in his family law proceedings confirming the existence of the loans – I do not accept that this provides any sound foundation for not approaching Mr Daley, particularly once it is recognised that Mr Daley provided a letter in the terms requested by the defendant.

130. Secondly, to the extent that the defendant sought to suggest that, having received the 13 October 2022 letter, “[he] didn’t see a need” to approach Mr Daley to discuss the demand with him (T151.50-152.10), I do not accept the defendant’s evidence. Again, I regard his evidence as unconvincing and highly implausible, given the backdrop of the alleged forgiveness of the debt in 2019. The defendant is a sophisticated businessman, and it is inconceivable that, having received that letter – and being apparently “shocked, bemused” and “bewildered” – he did not see a need to even attempt to contact Mr Daley to discuss the demand. The defendant, in his evidence, repeated the mantra (albeit in the context of why the loans were not formally documented): “… our word is our bond, our handshake is our signature” (T105.25; T129.35). He stated that was something that Mr Daley had “instilled in [him]”, and that it was how “[they] did business”. Yet, in spite of this, the defendant still took no steps to address this apparent breach of their “bond”.

131. In my view, the fact the defendant did not contact, or attempt to contact, Mr Daley prior to his death – whether by telephone call, letter, or speaking with him in person – to address the letter of demand dated 13 October 2022 and to clarify why he had seemingly now adopted a different position to the one he conveyed over lunch in September 2019, is inconsistent with the existence of the varied agreement.

132. Separately, the fact that the defendant gave no evidence that sought to explain why, at any point prior to Mr Daley’s death, he did not himself communicate with Mr Grasso (or instruct another to do this) raising the existence of the suggested 2019 variation to the loans also adds to the doubt I have over the defendant’s version.

The error with the year of the lunch

133. Sometimes – not always – witnesses are unable to be precise about particular dates. The significance and materiality of their inability to do so is necessarily case, and fact, dependent.

134. Here, the defendant’s account was that the lunch with Mr Daley occurred in 2019. Yet, despite what was obviously (on the defendant’s account) a highly significant event, he verified his defences to the statement of claim filed on 6 March 2024 – being the defence filed 17 April 2024 (the affidavit verifying that defence was sworn on 16 April 2024 – Exhibit F) and the amended defence filed 20 November 2024 (the affidavit verifying that defence was sworn on 15 August 2024 – Exhibit H) – asserting that the meeting where the loan agreements were varied occurred not in 2019, but in 2020.

135. During the cross-examination of the defendant, it was suggested that the alteration in the year the lunch allegedly occurred arose when preparing his affidavit, upon a realisation that in 2020 there were “lockdowns and restaurants weren’t open” (T115.25). The defendant denied this, but otherwise there was no explanation for why he had verified his defence, confirming that the date of the lunch he had with Mr Daley was in 2020, rather than in 2019.

136. During submissions, the defendant argued that the error in relation to the date was, in effect, an imperfection in the defendant’s account that was otherwise of no particular significance. I am not prepared to sweep this matter aside so readily: the error is not about a particular day or date, and nor could the error be categorised as relating to an innocuous event that would not ordinarily be retained (or clearly retained) in memory; on the contrary, the error relates to a year and, as the plaintiff submitted, a highly significant event.

137. In the end, I do not regard this as being destructive of the defendant’s credibility, as was argued. Nevertheless, it does raise a question about the reliability of the defendant and his account on this important issue – and I have approached the matter on this footing.

138. For completeness, I add that I do not accept the broad suggestion made by the defendant that any imperfection was attributable to his “mental health” issues. To the extent there was any evidence directed to this issue, and the verification of the defences, it was in general terms, and I do not accept it. Further, at no point was there any attempt to grapple with the fact (which, to my mind, sits inconsistently with this submission) that the defences verified by the defendant were themselves detailed (and, on their face, not suggestive of any difficulties), nor with the fact that the defendant had a solicitor acting for him at all times.

The payment of interest until March 2024

139. As is apparent from the defendant’s account (see [87], above), the loan agreements were varied during lunch in September 2019, and the “varied agreement” merely obliged the defendant to continue to pay interest upon the outstanding amount until Mr Daley’s death.

140. Notwithstanding the defendant’s evidence about this conversation with Mr Daley, and despite being aware (as I have earlier found) that Mr Daley passed away by no later than December 2023, he continued to make payments of interest beyond that time.

141. The payments of interest that were made by the defendant after Mr Daley’s death were, I find, as follows (T158.45-159.15):

142. the defendant paid the sum of $19,833.00 into Mr Daley’s NAB account on 18 December 2023 – one month after Mr Daley died;

143. the defendant paid the sum of $19,833.00 into Mr Daley’s NAB account on 18 January 2024 – two months after Mr Daley died;

144. the defendant paid the sum of $14,500.00 into Mr Daley’s NAB account on 19 February 2024 – three months after Mr Daley died; and

145. the defendant paid the sum of $14,500.00 into Mr Daley’s NAB account on 18 March 2024 – four months after Mr Daley died.

146. The plaintiff argued this was a notable inconsistency with the defendant’s variation case and significantly undercut it. The defendant, when cross-examined, sought to explain that the interest payments made after Mr Daley’s death (to be clear, knowing that he had passed away by December 2023) were made by him “out of respect” (T159.30-159.35):

“The reason I made the extra payments was out of respect. I wasn’t going to just cut it off blank when I’d just found out that he’d passed away. I felt that was pretty - would be pretty rude, to be honest, and that’s why I continued to make the payments.”

143. He also sought to suggest that (T160.5):

“…I was unsure what to do, which in my - what I’m saying there in my mind is I didn’t want to stop the payments straight away. I just - I was unsure when to stop them so I kept paying them for a few months and then stopped them…”

144. I regard the defendant’s evidence and each explanation, as the plaintiff essentially submitted, to be unconvincing, improbable and self-serving. It is, I consider, somewhat remarkable to assert (as the defendant has) that there was a varied agreement obliging him to pay interest on the loans only up to the time of Mr Daley’s death, yet claim (as the defendant has), as an explanation for why he acted inconsistently with that varied agreement, that it would have been “rude” to act in accordance with it and, additionally, that he was “unsure” of what to do. I do not accept the defendant’s evidence and consider it to reflect adversely upon the credibility of him, and his evidence.

145. In my view, the payment of interest – particularly those payments made in 2024 – was inconsistent with, and undercuts, the suggestion by the defendant that there was a variation to the loan agreements formed over lunch in 2019, as was argued.

The retention of the loan records

146. Although the loans were not formally documented, Mr Daley kept records – which are accepted to be accurate – relating to them: see [36]-[37], above. The plaintiff submitted that their creation, and importantly their retention, was supportive of the continuation of the five loans according to their terms.

147. Mr Daley was, as I have noted, an accountant and it was common ground that, although – as between Mr Daley and the defendant – the loans were formed with a degree of informality, Mr Daley nevertheless accurately recorded the existence of them and their terms. That he did so was, adopting the description used by the defendant in submissions, consistent with him being “a professional accountant… and clearly…a man of record keeping in his own right” (T319.20).

148. In my view, the existence of those records provides some, albeit slight, evidence supportive of the continuity of the loans – unvaried. That is because, once it is accepted that (consistent with his profession and accepted characteristics) he was keeping records of the five loans, and that these documents were in his possession until they were collected by Mr and Ms Grasso, the fact there was no notation on them suggesting the loans had been varied or any other record suggesting that there had been any variation or forgiveness of them tends to suggest the loans continued unaltered.

The evidence in the plaintiff’s case

149. Additionally, I accept the evidence in the plaintiff’s case relating to what was described in submissions as Mr Daley’s “state of mind”. That is, I accept that, in around January 2021, Ms Grasso discussed with Mr Daley the loans to the defendant, and he confirmed their existence and that they were “outstanding loans” and not to press for repayment (“[l]eave the loan for now”), given what he considered to be the “attractive” rate of interest and that he trusted the defendant would “repay it”: see [39] and [46], above.

150. Further, I accept that, in October 2022, Mr Grasso had a conversation with Mr Daley about writing to the defendant to “ask what his intentions are in terms of repaying the loan”, and that Mr Daley agreed to this: see [51], above.

151. The above evidence, which was admitted without objection, confirms the continuity of the existing arrangements that Mr Daley had with the defendant in relation to the loans, rather than there being any suggested variation to them.

Aspects of the defendant’s evidence

152. The defendant was strongly challenged during his cross-examination. The plaintiff essentially submitted that the Court should have serious doubts about the credibility and reliability of the defendant and his evidence, and that, ultimately, his evidence should not be accepted.

153. I have, in the course of addressing the various arguments advanced on the variation issue, dealt with what I consider to be the unsatisfactory and improbable aspects of the defendant’s evidence, and why I have rejected his evidence. To be clear, I have not accepted the defendant’s evidence in connection with variation issue.

154. To those reasons, I add the following as an illustration of why I have not accepted the defendant’s evidence. In particular, why I formed an adverse view as to the credibility and reliability of the defendant and his evidence.

155. In the course of his cross-examination, the defendant was directed to that part of his affidavit under the heading “DEMANDS” (defendant’s affidavit, page 17). The cross-examination commenced with somewhat benign questions about the demands made on behalf of Mr Daley for repayment of the money loaned to the defendant. I will set out this part of the cross-examination because I regard the defendant’s evidence (and the way he gave it) to reflect adversely upon his credibility (T141.15):

“Q. If you go to court ­book 422 please?

A. Yep.

Q. You’ve got a heading halfway down the page, [‘]Demands[’]?

A. Yep.

Q. The reason you’ve put that in there is because in this part of your affidavit you’re telling the Court about demands that were made on Mr Daley’s behalf for repayment of the debt?

A. I well, I specifically recall opening the letter that was sent to me--

Q. Sorry, can you just answer my question please?

A. Sorry, can you repeat it then.

Q. The reason that you put the heading, [‘]Demands[’] in this part of your affidavit is because you were going on to discuss demands that had been made on Mr Daley’s behalf for repayment of the $3.7 million?

A. I disagree because I don’t believe he made those demands.

Q. Then why have you put the word demands on page 422?

A. Because I was sent a demand by a gentleman called Michael Grasso who I didn’t even know who he was, I had no idea who he was.

Q. All I’m asking you is that the reason you put that heading there is because in the next section of your affidavit you were going on to talk about demands that were made of you?

A. No but--

Q. I’m just asking you about what you were doing--

A. No, I’m answering, I’m trying to answer your question, to the best of my knowledge and true in my heart I know that David would not have sent a­ demand to me.

HIS HONOUR

Q. He’s asking you just about the structure of your affidavit at this stage, so if you look at page 422 there’s a heading--

A. Yep.

Q. --before paragraph 61 and Mr ­Maconachie is asking you about the existence of that heading and what it was doing, so that’s the subject matter of what you’re being asked at the moment.

HIS HONOUR: Is that correct Mr­ Maconachie?

MACONACHIE: Thank you your­ Honour, that’s perfectly correct.

WITNESS: Well, it--

HIS HONOUR

Q. Just allow Mr ­Maconachie to reput the proposition.

A. Sorry.

Q. I’ll let him, I’m just trying to make sure that you are following the questions?

A. Yeah, yeah.

MACONACHIE

Q. All I’m asking you is that at court ­book 422 you’ve put a heading demands halfway down the page because the part of your affidavit that follows is going to talk about demands that were made for repayment of the $3.7 million, that’s why you put that heading there, isn’t it?

A. So, I’ve, I’ve put the heading there as a, a header for the demands that were sent to me but I don’t believe they were sent on behalf of David Daley. So, the demand part is just referring to the fact that I got a letter.”

156. My assessment is that the defendant was not only immediately, but unjustifiably, defensive when asked about the topic generally but also, I consider, deliberately evasive – proffering self-serving and often non-responsive answers to what were fairly innocuous questions. For example, his above evidence in response to a question about why he used the heading “DEMANDS” in his affidavit, was: “… I know that David would not have sent a ­demand to me”.

Conclusion: a summary

157. Thus, for the above reasons, I do not accept there was any variation to the loans as the defendant alleged.

158. It follows, therefore, that, consistent with the approach of the parties (see [79(1)], above), the plaintiff is entitled to judgment for the principal amounts owing under the loan agreements together with interest.

Issue 2: the demand issue

159. Although raised as the second substantive issue at the commencement of the trial, and maintained during the course of it (see [79(2)], above), the defendant abandoned any argument about whether the plaintiff had made a demand for repayment of each loan: the defendant conceded that the commencement of proceedings “amounts to a demand in respect to a loan on demand” (defendant’s closing submissions at [88]).

160. Given this issue has fallen away, the parties accepted that resolving Issue 1 favourably to the plaintiff was dispositive of the claim.

Issue 3: the variation efficacy issue

Introduction

161. Given my conclusion on Issue 1, the efficacy of the suggested variation (Issue 3) does not arise. Nevertheless, I am mindful of the desirability of trial courts dealing with all issues to avoid the prospect that, if an appeal is filed and upheld, the matter would need to be remitted for re-trial: Gulic v Boral Transport Ltd [2016] NSWCA 269 at [7]; PPK Willoughby Pty Ltd v Baird [2021] NSWCA 312 at [15]. One difficulty with following this approach is that to do so necessarily involves proceeding contrary to my findings about the defendant and his evidence. Notwithstanding that difficulty, I will briefly address the competing arguments on this issue and will simply assum**e the correctness of the defendant’s evidence in order to do so.

The competing arguments and principles: variation of the loan agreements

162. As to this issue, the controversy between the parties focused upon whether any varied agreement was supported by consideration: the defendant submitted it was, and the plaintiff argued to the contrary.

163. Before addressing that argument, it is important to note the following three matters that framed the position each party adopted.

164. First, the defendant accepted that the principles engaged relate to contractual variation: despite the defendant, during submissions, referring to “forgiveness” of the loans, that term was used synonymously with “variation”.

165. Secondly, the defendant accepted that, given the alleged variation was made orally “over lunch in 2019” and not recorded in a deed, the variation was only binding if supported by consideration. Relevantly, to the arguments raised, in ­ Wigan ­**v Edwards ­(1973) 47 ALJR 586, 594, Mason J said the following:

“… The general rule is that a promise to perform an existing duty is no consideration, at least when the promise is made by a party to a pre-existing contract, when it is made to the promisee under that contract, and it is to do no more than the promisor is bound to do under that contract. The rule expresses the concept that the new promise, indistinguishable from the old, is an illusory consideration. And it gives no comfort to a party who by merely threatening a breach of contract seeks to secure an additional contractual benefit from the other party on the footing that the first party’s new promise of performance will provide sufficient consideration for that benefit.”

166. Thirdly, the contest between the parties was confined to an issue about characterisation – viz., whether what the defendant argued he had agreed to do was sufficient consideration to support the varied agreement.

Consideration

167. The evidence relied upon by the defendant to establish the variation, and that it was supported by consideration, was a portion of his evidence contained in his affidavit, par 46. That paragraph of his evidence has been earlier set out (see [100], above), but it is convenient to identify that part presently being relied upon – which is as follows:

“…

[The defendant]: [‘W]hat’s wrong[?’]

[David Daley]: [‘]Nothing is wrong. I don’t want you to worry about the money and paying it back. You don’t have to pay the loans back[.’]

[The defendant]: [‘Y]ou can’t do that it’s too much money[.’]

[David Daley]: [‘]I don’t want it back. You have done so much for me over the years[.’]

[The defendant]: [‘]I don’t know what to say. I can’t just take it, how about I keep paying you the interest at least[.’]

[David Daley]: [‘F]ine, just keep making the interest payments until I die and we are square[.’]

…”

168. The defendant submitted that the variation was effective because it was supported by consideration that passed from him to Mr Daley: namely, “the continued receipt of interest until death” (defendant’s closing submissions at [72]).

169. I do not accept the defendant’s submission. In my view, as the plaintiff argued, the variation was inefficacious given the (assumed) varied agreement did not involve sufficient consideration passing from the defendant to Mr Daley for forgiving the loans: on the defendant’s account, all that occurred is that the defendant continued to fulfil what he was otherwise obliged to do under the existing loans. That is, given the loans were only repayable on demand, and interest was payable on them, the defendant’s suggested consideration was no more than the defendant fulfilling his existing obligations, albeit until Mr Daley’s death. The suggested new “promise” was for the defendant to do either the same or less than the existing obligation and is, therefore, “illusory consideration”: Wigan at 594.

170. It follows that, in my view, the loan agreements were not validly varied.

Issue 4: the estoppel issue

171. As I have noted, above, I am mindful of the desirability of trial courts dealing with all issues to avoid the prospect that, if an appeal is filed and upheld, the matter would need to be remitted for re-trial.

172. Nevertheless, in relation to Issue 4 (the defendant’s estoppel argument), one difficulty in addressing that claim is that the defendant’s case rested, and only rested, upon an acceptance of his evidence about what occurred “over lunch” in September 2019, and my finding on that matter. To address the estoppel argument, it would not only be necessary to assume different factual findings, but necessary to put to one side my adverse findings about the credibility and reliability of the defendant, and his evidence. In this case, these findings provide practical restraint, and deny the usefulness of endeavouring to determine the estoppel issue.

Interest

173. The parties agreed that, in the event that the plaintiff succeeds, it is entitled to interest (up to and including 18 April 2026) in the amount of $498,536.67 and, with the principal claimed, entitled to judgment in the amount of $4,198,536.67 – with daily interest accruing in the amount of $652.04 (defendant’s interest calculation formula; MFI 7).

Orders

174. For the above reasons, I make the following orders:

175. Judgment for the plaintiff in the amount of $4,214,185.63.

176. Note that the judgment sum includes interest up to and including 12 May 2026 (24 days).

177. Order the defendant to pay the plaintiff’s costs of the proceedings.

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