Plaintiff v Defendants

CORPORATIONS - whether director of trustee company breached duty of care to beneficiaries - failure to seek relief against forfeiture - duties ceased upon appointment of new trustees - failure to ensure DHS certificate registered in company name - no breach of duty in the circumstances.

TRADE PRACTICES - vendor sold half-interest in business to purchaser - whether representations made by vendor were misleading and deceptive Trade Practices Act 1974 s.52 - purchaser's decision not made in reliance on vendor's misrepresentations.

EVIDENCE - whether Jones v Dunkel [1959] HCA 8; (1958) 101 CLR 298 inference available - applicable principles - effect of inference where witness in both camps - adverse inference not relevant to facts in issue - inference not appropriate where witness is party's solicitor and evidence would be subject of privilege .

For Beamer Pty Ltd, Kimis & Co Pty Ltd, George Moutidis & Louis Moutidis

For Zenn Nominees Pty Ltd, Western Lodge Supported Residential Services Pty Ltd, Manuel Jiminez

1 These two proceedings arise out of events which occurred mainly in 1998 in relation to a supported residential services business ("the business") conducted from 155-161 Gordon St, Footscray ("the premises").

2 Kimis & Co Pty Ltd ("Kimis"), a Moutidis family company, established the business in late 1997. By a contract dated 1 July 1998 ("the contract of sale"), Kimis sold the business to Star Lodge Supported Residential Services Pty Ltd ("Star Lodge"), the trustee of the Star Lodge Trading Trust ("the Star Lodge trust"). The beneficiaries of the Star Lodge trust were a Moutidis family company called Beamer Pty Ltd ("Beamer"), and a company connected with Bassam (or Sam) Najjar called Najjar Special Accommodation Services Pty Ltd ("Najjar SAS"). Kimis also assigned to Star Lodge its lease with the owner of the premises, Hidek International Pty Ltd ("Hidek").

3 Within a couple of months after the sale of business and assignment of lease, Hidek purported to terminate Star Lodge's lease for the non-payment of certain rates and taxes. Thereafter, Najjar entities took over the business on their own. Later that year, the business was taken over by Western Lodge Supported Residential Services Pty Ltd ("Western Lodge"), a company owned by Manuel Jiminez (or Jiminez-Navarro).

4 Proceeding No 6604 of 1999 ("the Najjar proceeding") involves a claim by companies associated with Sam Najjar, arising out of misrepresentations allegedly made in early 1998 by Kimis or members of the Moutidis family, which are said to have induced the Najjar entities to acquire an interest in the business.

5 Proceeding No 8145 of 1998 ("the Beamer proceeding") involves a claim by Beamer against the landlord, Hidek, and various Najjar and Jiminez entities. In very general terms, the Beamer proceeding challenges the purported termination of Star Lodge's lease and the subsequent acquisition of the business by Najjar and Jiminez entities.

6 On 29 October 2003, Master Kings ordered that the Beamer and Najjar proceedings be heard at the same time. I ordered that the evidence in each of the Beamer and Najjar proceedings stand as evidence in the other.

7 Kimis is the first defendant in the Najjar proceeding. Kimis owned and operated the business until July 1998. On 9 September 1996, Elias (known as Louis) Moutidis and Sophia (known as Sophie) Moutidis resigned as directors and their son, George Moutidis, was appointed a director and company secretary. Another of their sons, Kim Moutidis, was appointed a company secretary on 30 September 1997. Louis and Sophie Moutidis are the sole shareholders of Kimis. Kimis is not a party to the Beamer proceeding.

8 Beamer, the sole plaintiff in the Beamer proceeding, was the vehicle through which the Moutidis family held their interest in the business after July 1998. Since 19 May 1998, the sole directors and shareholders have been George and Kim Moutidis. Beamer owned half of the units in the Star Lodge trust, which became the beneficial owner of the business after its trustee, Star Lodge, purchased the business from Kimis. The parties proceeded on the agreed basis that Beamer had standing to sue on behalf of the Star Lodge trust and its beneficiaries, in circumstances where the current trustee has failed or refused to sue. Beamer is not a party to the Najjar proceeding.

9 George and Louis Moutidis are the second and third defendants, respectively, in the Najjar proceeding. They are not parties to the Beamer proceeding.

10 Star Lodge is the first defendant in the Beamer proceeding. It was the trustee of the Star Lodge trust from the inception of the trust until 9 October 1998. The Star Lodge trust bought the business from Kimis in July 1998 under the contract of sale.

11 Star Lodge was acquired as a shelf company in June 1998. Its sole current director is George Moutidis, who was appointed on 9 June 1998. Mr Najjar was also a director at all relevant times. George Moutidis and Sam Najjar each own one of the two issued shares in the company. Star Lodge is not a party to the Najjar proceeding and was not represented at trial.

12 Sam Najjar is the second defendant in the Beamer proceeding and the second plaintiff in the Najjar proceeding. His claim in the Najjar proceeding and the claim against him in the Beamer proceeding are both stayed, as he is an undischarged bankrupt. He gave evidence but was not represented at trial.

13 Najjar SAS is the third defendant in the Beamer proceeding and the first plaintiff in the Najjar proceeding. From 21 January 1998 until 27 October 2003, it was the trustee of the Najjar Family Trust ("the Najjar trust"). Najjar SAS owned the other half of the units in the Star Lodge trust. There was some confusion at various times during the trial as to whether or not Najjar SAS had been deregistered. That confusion was eventually resolved by the tender of a current ASIC search which shows that the company has never been deregistered. It was not represented at trial.

14 Zenn Nominees Pty Ltd ("Zenn") is the tenth defendant in the Beamer proceeding and the third plaintiff in the Najjar proceeding. On 27 October 2003, Sam Najjar, as appointor of the Najjar trust, removed Najjar SAS and appointed Zenn as the trustee of the Najjar trust.

15 Western Lodge, the fourth defendant in the Beamer proceeding, is a company owned and controlled by Manuel Jiminez, the sixth defendant in that proceeding. It is not a party to the Najjar proceeding. Since early December 1998, it has conducted an SRS business at the premises. Sam Najjar is employed by Western Lodge as the manager of that business.

16 Between 9 and 17 January 2002, Peter Vince was the interim receiver and manager of the assets and undertaking of Western Lodge, pursuant to an order of this Court made on the ex parte application of Beamer.

17 Other companies owned or controlled by Mr Jiminez were the eighth and ninth defendants in the Beamer proceeding. The claims against them were dismissed by consent during the course of the trial.

18 Zenn, Western Lodge and Mr Jiminez were represented at trial by the same counsel and solicitors. For the purpose of convenience, where appropriate they are referred to collectively in these reasons as "the Najjar defendants".

19 Hidek is the fifth defendant in the Beamer proceeding. It is not a party to the Najjar proceeding. Hidek is owned by Paul Dedek and his wife, Alena Dedek. They were the only directors at all relevant times.

20 Until October 2003, Hidek was the registered owner and lessor of the premises. At that time, it transferred its freehold interest in the premises to Paul and Alena Dedek for no consideration. That transfer was not discovered by Beamer or disclosed to the court until well into the trial; this issue will be discussed later.

21 Nicholas Mitsios is an accountant who has been employed by various Moutidis entities. On 9 October 1998, he and Jack Feldman were appointed as trustees of the Star Lodge trust in the place of Star Lodge. Mr Feldman resigned as a trustee in December 1998. Mr Mitsios is still a trustee.

22 On 9 August 2004, during the course of the trial, Beamer was granted leave to amend its pleadings in the Beamer proceeding to add Mr Mitsios as the eleventh defendant. This was done with the consent of Hidek and the Najjar defendants.

23 On 8 October 2004, on the application of Mr Mitsios, I ordered that he cease to be a defendant. He remains a party by reason of a notice of contribution served by the Najjar defendants during the course of the trial. The contribution proceedings were not heard at the same time as, and are being held in abeyance pending the outcome of, the trial of the main proceedings.

24 By its tenth amended statement of claim dated 9 September 2004 ("the Beamer claim"), Beamer makes a number of discrete claims for relief, all of which arise out of the events of mid to late 1998 which resulted in Beamer losing any interest in the business or the premises.

25 Beamer's principal claim arises out of the circumstances in which the Star Lodge lease was terminated. In terminating the lease, Hidek relied upon a notice of default dated 28 July 1998 ("the default notice") and a notice of re-entry dated 14 August 1998 ("the re-entry notice"). The Beamer claim pleads that the Star Lodge lease has not been validly terminated or, if it has, Beamer is entitled to relief against forfeiture.

26 Much of the trial was spent exploring Beamer's allegations of some sort of conspiracy between Hidek and the Najjar defendants, to wrongfully remove Beamer and the Moutidises from the business and the premises. Beamer disputes that the default and re-entry notices were prepared or served on or about the dates they bear. Beamer alleges that they were created at some later date or dates and dishonestly backdated ("the conspiracy claim").

27 Beamer also challenges the circumstances in which the Najjar defendants acquired their respective interests in the business after the termination of the Star Lodge lease. In considering this part of its claim, Beamer says that the assets and undertaking of the business are the goodwill, the leasehold interest and a certificate of registration issued to Kimis by the Department of Human Services ("DHS") in November 1997 ("Kimis' DHS certificate").[1] In essence, Beamer alleges that Najjar SAS and Western Lodge acquired or "received" the business with knowledge that Sam Najjar had breached his director's duties to Star Lodge, and Star Lodge had breached its trustee's duties to Beamer.

28 The Beamer claim also raises a number of claims which were expressly or impliedly abandoned. For example claims based on trespass[2] or disposition of property contrary to s. 172 of the Property Law Act 1958 ("PLA").[3]

29 In general terms, Hidek and the Najjar defendants deny the allegations against them. A number of specific defences will be considered later in these reasons.

30 The pleadings in the Beamer proceeding are not always easy to understand, and will be considered in greater detail below.

31 By the third amended statement of claim dated 6 September 2004 ("the Najjar claim"), Najjar SAS and Zenn ("the Najjar plaintiffs") seek damages from Kimis, George and Louis Moutidis ("the Moutidis defendants") in respect of alleged misrepresentations. The Najjar claim alleges that between February and June 1998 the Moutidis defendants made the following representations to Najjar SAS and Mr Najjar:

(c) That the market value of one half share of the business was $100,000;

(d) That the chattels listed in the inventory referred to in schedule A to the contract of sale were owned by Kimis.

32 Najjar SAS paid $100,000 to acquire half of the issued units in the Star Lodge trust. Sam Najjar lent Najjar SAS that sum, which he raised by mortgaging his home. The Najjar plaintiffs say that these things were done in reliance on the representations.

33 Each of the representations is said to have been false and untrue and made in breach of a duty of care and of s. 52 of the Trade Practices Act 1974 ("TPA") and s. 11 of the Fair Trading Act 1985. George and Louis Moutidis are also alleged to have accessorial liability under s. 75B(1) of the TPA.

34 The Najjar plaintiffs allege that because Hidek re-entered the premises and terminated the lease for Star Lodge's breach, the business and the units in the Star Lodge Trust thereby became worthless. They claim the sum of $100,000 as their loss.

35 By their defence dated 12 May 2004 ("the Moutidis defence"), the Moutidis defendants deny the making and the falsity of the representations. They also deny that there was any reliance on any such representation and say that from April until 1 July 1998, Sam Najjar or Najjar SAS managed the business and made their own assessment as to profitability. In particular, they allege that Mr Najjar or Najjar SAS were responsible for receiving the takings and paying the expenses of the business, and were therefore in a position to make their own assessment as to the profitability and worth of the business. They also plead that Sam Najjar and Najjar SAS sought the advice of their financial advisors and solicitors in assessing the profitability of the business, incorporating Star Lodge, drawing the contract of sale and assigning the lease.

36 Although the Moutidis defence pleads that the Najjar plaintiffs are prevented by various estoppels from pursuing their claim, no submissions were made by any party in relation to those allegations and they were effectively abandoned.

37 The Najjar plaintiffs neither pleaded nor led any evidence that George Moutidis made any of the relevant representations. Given those matters, I do not understand why he was made or remained a defendant in the Najjar proceeding. The claim against George Moutidis must be dismissed.

38 Given the nature of Beamer's claims, particularly the conspiracy claim, and the absence of independent written records, many of the important issues in these proceedings turn on findings as to credit. The task of assessing the evidence was not assisted by the fact that the events under consideration occurred approximately 6 years before the witnesses gave evidence. Even honest witnesses can be mistaken, particularly in their detailed recollection, after such a time.

39 A total of 32 witnesses gave evidence during the trial. The following is a summary of the roles and backgrounds of the various witnesses, together with some general comments about credibility issues. More specific findings on credit are made elsewhere in these reasons.

40 George Moutidis was born in Australia. He was 26 years old at the time of giving evidence, making him only 20 years old in 1998. He completed schooling up to Year 12. Since then, he has worked with his father in the building industry. At the time of trial he was completing a plumbing apprenticeship. He gave no impression of ever wanting to be involved with the business in the first place. Although he and his brother Kim were officers of both Kimis and Beamer, they did not play an active role in either company and their parents made all relevant company decisions. George's involvement in and memory of key events was limited and reflects his role in the company. On some occasions, he appeared to engage in the reconstruction of events.

41 Sophie Moutidis was born in Greece and came to Australia when she was 11 years old. She had a total of five years of education in Greece and Australia and left school when she was 13 years old. Her only employment experience was five years as a sales assistant in a dress shop, and six months in a factory. She displayed a strong sense of grievance against Hidek and the Najjar defendants, and was prone to making sometimes emotional speeches against them. She often exaggerated or answered questions in a non-responsive manner. She was not an easy witness for counsel to pin down on specific details.

42 Louis Moutidis was also born in Greece. He was 16 years old when he came to Australia. Upon arrival, he worked in factories for almost two years. Later, he established his own painting business, and conducted that business until he obtained a licence as a registered builder. His English language skills were the least developed of any of the principal witnesses. He read English slowly and with obvious difficulty, a matter which is of some relevance in this case. His ability to recall specific details was at times quite limited. He also seriously exaggerated or understated in his evidence. The evidence of both Sophie and Louis Moutidis in some areas was implausible and patently self-serving.

43 Chris Moutidis is the younger brother of George and Kim Moutidis. He gave limited evidence in relation to a visit to the premises with his father to pick up a boat and birdcage. I do not doubt that he tried to answer questions truthfully. However, he was only 13 or 14 years old at the time of the visit some time in 1998.

44 Sam Najjar was born in Lebanon in 1970. He was therefore 28 years old at the time of the relevant events in these proceedings. Mr Najjar came to Australia when he was three years old. He attended a technical school until Year 10, then completed a certificate of electronics at Footscray TAFE. Towards the end of his TAFE course, in about 1989, Mr Najjar obtained employment with Toshiba. He was responsible for the repair of photocopiers, faxes, cash registers, computers and printers. After working with Toshiba for a number of years, Mr Najjar was employed by a company called Data Systems, where he was involved in hospitality systems. He left Data Systems at the end of 1997. From late 1997 until July 1998, Mr Najjar's only income (other than anything he may have earned from the business) was from casual work delivering pizzas. He clearly wanted to rise above being the pizza delivery man and office machinery repairer, to running his own business. He seems to have got in over his head with the business.

45 Sam Najjar was not an impressive witness, for a number of reasons. I do not mean this unkindly, but Mr Najjar was clearly a man of somewhat limited intelligence. The transcript of his evidence reads more fluently than the evidence was actually given. There were often very lengthy delays in answering questions or completing sentences. He calculated months and counted on his fingers, and had trouble even spelling his own cousins' surnames. On occasions his evidence about the dates and precise details of events was obviously incorrect, but I believe was proffered with honest intentions.

46 Most significantly, Sam Najjar was, as his own counsel conceded, a witness who reconstructed evidence on important topics. Instead of saying he could not remember an event, he would try to reconstruct what he thought might have happened. Specific examples of his reconstruction will be discussed later in these reasons. Whilst I do not believe that he reconstructed out of a desire to mislead the court, there were significant problems with his evidence that could not be explained away, even making allowance for the fact that his evidence was broken up over a number of days. I do not feel comfortable accepting his evidence on a number of contentious matters, without corroboration from some other source.

47 Manuel Jiminez was born in Spain and migrated to Australia with his parents in October 1965, when he was 14. Upon arriving in Australia, he attended primary school for one month, and did no further schooling. As at September 1998, he was a director of at least four companies, and had been involved in directorships of companies since 1978. Some of those companies own or have owned special accommodation homes. Mr Jiminez has held the position of treasurer or financial director of the Melbourne Opera and the Australian Opera. He also acts as a business advisor to clients of his business, Australian Land and Development Company ("ALDC").

48 Although his written English may not have been perfect, Mr Jiminez displayed no problems with spoken English. I have no doubt that he fully understood and exploited the nuances of the English language in his evidence.

49 Manuel Jiminez was a most unimpressive witness. He thought long and hard about questions, analysing their meaning and carefully choosing a response which he thought best suited his case. Unfortunately, the transcript does not convey the full flavour of his evidence. He often paused for a considerable period of time before answering questions, apparently thinking through where a particular answer might take him. Sometimes he would glance surreptitiously at documents before answering questions. When he was giving his most implausible evidence, he would turn towards me and fix me with a long, direct stare and often also a half-smile or smirk; at such times, he frequently adopted a particularly deferential tone of voice or address. His demeanour on these occasions was almost a caricature of somebody trying to appear sincere. I have no doubt that Mr Jiminez was utterly indifferent as to whether or not he was telling the truth.

50 Bobi Doslakoski was an administrative assistant to Mr Jiminez at his office in Elizabeth Street, Melbourne ("the Jiminez office") between 1997 and 1999. In that capacity Mr Doslakoski was directly involved in the preparation, annotation and sending of various relevant documents. I have no reason to doubt his honesty.

51 David Phillips is a solicitor running a sole legal practice in suburban Melbourne. In the early stages of the Beamer proceeding, Mr Phillips acted for both Western Lodge and Hidek. His evidence was limited to the question of whether an important document, exhibit N54, had been discovered prior to the trial. It is not necessary for me to determine this question for the purposes of liability, although it may be relevant to the question of costs.[4]

52 Joe Dicks is a partner of the chartered accounting firm PPB. Using documentation provided by the Najjar defendants, Mr Dicks provided his expert opinion on the profitability of the business during the period from 18 December 1997 to 30 April 1998.

53 Camille Nahas is the accountant who prepared the financial accounts for Western Lodge for the 1999, 2000 and 2001 financial years. He claimed privilege from self-incrimination whilst answering questions about the tax affairs of Mr Jiminez' company.

54 Paul Dedek was born in Prague in 1941 and worked in the television industry until he migrated to Australia in the early 1970s. He worked for ABC Television as a video tape technician. He later started his own businesses, involving the servicing of electronic equipment and a manufacturing business. His main business interest since 1997 has been the premises. His spoken English was good, although he was not confident about the quality of his written English and relied on his daughter, Simone Pardo, for assistance with the latter.

55 I have borne in mind when assessing his evidence that Paul Dedek was the only witness who had the benefit of sitting in court throughout the trial and hearing what other witnesses said. As a result, he displayed some familiarity with court processes and rules of evidence. He was cautious in answering questions in cross-examination, perhaps as a result of having seen how a skilled cross-examiner could exploit any inconsistencies in the evidence of a witness. I thought he was generally a truthful witness.

56 Alena Dedek is married to Paul Dedek. She was born in Prague in 1942 and was engaged in home duties during the period relevant to the proceedings. Although a director of Hidek at relevant times, it is clear that her husband was the person who ran the company. She only got involved in Hidek's business when her husband asked her to. It was therefore not surprising that she had little recollection of dates or some other details of events. Alena Dedek was a quietly-spoken women who appeared to be very nervous in the witness box. I formed the impression that she was an honest witness.

57 Simona (known as Simone) Pardo is the daughter of Paul and Alena Dedek. Her role in relevant events was limited to checking the default notice which her father prepared. She impressed me as a truthful witness.

58 Jack Bock is a partner of the law firm, Cohen Woolf & Weinberg. During the relevant period he was a solicitor employed by the Dedek interests. Initially, he was a principal of the firm called Chrapot Bock & Co in Malvern Road, South Yarra, which became Bock & Co in February 1998. In approximately October 1998, Bock & Co merged with Cohen Woolf & Weinberg, the firm who acted for the Najjar defendants at relevant times. Mr Dedek consulted Mr Bock in relation to the emergency order served on the business, the means by which the Star Lodge lease could be terminated and drafting the Najjar SAS lease of the premises.

59 Several witnesses were called from the Maribyrnong City Council ("the council").

60 Paul Gibcus is a registered qualified building surveyor. He worked for the council as its municipal building surveyor between late 1995 and the end of 1999. He gave evidence about inspections he carried out at the premises and various statutory notices which he issued. He impressed me as an honest witness who tried to be helpful and impartial.

61 Patricia (or Patsy) Bucci has been working in the council's rate office as an administration clerk for many years. She was called to identify the handwriting of one of her co-workers, Anne Prideaux, on several documents. She also gave evidence about her calculations of outstanding rates for the premises. Her evidence was not contentious.

62 Dale Siebuhr was employed by DHS as a nursing advisor responsible for monitoring the standards of care and accommodation in SRS facilities in the western region of Melbourne. He was still employed by DHS at the time of giving evidence. He gave evidence about a number of inspections of the premises which he carried out at relevant times. He was an honest witness, although displayed some understandable defensiveness about certain mistakes made by DHS in relation to the registration of the SRS.

63 Martin McNeill and Shane Gore were two fire-fighters employed by the Metropolitan Fire Brigade ("MFB"). They both gave evidence in relation to an inspection which they carried out at the premises on 26 May 1998. I have no doubt that they both gave their honest recollections of that inspection. In assessing their evidence, I have borne in mind the fact that together they perform hundreds of such inspections every year and that this particular inspection occurred some six years before they gave their evidence.

64 Graham Millard was the proprietor of GEM Fire Services ("GEM"), a company that designs, supplies, installs and tests fire sprinklers and fire alarms. He gave evidence that he was involved in inspecting the premises from 1994 onwards and detailed the fire-safety deficiencies present at the premises. Employees of GEM were engaged in conducting weekly tests at the premises.

65 Alan Watts was an employee of GEM responsible for the routine testing of fire sprinkler systems. He gave evidence about his visits to the premises to inspect the fire-fighting equipment.

66 Walter Russell is an electrician specialising in fire protection. He gave evidence of a visit to the premises in mid-1998 for the purpose of providing Louis Moutidis with a quote for fire protection work.

67 Dennis Koutsantonis was an old friend of the Moutidis family who had experience in the boarding house industry. He introduced Louis Moutidis to Walter Russell and gave evidence of their visit to the premises.

68 Mary-Ann McKenzie was a real estate agent in the aged care industry. She gave evidence in relation to how she would value an SRS business. Given my finding that no representation was made as to the market value of the business, her evidence was ultimately irrelevant.

69 Nicholas Kavadias was an accountant employed by some of the Moutidis interests. His firm prepared a summary of the receipt books kept by Kimis during the time it operated the business. His evidence was not controversial.

70 Denise Waugh was a nurse who had been employed at the premises by Woodbury Way Pty Ltd ("Woodbury Way"), a previous tenant. She later worked for Kimis for about three days in December 1997, until Paul Dedek demanded that she leave the premises. Mrs Waugh displayed an obvious and visible antipathy towards Paul Dedek, both whilst she was in the witness box and in her demeanour during the many weeks when she sat in court with Sophie Moutidis and other members of the Moutidis family, long after Mrs Waugh had completed her evidence. Her antipathy may be due, at least in part, to the circumstances of her departures from the premises under the Kimis lease or the Woodbury Way tenancy. Mr Dedek's behaviour on both occasions was undoubtedly heavy-handed. Mrs Waugh could not be regarded as an independent witness.

71 Michael Powell was one of the directors of Woodbury Way. His evidence dealt primarily with the issue of what chattels were left on the premises when Woodbury Way vacated them.

72 Gary Story is a forensic document examiner and principal of the firm Forensic Document Examination Australia. He was commissioned to prepare an expert report on certain contentious documents, including exhibit N54.

73 Much of this case turns on questions of credit. There are few documents or pieces of objective evidence on some of the most critical issues. It is therefore desirable to set out in some detail the background to the critical events of 1998, as it helps in understanding the possible motivations of the parties and the likelihood of certain disputed events having occurred. However, there were many "red herrings" in this case, and I do not propose to refer to or resolve every factual dispute that arose between the parties.

74 In 1975, Louis and Sophie Moutidis met and married. They acquired Kimis as a shelf company in November 1985, initially running it as a painting business. Louis ran the business, whilst Sophie looked after their sons. In 1989, Louis became a registered builder and turned his attention to residential and later commercial building work through another company, Harleymoore Pty Ltd ("Harleymoore").

75 In the early 1990s the Moutidis interests bought a boarding house business at 348 Beaconsfield Parade, St Kilda ("the St Kilda business") for $100,000. The St Kilda business contained approximately 65 rooms, accommodated 100 residents and had an occupancy rate of between 50% and 80%. Sophie Moutidis gave evidence that she "had never seen so much cash in her life", and after being run by the Moutidises for two years, the St Kilda business was sold for $200,000.

76 The Moutidises remained interested in the boarding house industry. Harleymoore soon purchased a property called "Staffa House" located at 148 Nicholson Street, Fitzroy. Although Staffa House was bigger and could accommodate more people, it was also purchased for $100,000. After operating Staffa House for two years, the Moutidises started a café at the front of the boarding house. They needed to buy a cash register. The operator of the milk bar next door had a cousin who sold cash registers. It was in this way that the Moutidises first met Sam Najjar. After selling a cash register to them, Mr Najjar started attending the Staffa House café and became friendly with the Moutidises. Mr Najjar often said that he and the Moutidises, especially Kim, became "very, very good friends", with whom he used to spend a lot of time. Louis and Sophie Moutidis were not as effusive in their description of the friendship or the frequency of contact with Sam Najjar.

77 Although Staffa House was apparently operating profitably, the construction side of Harleymoore's business had serious financial problems. Harleymoore's financial problems required the Moutidises to consider selling Staffa House. Mr Najjar and his cousin were identified as potential buyers. Harleymoore required the injection of $200,000 in order to avoid having to sell Staffa House. On that basis, Mr Najjar was offered a 50% interest for $200,000. However, Mr Najjar was only able to arrange finance for $100,000, which was insufficient. Soon thereafter, Staffa House was sold to another party for $345,000 and the proceeds employed to reimburse creditors. In September 1996, it went into liquidation and George and Kim replaced Sophie and Louis as directors of Kimis.

78 A few months after selling Staffa House, the Moutidises started looking for another boarding house business. In June or July 1997, a real estate-agent took Louis and Sophie Moutidis to view the premises.

79 The premises are comprised of a double-storey building of approximately 1940's design with a brick frontage and four wings. If entering from the front of the building, one would move through twin glass doors into an entrance foyer. There are kitchen facilities, bathrooms, some office space and approximately 100 bedrooms, of which the majority are twin-share and the remainder are single bedrooms. Towards the rear of the premises, three separate courtyards adjoin the building and there are two sets of gates opening onto a rear street.

80 From 1991 to October 2003, the premises were owned by Hidek. By a lease dated 21 January 1991, the premises were let to Thomas and Rita McKenna, who subsequently assigned their lease to Woodbury Way, the principals of which were Mr and Mrs Powell. In 1994, Woodbury Way registered the premises as an SRS pursuant to the Health Services Act 1988 (Vic) ("the HS Act").

81 The HS Act defines an SRS as "premises where accommodation and special or personal care are provided or offered for persons (other than members of the family of the proprietor of the premises) for fee or reward but does not include a residential care service or a State funded residential care service."[5] The registration of an SRS is the responsibility of the Secretary to the DHS. Prior to being registered as an SRS, premises are inspected by a building inspector appointed by the DHS as well as DHS's own nursing advisors. The proposed operators and any directors of the operating company are also interviewed to assess whether they are "fit and proper" persons and have the necessary financial capacity to operate such an establishment.

82 Although it should have vacated the premises around March 1997, Woodbury Way did not vacate until May 1997, in circumstances which were the subject of heated disagreement between various witnesses, but of no issue relevance.[6]

83 After inspecting the premises in mid-1997, Louis and Sophie Moutidis started negotiations with the Dedeks on behalf of Hidek. Initially it was proposed that Kimis would purchase the premises outright. During August 1997, Hidek's solicitors, Bock & Co, prepared various versions of a proposed contract of sale of the freehold of the premises.

84 However, apparently for financial reasons, the purchase did not go ahead. Instead, in September 1997, Kimis entered into an agreement to lease the premises from Hidek ("the Kimis lease"). The Kimis lease was for an initial term of two years commencing on 26 September 1997, with an option to renew for four further terms of five years each. Rent of $8,666.66 was payable monthly in advance. The tenant agreed to keep effective insurance over the premises, and to pay all municipal and water rates, land tax, and charges for electricity, telephone, garbage and trade waste disposal and fire equipment maintenance.

85 Hidek also granted Kimis an option to purchase the premises, which expired on 31 March 1998 ("the option agreement"). The option agreement provided that if Kimis did not purchase the premises and later sold the business operating from them, it would pay Hidek $20,000 for the furniture on the premises which was owned by Hidek.

86 After Kimis took possession in late September 1997, the Moutidises set about repairing the premises and furnishing the various rooms. There is a significant dispute as to the condition of the premises, and what furnishings and chattels were at the premises, when the Kimis lease commenced. As that dispute is relevant primarily to the Najjar proceeding, the evidence on these topics will be discussed in that part of these reasons.

87 By around late November 1997, the premises were ready to operate as an SRS. At that time there were approximately 14 SRS facilities in the western metropolitan region of Melbourne, of which the premises were the largest. DHS co-ordination of SRS facilities in the western metropolitan region was conducted by Ian Shaw and Dale Siebuhr.

88 The DHS interview process in 1997 and 1998 required each director or officer who might exercise control over an SRS to be interviewed separately on their knowledge of the HS Act and regulations, problem-solving abilities and understanding of broader care-related issues. If an applicant was unable to perform satisfactorily at interview, it was DHS policy to offer them a second interview at a later date.

89 On 19 November 1997, George and Kim Moutidis both performed satisfactorily in interviews with Mr Shaw and Mr Siebuhr and were approved as operators of an SRS. The premises were also inspected and it was noted that carpet-laying and installation of a communication system had to be completed before final approval would be granted. The Kimis DHS certificate was issued on 1 December 1997, with an expiry date of 31 December 2000. The Kimis DHS certificate confirmed the decision under the HS Act to register the premises as a health service establishment and authorised Kimis to conduct an SRS at the premises.

90 The business started accommodating residents by mid-December 1997. Some of the residents had family, financial or psychological problems, while the remainder were drawn to the cheap accommodation. Rates were either paid by the resident personally or by one of approximately 60 crisis housing referral agencies. Breakfast and dinner were offered at an additional cost.

91 After assisting with the renovation and refurbishment work, Louis Moutidis returned to his building work and only dropped into the premises occasionally. George Moutidis provided some assistance to his mother in running the business, but Sophie Moutidis had primary responsibility for the day to day running of the business. All commercial decisions were made by Sophie and Louis Moutidis. Kim Moutidis was not involved with the business.

92 In the early days of operation of the business, Kimis engaged Denise Waugh, a nurse who had worked at the premises when Woodbury Way was the tenant. A few days after Mrs Waugh started working for Kimis, Mr Dedek attended at the premises and recognised her. It is common ground that he demanded that she leave the premises and that the Moutidises complied with his demand. There is an evidentiary dispute as to how and to whom the demand was communicated, but it is not necessary for me to resolve that. Mr Dedek had no legal basis for trying to dictate who the tenant could employ, even if he believed the employee to be somebody who had tried to steal from him in the past.

93 Kimis was in significant financial difficulty almost as soon as the business commenced. The Moutidises say that this was because income from the business was being poured into their construction business and they had had to pay substantial amounts to repair and refurbish the premises. It was in this environment, a fledgling business owned by a company in financial difficulties, that Sam Najjar began frequenting the premises.

94 Based on their experience with Staffa House, the Moutidises were aware that Mr Najjar was interested in buying into a boarding house type of business and that he was able to pay around $100,000. In the early days of operation of the business, they invited Mr Najjar to visit the premises. The date of his first visit to the premises is unknown, but on 23 December 1997 Mr Najjar made his first record of a resident's attendance and wrote his first receipt.

95 Mr Najjar kept in touch with the Moutidises by calling them or dropping by the premises. Discussions about the possibility of Mr Najjar acquiring an interest in the business soon commenced.

96 Mr Najjar was offered an interest because of the parlous financial state of Kimis. Sophie Moutidis gave evidence that by September 1997, Kimis had accumulated approximately $200,000 in debt. This had arisen primarily from the construction business. Furthermore, establishing the business had required a significant capital outlay, and in early 1998 any spare revenue generated was being used to build the business.

97 A further reason for involving Mr Najjar appears to have been the option agreement. The Moutidises had planned to finance the purchase of the premises with a bank loan of $500,000 and by transferring to Mr Dedek two units they were building in Park Grove, Richmond ("the Richmond units"). However, in January 1998, the Richmond units were still not completed and were subject to a bank mortgage of $140,000; time was running out for Kimis to exercise its rights under the option agreement.

98 Sophie Moutidis was not enamoured with the idea of going into business with Mr Najjar. She initially proposed that Mr Najjar lend the Moutidis interests $100,000, in return for a repayment of $150,000. When that was rejected by Mr Najjar, the discussion turned to a sale of half of the business.

99 The $100,000 purchase price for a half interest was agreed upon without any debate. According to Louis Moutidis, agreement for Mr Najjar to purchase an interest was reached by February 1998. Mr Najjar initially disagreed, stating that his decision was made in March or April 1998. However, in cross-examination he agreed that his decision was made in January of that year.

100 As a 28 year old with very little commercial acumen, Mr Najjar sought the advice of his cousin, Ali Sleiman. Mr Sleiman had a friend, Manuel Jiminez, who had assisted him with a tenancy dispute and also had some experience as the owner of various properties on which SRS businesses were conducted. In early January 1998, Mr Sleiman introduced Mr Najjar to Manuel Jiminez at the Jiminez office.[7] With Mr Jiminez' assistance, Najjar SAS was incorporated on 21 January 1998 and the Najjar trust was established. For advice on the legalities of the purchase, Mr Jiminez recommended that Mr Najjar contact Peter Cohen of Cohen Woolf & Weinberg, solicitors, and on 21 April 1998 wrote a letter of introduction to Mr Cohen on behalf of Mr Najjar.

101 Mr Najjar began visiting the premises more regularly. Around April 1998 he began some sort of trial period. He started involving himself more fully in the affairs of the business. In particular, Mr Najjar collected and opened mail and handled much of the office administration.

102 During the first half of 1998, patronage of the business increased substantially. By May and June 1998, the business was experiencing occupancy levels around 90% and income of almost $40,000 per month. Mr Najjar was able to assess the income figures first-hand, and an analysis of the receipt book for May and June 1998 indicates that he signed over 60% of the rent receipts issued in that period.

103 Mr Najjar was adamant that he was not paid any salary prior to July 1998. In direct contrast, Louis and Sophie Moutidis both gave evidence that Mr Najjar was paid a cash salary of $600 per week during May and June. There are no documents which shed light on this issue. Although curious, in my view it is not necessary to resolve this dispute.

104 Mr Najjar was pushing to settle the transaction from April 1998 onwards. The Moutidis' preference was to settle on 1 July 1998.

105 In May or early June, Mrs Moutidis and Mr Najjar approached the Moutidis' accountant, Nicholas Mitsios, for advice on how to accommodate each party's 50% interest in a new business structure. Mr Mitsios advised them to form a unit trust to hold the business, to incorporate a new trustee and then allocate one unit in the new trust to each party's family trust.

106 On 5 June 1998, Louis Moutidis, Mr Najjar and Mr Mitsios attended a meeting at the offices of Cohen Woolf & Weinberg. The proposed structure of the new business was outlined to the parties, and it was resolved that Peter Cohen would draft the contract of sale of business from Kimis to the new entity.

107 On 9 June 1998, the Star Lodge trust and its trustee, Star Lodge, were set up. George Moutidis and Sam Najjar were appointed as directors of Star Lodge. The Moutidis interest in the Star Lodge trust was held by Beamer whilst the Najjar interest was held by Najjar SAS.

108 The contract of sale drafted by Peter Cohen reflected the sale of the business by Kimis to Star Lodge for consideration of $200,000. A transfer of the Kimis lease to Star Lodge was signed on 1 July 1998 ("the Star Lodge lease"). Two days later, three copies of the contract of sale were executed by Mr Najjar in Mr Mitsios' office. At that time, Mr Najjar handed Louis Moutidis a cheque for $100,000, which he had obtained by remortgaging his home. Beamer did not in fact pay Kimis any money for its half of the business.

109 Upon receipt of the Najjar money, Kimis immediately set about satisfying its many creditors. In fact, by 30 July 1998, only $4,163 of the Najjar money remained in the Kimis bank account.

110 Unfortunately, the original contracts of sale relied upon by Beamer and the Najjar defendants differ in one material respect. The document relied upon by the Najjar defendants contains an inventory of chattels at the end of the document, which the Moutidises say was not attached to the contract of sale when they signed it. This dispute is relevant to the Najjar proceeding and the evidence will be considered later.

111 As a result of the sale of business, it was necessary for Star Lodge to obtain DHS registration. An application for variation of registration ("the DHS transfer form") was prepared by Peter Cohen and given to the Moutidises to sign. Kimis was shown as the applicant transferor, and Kimis' name and the relevant details of the business were typed into the standard form. Kim and George Moutidis subsequently signed it in their capacity as directors of Kimis. The DHS transfer form is dated 26 June 1998.

112 After his sons had signed, Louis Moutidis gave the DHS transfer form to Mr Najjar to give back to Mr Cohen. Mr Cohen was not called and no evidence was led as to when the form was actually lodged with DHS. Sam Najjar met with and spoke to DHS staff on several occasions during July 1998. He said that one of the matters he discussed with them was how the transfer of registration was going.

113 In evidence-in-chief, Louis Moutidis said that the DHS transfer form had a blank space for the transferee's name to be inserted and that Mr Najjar had specifically asked him to leave the name of the transferee blank. That assertion was consistent with a statement which was attributed to Louis Moutidis in one of George Moutidis' affidavits and with previous correspondence sent on behalf of the Moutidises. I have no doubt that these statements were intended to convey the impression that Mr Najjar was acting suspiciously and plotting to be rid of the Moutidises even before the completion of the contract of sale. When it was pointed out to Louis Moutidis in cross-examination that there was no place for the transferee's name to be inserted on the DHS transfer form, Mr Moutidis tried in a rather unconvincing way to distance himself from all the earlier assertions and suggested that he had been talking about some other, unidentified document.

114 Although in the form prescribed by the HS Act, the DHS transfer form did not provide for the name or signature of the transferee to be inserted anywhere. This glaring omission meant that the DHS transfer form was able to be used later to effect a transfer of DHS registration from Kimis to Najjar SAS, without Kimis' consent.

115 The contract of sale was supplemented by a further agreement between Najjar SAS and Beamer outlining how the business would be conducted by Star Lodge and how profits and expenses would be allocated. At all times it was agreed that Mr Najjar was to be responsible for the day to day running of the business.

116 The pleadings and the evidence of both Beamer and the Najjar defendants in relation to this further agreement are unsatisfactory in many respects.

117 The Moutidises said that it was initially proposed that Beamer would receive $22,000 per month payable in arrears and would pay the rent, taxes, rates, maintenance and insurance for the business. Najjar SAS would retain any revenue above $22,000. Sam Najjar denied that any such agreement was entered into. However, he did allege that the Moutidises wanted a piece of paper to show to their bank, which demonstrated a monthly income of $22,000, even though no such agreement had been reached. Louis Moutidis denied that was the case.

118 At some stage in late July, the parties orally agreed that Beamer would receive a monthly payment of $13,335, not $22,000, and in return Najjar SAS would assume responsibility for paying rent.

119 Mrs Moutidis and Mr Najjar asked Mr Mitsios to draw up an agreement reflecting the general terms which had been agreed. Mr Mitsios drafted such a document and delivered it to Mr Najjar at the premises. Given that the document which he drafted expressly referred to a report, the ESR, which was not received before 21 July 1998, I find that Mr Mitsios cannot have drafted the written document prior to that time. Mr Najjar, Mr Mitsios and the Moutidises were all vague and somewhat inconsistent about the timing of the oral agreement and the preparation of the written agreement. It is possible that the written agreement was not prepared until early August.

120 Although Mr Mitsios wanted Mr Najjar to sign the agreement in his presence, Mr Najjar told Mr Mitsios that he did not have the Najjar SAS company seal with him. The written agreement was never signed.

121 The unsigned document stipulated that Najjar SAS would manage the business "for the term of the agreement" subject to certain conditions. In essence, Beamer was to receive $13,335 per month whilst retaining responsibility for the payment of insurance, water and council rates. Beamer was required to provide a guarantee that it would rectify all problems identified in the ESR. Najjar SAS guaranteed all other costs and was then entitled to any residual profits.

122 Although no written document was executed, I am satisfied that around late July or early August 1998, Najjar SAS and Beamer entered into an oral agreement which included the terms set out in the unsigned document ("the supplementary agreement").

123 It is apt to describe the beginning of Mr Najjar's term as a part-owner and operator of the business as a "baptism of fire". Mr Najjar was immediately faced with the problem of dealing with service providers who were owed money by Kimis. For example, Telstra cut off the telephone. People attended to turn off the gas, but Mr Najjar successfully pleaded for an extension of time for payment. Similar problems arose with respect to rubbish collection, linen suppliers and sanitary cleaning services.

124 In an endeavour to regain control over the situation, Mr Najjar contacted Mr Jiminez for advice. Whilst Mr Jiminez was initially reluctant to assist, because Mr Najjar had not paid a previously agreed fee, he eventually agreed to help.

125 Mr Jiminez met with Mr Najjar and Wayne Cuthbertson, one of the staff, one Saturday in the second half of July 1998. Mr Najjar explained that he had paid $100,000 to the Moutidises and that within days of taking charge of running the business the telephone lines were cut off, the linen supply stopped and problems with various other services arose. According to Mr Jiminez, Mr Najjar also explained that the Moutidises were asking for $13,500 which Mr Najjar had agreed to pay them on a monthly basis. Mr Jiminez said that he asked Mr Najjar how much money was in the account and Mr Najjar replied that there was not enough money to pay $13,500 at that stage. Mr Jiminez said he agreed to help out because "really, the whole thing was in a bit of a mess, and I told him that I would contact Peter Cohen to find out how this came about". Some days later, Mr Jiminez informed Mr Najjar that he would require $800 per month for the period in which Mr Jiminez would be involved in helping him out. Mr Najjar agreed to that.

126 After discussing the matter with his solicitor, Peter Cohen, Mr Jiminez agreed that he would contact suppliers on behalf of Mr Najjar, inform them of the change in management and ask them to continue to provide their services. Consequently, various letters were written to suppliers in the last week of July. The letters were dictated by Mr Jiminez and typed by one or other of his staff, Bobi Doslakoski or Mira Clarick. Mr Doslakoski apparently prepared one or more Star Lodge letterheads on the computer, which were used for these and other letters. Where necessary, an electronic copy of Mr Najjar's signature was inserted by Mr Jiminez' staff. Mr Najjar did not see all the letters that were sent out in his name.

127 Of particular importance in this case were various unpaid rates and taxes, the non-payment of which was later relied upon by Hidek in terminating the Star Lodge lease.

128 In late April 1998, Hidek received a land tax assessment notice dated 24 April, at the Dedek's home address ("the land tax notice"). Under the Kimis and Star Lodge leases, the land tax was payable by the tenant. Mr Dedek said it was his practice to make a copy of any such notice and give it to the tenant at the premises. Mr Dedek said he handed a copy of the land tax notice to Louis Moutidis in late April 1998 and Mr Moutidis said he would take care of it.

129 By June 1998, Mr Dedek was aware that Kimis had not complied with the land tax notice. On 16 June, he attended at the State Revenue Office and paid the outstanding amount of $222.24 himself. Mr Dedek said that he then took a copy of the receipt and gave it to Mr Moutidis on 23 or 24 June, with a request for re-imbursement, at the same time as he collected the rent cheque for June.

130 Although he initially denied that he knew the tenant had to pay land tax for the premises, Louis Moutidis ultimately conceded that he knew that Kimis was liable to pay land tax. However, he denied that Mr Dedek ever gave him a copy of the land tax notice or that he requested reimbursement. Mr Moutidis claimed that he would have paid the land tax notice had he been given it. Given that the Moutidises were regularly late in paying accounts, often bounced cheques, had no apparent system for making or recording payments, and displayed a careless attitude towards paperwork generally, I do not accept Mr Moutidis' bald assertion that he would have paid the amount in the land tax notice had he received it.

131 I find that Mr Dedek did give a copy of the land tax notice to Mr Moutidis in April and June 1998.

132 A problem also arose regarding unpaid water rates. Mr Dedek gave evidence that his practice with respect to City West Water, and other accounts for which the tenant was responsible, was to arrange for them to be delivered directly to the premises for the tenant to pay. This was because the Dedeks were often away for months at a time and did not want correspondence to lie unattended in their letterbox. That practice is borne out by the addresses on various accounts which were in evidence.

133 A copy of a City West account for $1,790.65, dated 16 April 1998, was discovered by the Moutidises. However, they were unable to explain how it came to be in their possession or their discovery. I infer that they received it in or around April 1998, but simply ignored it, as they did with other accounts. In any event, there is no evidence that at the time of delivery of the water notice in July 1998 Kimis had paid anything at all to City West Water in respect of its first nine months of occupation of the premises.

134 On or about 8 July 1998, Hidek was served by Davies Moloney, solicitors for City West Water, with a Magistrates' Court complaint, seeking recovery of $1,986.90 in respect of current and unpaid water rates for the premises for the period 1 October 1997 to 30 June 1998, and $362.20 in respect of legal costs relating to the complaint, being a total sum of $2,349.10 ("the water notice").

135 Mr Dedek said that this was first time he became aware that there were unpaid water rates in respect of the premises. He said that he telephoned Mr Moutidis shortly after receiving the water notice and received what he termed "the usual answer, 'Don't worry I'll fix it'".

136 Patricia Bucci of the council, gave evidence that council rates were due and payable on a quarterly basis, namely, 30 September, 30 November, 28 February and 31 May of each year. Ratepayers were made aware of their payment obligations by instalment notices sent approximately three weeks before the payment date. The instalment notices for 30 September 1997 and 28 February 1998 were tendered at trial. They were sent to Hidek, care of Paul Dedek at his private residence. The council rates to which the default notice refers would have become due and payable on 31 May. The relevant instalment notice was never produced. There is no evidence that Kimis or the Moutidis interests received the instalment notice for 31 May before the end of July.

137 Unfortunately, the problems with services also extended to the maintenance of adequate fire protection. Given the type of accommodation involved, the high number of residents and community sensitivity after the Kew Cottages disaster, it is not surprising that the premises were the subject of some scrutiny from local authorities.

138 On 31 March 1998, Paul Gibcus conducted an essential services inspection on behalf of the council. The inspection was prompted by notification from the MFB that there had been a small, contained fire at the premises and a subsequent request for an inspection from the Health Services Department. Upon inspection, Mr Gibcus formed the view that there were serious matters that required attention. However, he did not prepare a report on his inspection until 2 July 1998, and for reasons which were not adequately explained, he did not serve that report until late July.

139 On 26 May 1998, Martin McNeill and Shane Gore of the MFB attended the premises in response to a public complaint about the sprinkler system. They were met by Louis Moutidis and conducted an inspection of the building using a fire safety checklist. At the conclusion of the inspection, Louis was served with and signed a document called a "Maintenance Advisory Notice" ("the MFB notice") which documented various defects, including that the exit doors required immediate attention.

140 There is a dispute as to whether Sam Najjar was present when the MFB inspection occurred and when he first learned of the MFB notice. As the dispute is primarily relevant to the Najjar proceeding, the conflicting evidence will be considered later. It was not disputed that Mr Dedek was not aware of the MFB notice until after service of an emergency order in August 1998.

141 GEM conducted weekly inspections of the fire sprinkler system at the premises. Due to non-payment of outstanding fees, GEM attended at the premises on 17 June 1998 and suspended testing on that date. Mr Najjar was aware of this at the time. GEM only agreed to start re-testing on 3 August 1998 when Mr Najjar, on behalf of Star Lodge, and GEM entered into an agreement for the maintenance of the fire sprinkler system for a further 12 months, and made an advance payment of $800.

142 Mr Gibcus' report dated 2 July 1998 is described as an "Essential Services Report" ("ESR") and made 21 recommendations concerning, inter alia, ventilation systems, emergency lighting, removal of unapproved furniture, provision of appropriate extinguishers, fire hydrants, smoke alarms, sprinkler systems and communication systems. The ESR is addressed to Hidek. The ESR concluded with the following bold and underlined text:

"It is strongly recommended that all the items outlined above are urgent and pose the real threat to the lives of the people who inhabit this building, therefore it is our highest priority to advise you, being the owner of the above specified property to attend to these issues as outlined in this report Immediately."

143 The urgent language in the notice does not sit particularly well with the fact that it took the council more than three months to prepare the ESR. Like a number of the fire or building notices in this case, the ESR conveyed a sense of great urgency in its language. I agree with Mr Hevey that some of these notices give one the impression that the council or relevant authority was, quite understandably, concerned about protecting its position in case of a future disaster or litigation, and that not every item on the notices was in fact substantial or urgent.

144 The ESR bears a "received" stamp with the date of 21 July 1998, but it is not clear who applied that stamp. The ESR was sent to DHS, as well as to Mr Dedek; the latter did not receive it until 24 July, as he had been away earlier that month.

145 Mr Najjar's recollection was that he did not have any knowledge of outstanding fire orders prior to a meeting held at DHS and attended by the council on 23 July. However, it seems likely that Mr Najjar had learned of some of the fire problems a day or two earlier. The council's file records that a copy of the ESR was faxed to Mr Najjar "as requested by him" on 21 July. In any event, Danielle Chiron of the council gave him a copy at the premises on the 23rd.

146 The meeting on the 23rd was attended by Ms West from the council, Mr Siebuhr from DHS and Mr Najjar and Mr Cuthbertson from the business. The meeting was called by DHS because of concerns they had with the premises in regards to safety, in particular fire safety.

147 Mr Moutidis did not attend the meeting on the 23rd. Mr Moutidis said that he was not invited to the meeting.

148 Mr Dedek said that he was not aware of the March inspection by the council at the time it occurred, and that the first he knew of it was when the ESR was received by him on 24 July. After he received it, he dropped in at the premises where he met Mr Najjar and went through the document. Mr Najjar said that Mr Dedek was "a little bit upset" on this occasion and wanted to walk around the premises with Mr Najjar, so they could look at the particular points raised in the ESR.

149 Mr Dedek's visit to the premises also seems to have been a response to a phone call he received from Danielle Chiron of the council, who asked whether she could provide his telephone number to "the new owner". Mr Dedek was most surprised at hearing that there was a new owner, and he and Mrs Dedek drove to the premises to find out what was happening. However, the use of the term "new owner" probably misled Mr Dedek, as he was aware at the time the lease was transferred from Kimis to Star Lodge on 3 July 1998 that Mr Najjar was a financial contributor to the business, and was involved in its operations. He was aware that the Moutidises were "putting a new guy" into the business, or taking on a partner.

150 Upon attending at the premises, Mr Dedek said he met with Mr Najjar and asked him "Who is the new owner?" Mr Najjar replied "Oh you don't know, I purchased the business." Mr Dedek inquired as to whether there were any purchase contracts and Mr Najjar proceeded to show him legal documents which include the disputed inventory. At that point Mr Dedek informed Mr Najjar that the chattels on the disputed inventory were not his property, they were the property of Hidek.

151 Mr Najjar said he rang Louis Moutidis about the ESR. He said that Louis Moutidis became very aggressive and upset over the phone and "a little bit abusive" and said "It's not your problem, don't worry about it. Leave it for me and the landlord". On the other hand, Louis Moutidis said that Mr Najjar never called him during July and August 1998 and the only contact between them was when Louis called Mr Najjar in late July to ask about the payment allegedly owing under the supplementary agreement. It is not necessary for me to resolve this factual dispute.

152 The Moutidises first received a copy of the ESR on 5 August. Louis Moutidis proceeded to contact a friend by the name of Dennis Koutsantonis, who had purchased the St Kilda business from him, and had some sprinklers fitted. His subsequent visit to the premises with Mr Koutsantonis will be discussed later.

153 Mr Dedek agreed that upon reading the ESR, he thought there was nothing wrong that could not be fixed. He did not approach the council and ask why it had taken three months to send the ESR, nor did he ask Mr Najjar how long he had had the document. Mr Dedek said that upon receiving the ESR he started working on fixing things himself "straight away".

154 Mr Najjar agreed that Mr Dedek started coming to the premises on a regular, almost daily, basis after the receipt of the ESR. Mr Dedek attended to a lot of the items and would instruct Mr Najjar and staff on certain tasks, such as clearing underneath the stairways, clearing up rubbish or ensuring doors were accessible. Mr Dedek also attended to the emergency lighting, the back-up batteries and things like that.

155 Either before or after the meeting with Mr Najjar, Mr Dedek met with his solicitor, Mr Bock. He said that meeting occurred on Friday 24 July 1998. Mr Dedek's diary entry for that day records an entry for Mr Bock at around 4.45 pm on that day. When Mr Dedek attended Mr Bock's offices in Malvern that day, Mr Bock asked him to come back later.

156 Mr Bock had a clear recollection that the first relevant meeting he had with Mr Dedek was some time around July 1998. He remembered it being approximately one year since Mr Dedek's visit to his home when Mr Bock was convalescing from surgery. Mr Bock confirmed that the first meeting in July 1998 was very brief, because he was needed elsewhere, and he asked Mr Dedek to make an appointment to come back. At that first meeting Mr Dedek did ask Mr Bock whether he knew anything about a sale of the business. Mr Bock said he would be able to tell him more after his practice merged with Cohen Wolf & Weinberg in a few days, as they acted for the tenant or the purchaser.

157 Mr Bock met again with Mr Dedek around noon on Monday, 27 July 1998. Mr Dedek told Mr Bock that there was a problem with the current tenant, because it had fallen into arrears with rent and outgoings and Mr Dedek "wanted to throw him out". Mr Bock told Mr Dedek he would have to give a 14 day notice and Mr Dedek said he had all the notices, ones which Mr Bock had previously prepared. Mr Bock advised that if he was going to be asking for outstanding amounts it was important to serve a clear letter stating the amounts outstanding.

158 Mr Dedek had obtained a version of the relevant notices in the previous year, in the following circumstances. After returning from an overseas trip in early 1997, Mr Dedek was informed by his son that there were some problems with the premises and the tenant, Woodbury Way. On 6 May 1997, Mr Dedek visited the premises. It is common ground that there was some sort of confrontation between Mr Dedek and Mr Powell and others on that day, the precise details of which are not relevant. The police were ultimately called and the tenant left the premises. However, in connection with the proposed eviction of Woodbury Way, Mr Dedek had asked Mr Bock to prepare re-entry documents. Mr Bock prepared a notice of re-entry, and a notice to police and locksmiths regarding Woodbury Way, in May 1997. These were part of what Mr Bock described as a "three document process". Those documents were never used because of the negotiated settlement, but Paul Dedek kept them on his file.

159 Mr Bock said he was used to Mr Dedek scanning documents through his computer and "recycling" them for later use. Although Mr Hevey was critical of the fact that a solicitor allowed his client to modify his documents in this way and, in particular, to leave the solicitor's details on the police notice thereby conveying the impression that the solicitor had prepared the final document, I accept that this is what in fact happened.

160 The parties are in heated dispute over the creation and service of the default notice, which is dated 28 July 1998. In it, Hidek gave notice to Star Lodge that unless the amounts specified in it were paid within 14 days, Hidek would terminate the Star Lodge lease and re-enter the premises.

161 Beamer alleges that the default notice was not created on or about 28 July and, even if it was, it was not served on or about that date. Beamer alleges that it was not prepared until some later time. At the start of the trial, Beamer obtained leave to withdraw a positive allegation that the default notice was prepared on or about 1 September 1998.

162 Hidek says that the default notice was prepared on or about 27 or 28 July and served by Paul Dedek on Sam Najjar on 28 or 29 July and by Alena Dedek on George Moutidis at the Moutidis home on the following day.

163 The PLA outlines the requirements for notices served under the Act. Any notice required to be served shall be in writing[8] and shall be sufficiently served if it is left at the last known place of abode or business of the lessee or affixed to any house or building comprised in the lease.[9]

164 Sam Najjar agreed that Paul Dedek served the default notice on him at the premises on 28 or 29 July. Further Mr Najjar and Mr Jiminez say that they created a covering letter under which they themselves forwarded a copy of the default notice to the Moutidises ("the covering letter"). Mr Najjar says he delivered the covering letter and enclosed copy default notice to Sophie Moutidis on 29 July. She denies that.

165 George and Sophie Moutidis agreed that Mrs Dedek attended their home in late July, but said that she only collected cheques for water and council rates and rent, and did not give them any documents.

166 Two versions of the default notice were prepared. They were in identical terms save that one was addressed to Star Lodge and the other to "George Moutidis, Kimis & Co Pty Ltd" and they referred to the relevant tenant. The substance of the default notice was as follows:

"As the Land tax for the property 161 Gordon St Footscray, which you are leasing, has not been paid, I had no option but to pay the amount of $222.24 for the Land Tax due on 19/6/98. I have sent the receipt to you for reimbursement.

I am sending you the summons, which I received from Davies Moloney Solicitors acting for Melbourne Water demanding $2,349.10 for water rates and their legal costs. Also I am sending you the rates certificate from the Maribyrnong City Council of $8,037.86 for rates including the penalty for late payments.

All these costs are outlined in our lease agreement and are to be paid by the tenant [Star Lodge Pty Ltd] [Kimis & Co Pty Ltd].

I have experienced difficulty of payments and received a number of dishonoured cheques from you. In light of this I request immediate action or I have no other option than to terminate the lease in 14 days and re-enter the property."

167 Mr Dedek said that the default notice was addressed to both Star Lodge and George Moutidis because he was not sure whether Star Lodge or Kimis was responsible. He was sure that George Moutidis was one of the directors of Kimis.

168 Mr Dedek said he prepared the default notice on his computer, by scanning and then modifying the similar notice which Mr Bock had prepared for him in the previous year. The figures in the default notice were obtained from Mr Dedek's books and documents. He said the default notice was created on the afternoon or evening of 27 July, and printed out on the morning of the 28th.

169 Mr Dedek said that, as his written English was not perfect, he asked his daughter, Simone Pardo, to help him with the letter and that she came around to his house that evening to do so.

170 Although he met with his solicitor, Mr Bock, on 27 July, Mr Dedek did not ask Mr Bock to prepare the default notice or the notice of re-entry. As mentioned earlier, the proposed course of action of issuing a letter of demand and a re-entry notice was discussed at that meeting.

171 In late July 1998, Simone Pardo was working at Rinnai Corporation in Braeside. She gave evidence that her father called her at work and asked her to come over later that day. She recalled the telephone conversation because she was seven months pregnant at the time and was going to have a glucose test later that day. Ms Pardo's diary records an appointment at 4.30 pm on 27 July, with a related entry for 3.30 pm being "drink glucose". She could not recall whether Mr Dedek called her in the morning or in the afternoon. She said her father asked her if she would come over and correct a letter for him. Although she was reluctant to go, she believed that her father's request was urgent and that she had to go that night.

172 The earliest she would have left the Monash Medical Centre after her test that day would have been 5.30 pm. She was not sure whether she picked up the letter from her parents' house and took it away to correct it, or whether she corrected it there.

173 Ms Pardo confirmed that she regularly checked her father's English in letters and helped him with his grammar. She said that the default notice looked like a letter she had checked, but had no actual recollection of the document or the details of it.

174 At various stages in the trial, certain documents were produced which Mr Dedek said he produced from his home computer. These documents were various "properties reports" from the computer, which purported to show that the default notice and re-entry notice were prepared on or about the dates alleged by Hidek. Mr Dedek rejected any suggestion that he had falsely changed the dates on the properties reports in relation to the default and re-entry notices.

175 However, it was conceded by Hidek's counsel during the course of the trial that reports such as these could be altered in various ways, either before or after the date they purportedly bore. Given that concession, and in the absence of expert evidence as to their authenticity, I have not given them any weight as objective proof on the issue of whether or not the default notice was created and served on or about 28 July.

176 Mr Dedek and Mr Najjar's evidence about the service of the default notice at the premises is generally consistent.

177 Mr Dedek said he took the default notice and gave it to Mr Najjar at the premises, together with the water notice and the council rates notice. Mr Dedek was not sure if he showed him a copy of the land tax notice as well. Mr Dedek said that when he gave the default notice to Mr Najjar, Mr Najjar replied "You have to speak to George". Mr Dedek said that he only left Mr Najjar with the one page default notice.

178 Mr Dedek did not remember at what time of day he served the default notice on Mr Najjar. He also could not explain why, after delivering the default notice to the premises, he did not continue on to Richmond at the time to deliver the other letter to the Moutidises.

179 Mr Najjar said that the first time he saw the default notice was when Mr Dedek brought it over to the premises in late July 1998. Mr Najjar agreed that he was on his own when Mr Dedek delivered the notice. Mr Najjar thought he had been provided with an original of that letter and not a copy.

180 When Mr Najjar asked Mr Dedek why he was giving him the default notice, Mr Dedek said that there were outstanding rates, council rates, and land tax. Mr Najjar said that he told Mr Dedek that it was not his responsibility, because Star Lodge had only been there for 28 days or even less. Mr Najjar said he asked Mr Dedek why he did not sort this out with Louis Moutidis and Mr Dedek said "We are going to". Mr Najjar said that during this visit Mr Dedek only gave him the default notice.

181 Both Mr Najjar and Mr Dedek gave differing accounts as to whether the default notice was served on 28 or 29 July 1998. Both started by saying it was the 28th and then changed their evidence to the 29th. Mr Dedek said that he now believed he served the default notice on Mr Najjar on the 29th and offered several reasons for supporting that.

182 Firstly, on 14 September 1998, Mr Bock wrote a letter to Mr Dedek stating "we confirm that you have advised us that a notice of default was left at the premises on or about 29 July 1998".

183 However, the letter from Mr Bock of 14 September contradicts the Hidek defence dated 16 February 1999, paragraph 15A of which alleged that the default notice was dated and served upon Star Lodge on 28 July. When questioned on the discrepancy between the defence and the letter written by Mr Bock, Mr Dedek preferred to rely on the version in Mr Bock's letter (in other words that the letter had been served on the 29th and not the 28th).

184 Secondly, Mr Dedek said that on the same day that he delivered the default notice to the premises, he called in at the council offices and asked for a supplementary rate notice, in order to have his own copy of the document for his records. Such a notice, dated 29 July 1998, was tendered in evidence.

185 On 26 May 1999, Mr Jiminez swore an affidavit in the Beamer proceeding on behalf of Western Lodge and Hidek. In that affidavit he deposed that "Mr Dedek has informed me and I verily believe that Mr Dedek personally delivered this letter to Mr Najjar at the premises on 28 July 1998". Mr Dedek referred to Mr Jiminez' affidavit in his own affidavit of 30 June 1999, in which he deposed that Mr Jiminez' affidavit was true and correct in all respects.

186 Mr Dedek freely conceded that six years later, he had no independent recollection of whether service occurred on the 28th or the 29th.

187 It is hardly surprising that witnesses are unable to recall from their own memories, some six years after the events, whether the default notice was served on one or other of those days. It is easy to understand how they have looked for some external indication as to what the correct date was, and have then reconsidered the position when shown other documents. At the end of the day, it is not necessary for me to resolve this dispute, as long as I am satisfied that the default notice was in fact prepared and served by 29 July 1998. I am so satisfied.

188 According to Mr Dedek, on the same day that he printed out the default notice, and before serving it at the premises, he rang Louis Moutidis. Mr Dedek said that during the conversation, they discussed the outstanding accounts. He said that Louis Moutidis said "No worries. I'll pay the rates. The cheque will be ready in my house in each month, but I'll leave the cheque for the rent but don't bank it for a week. The rest you can use it immediately."

189 Louis Moutidis agreed that Mr Dedek had a conversation with him on 28 or 29 July in which the August rent was discussed and Mr Dedek requested payment of the council and water rates. He said it was agreed that Mrs Dedek would collect the rates cheques from the Moutidis home on the following day.

190 Mr Moutidis said that Mr Dedek called him on his mobile telephone while he was driving to work. He said he pulled over to the side of the road and noted the amounts which Mr Dedek gave him on a piece of paper which he no longer had at the time of trial. Louis said that after the conversation he immediately rang his wife and told her the amounts for which she would need to write cheques. However, Louis Moutidis denied that during this conversation he also told Mr Dedek that he could collect a cheque for the August rent which could not be banked for a week because there were insufficient funds in the account.

191 Mr Dedek said that after his visit to Mr Najjar at Star Lodge, he went home and put the other default notice addressed to George Moutidis and the enclosures in an envelope. He said he asked his wife to go to the Moutidis home to deliver the envelope and get a rent cheque.

192 There are a number of differences between Mrs Dedek's evidence and the various Moutidis versions about Mrs Dedek's visit in late July to collect cheques.

193 Mrs Dedek recalled that some time at the end of July 1998 she attended the Moutidis home at the request of her husband. He asked whether she could deliver something because he did not have the time. He gave her an envelope and asked her to deliver it to the Moutidis home and pick up some cheques. Mrs Dedek did not read the contents of the envelope, which was open. She thought that there was more than one sheet of paper inside the envelope.

194 Mrs Dedek drove her car, parked near the Moutidis home and knocked on their front door a couple of times. The door was open and after asking "Anybody there?" and receiving no reply, she started to enter the house. George Moutidis came to the door and Mrs Dedek gave him the envelope either at the door or in the hallway of the house.

195 After giving him the envelope, George proceeded towards the back of the house and Mrs Dedek followed him some way down the hallway. She said that George was standing at a little table in the kitchen where he took his cheque book and started to write some cheques. He gave three cheques to Mrs Dedek. She said he only wrote out two cheques because one was already prepared. Mrs Dedek did not see George take anything out of the envelope.

196 Her evidence was that she just checked the first cheque was for more than $8,000, because she was mainly there to collect the rent. Mrs Dedek could not say whether the cheque she noticed was for $8,655 for rent or $8,037.86 owing to the council.

197 George Moutidis could not remember the date or the time when Mrs Dedek attended the Moutidis home to collect the cheques. He said that he saw Mrs Dedek through the open front door, because he was walking down the staircase when she arrived.

198 George Moutidis could not remember what Mrs Dedek wore, whether she was carrying a handbag or whether she had anything else in her hands. He did not deny but had "no recollection" of being handed an envelope by Mrs Dedek. He was clear that he did not receive a copy or an original of the default notice in late July 1998 from Mrs Dedek.

199 At first, George Moutidis said that he had only handed Mrs Dedek one cheque, but later he was adamant that he had handed her two cheques. He said he could remember handing Mrs Dedek two cheques but could not remember whether he actually wrote them out. He said he could not be "100 per cent sure" whether he wrote the cheques himself and was not able to say whether the handwriting on the cheque butts was his.

200 At another stage, George's evidence was that his mother told him what amounts to write on the cheques. He said he was sure of this because his mother was the only source of that information available to him. However, he could not recall whether his mother had any documentation from which she obtained the amounts to be written on the cheques. On another occasion, George said he could not be "100 per cent sure" that his mother told him the amounts to write on the cheques.

201 His oral evidence did not sit well with his affidavit of 28 September 1998, in which he deposed:

"Mrs Dedek, a director of Hidek, attended my home and requested that I pay City West Water rates and City of Maribyrnong water rates in relation to the premises. I signed cheques and gave them to Mrs Dedek in the sum of $2,349.10 payable to City West Water and $8,037.86 payable to Maribyrnong City Council, they being the amounts Mrs Dedek informed me were due and owing."

202 George Moutidis said he had no recollection of this at the time of trial, but if it was in his affidavit it must be true.

203 The most unsatisfactory aspect of the Moutidises' evidence about Mrs Dedek's visit related to the question of whether Sophie Moutidis was also present at the time. In numerous affidavits filed in these proceedings, George Moutidis had made no mention whatsoever of his mother being present when Mrs Dedek visited. However, when asked in examination-in-chief whether anyone else was at home that day, George replied "Yes my mother was at home". He said that his mother spoke to Mrs Dedek on that occasion.

204 Like George's many affidavits, Mrs Moutidis' witness statement of 27 October 2003 contained no suggestion that she had been present when George Moutidis handed over the cheques to Mrs Dedek. Nor did Beamer's counsel say in his opening that George or Mrs Moutidis would be giving any such evidence.

205 Sophie Moutidis was adamant that she was at the Moutidis home when Mrs Dedek arrived on that day. Initially, Mrs Moutidis thought that it was on 30 July that she had given the cheques to Mrs Dedek and that was the same day that Mr Dedek had rung Louis Moutidis on his mobile. Later, Mrs Moutidis said Mrs Dedek's visit could have occurred on 29 or 30 July.

206 Mrs Moutidis said that she expected Mrs Dedek's visit to the Moutidis home because "Like I recall one hour, two hours earlier Louis rang me and said Mrs Dedek is going to come to make sure George is there to give her the two cheques." She said she was in the kitchen or just outside the kitchen, at the back of the house, when she heard someone knocking. She said she recalled that George was upstairs in his room at the time.

207 Mrs Moutidis said that Mrs Dedek was at the open front door and that she ran and invited Mrs Dedek in. She said that Mrs Dedek asked if she knew why Mrs Dedek was there and that she had replied that she did. Mrs Moutidis said she called out to George, who had the cheques with him. She said George already had the cheques written out when Mrs Dedek arrived and brought them down very quickly. This did not sit well with her earlier evidence that she could not remember who wrote out the cheques.

208 Mrs Moutidis said she got the amount for the cheques over the phone from her husband. At one stage she said she could not remember whether she or her husband gave George the figures; later she said that they had both given the figures to George.

209 Sophie and George Moutidis were both signatories to the Kimis cheque accounts. The evidence was that Sophie wrote out most of the cheques for the business. It was never satisfactorily explained why George, who had very little to do with the business, would have written out the cheques rather than Sophie, had she in fact been at home that day.

210 Sophie Moutidis said that Mrs Dedek's handbag was closed, she did not have anything in her hands, she took the cheques and didn't put them in the bag. Mrs Moutidis was adamant that Mrs Dedek did not give her the default notice. Of course, Mrs Dedek never suggested she did give it to Mrs Moutidis; rather, she denied that Mrs Moutidis was even there on that occasion.

211 Mrs Moutidis volunteered a remarkably colourful picture of Mrs Dedek's appearance and behaviour on this occasion. She gave a detailed description of what she said Mrs Dedek was wearing and how she behaved. She said Mrs Dedek was carrying a brown string or leather handbag and wearing a brown and white or brown and beige woollen jacket. However, Mrs Moutidis could not recall what Mrs Dedek was wearing on any other occasion when she met her. No explanation was proffered as to why Mrs Moutidis would remember so vividly the clothes worn on this occasion. From the Moutidis' point of view, this visit was of no particular significance at that time. This evidence had the flavour of self-serving reconstruction, at the very least.

212 Mrs Dedek did not recall what she was wearing on that day. She said she doesn't have a brown coat and would not have worn a coat in the car anyway. She did not recall being in a hurry or proceeding rapidly. Mrs Dedek did not see anybody apart from George Moutidis at the Moutidis home that day.

213 According to Mrs Moutidis, Mrs Dedek was very anxious to get the cheques and run away. She said she offered her coffee, but Mrs Dedek said she was in a hurry and had to go bank the cheques. "I was surprised after that, very surprised." The clear flavour of her evidence in this regard was to try to portray Mrs Dedek as having fled like a criminal from the scene of the crime. This portrayal also smacks of reconstruction, perhaps designed to bolster the conspiracy theory.

214 For all these reasons, I do not accept that Mrs Moutidis was present when Mrs Dedek delivered the envelope.

215 Louis Moutidis and Paul Dedek could not give any evidence from personal knowledge as to who was present on that occasion or how many cheques were handed over.

216 Mrs Dedek returned from the Moutidis home with three cheques: one for $8,655 for the rent, one for $8,037.86 for the council rates and one for $2,439.10 for the water rates. The cheque butts for the water and council rates are both dated 30 July, which tends to support the conclusion that Mrs Dedek visited on 30 July.

217 I am satisfied that Mrs Dedek did hand an envelope to George Moutidis on 30 July and that it contained the default notice addressed to Kimis and the supporting documentation. I am not able to make any finding as to what George Moutidis did with the envelope or whether any of the Moutidises ever opened it.

218 Sam Najjar said that after receiving the default notice from Mr Dedek, he rang Mr Jiminez, who told him to bring it to his office. Initially, Mr Najjar was not sure if he went around to the Jiminez' office on the same day or on the following day. Later in his evidence, Mr Najjar said that he took his copy of the notice to the Jiminez office the following day, early in the morning. Mr Najjar was of this view because he said that he tried to get out early and come back to the premises to do whatever work was required.

219 Mr Jiminez was unable to say on what date he first saw the default notice. However, he agreed that Sam Najjar brought the default notice to his office. Mr Jiminez said that when Mr Najjar told him that there was a dispute regarding a demand by the landlord for outstanding moneys, he asked Mr Najjar whether "his partner" knew about it. Mr Najjar replied that the landlord had served it on him as well.

220 Both Mr Najjar and Mr Jiminez said that Mr Jiminez wanted to make sure that a copy was sent to George Moutidis and to Mr Najjar's solicitor, Mr Cohen. The covering letter, which is dated 29 July 1998, was then written on Mr Jiminez' computer. The covering letter says as follows:

"Enclose find notice to pay received from landlord. Could you please attend the payment of the same at your earliest convenience.

Please note that you have 14 days to affect [sic] payment from the date of this notice."

221 The covering letter is not on identical letterhead to half a dozen other letters which had been prepared and sent on 28 and 29 July by Mr Jiminez or his staff on behalf of Star Lodge. The words "Pty Ltd" have been added to the words "Star Lodge" in the covering letter. The font also appears to be different. Also, because the copy in the Court Book appears to have been faxed and copied, the typeface has a darker appearance and the paper is "spotty". These are all features which some but not all later letters from Star Lodge share. Mr Doslakoski was unable to explain why two different letterheads appear to have been created and used. Whilst the use of two computer generated letterheads is rather curious, I accept Mr Doslakoski's evidence that the signature on the covering letter is his, and that he would have prepared the covering letter on 29 July.

222 The covering letter has a handwritten annotation which says "29\7\98 SN hand delivered". The handwriting was that of Mr Jiminez, who gave evidence that he made handwritten annotations such as this in order to keep account of the costs associated with producing letters for his clients. Letters were either faxed, delivered by courier or delivered by hand. The annotation was not made as some sort of proof of service.

223 Mr Jiminez was unable to say when he dictated the covering letter and at what time Mr Najjar came to his office. Mr Jiminez confirmed that the signature at the bottom of the letter was that of Mr Doslakoski, who often signed letters in the name of Star Lodge, even though he was not an officer or employee of the company.

224 Mr Jiminez said that he did not ask Mr Najjar to sign the covering letter, because he did not perhaps attach the importance that the letter had in hindsight deserved. Mr Jiminez said that obviously if Mr Najjar was there at the time that a letter was going to be dictated, he would sign it himself. But if he was not there it would be signed as "per". He said that was the normal practice at the time in relation to the many letters that were produced in the period leading up to 5 August 1998, because of the problems with outstanding bills and fire and council orders and the need to fix things up urgently. Mr Jiminez said that in some instances he checked with Mr Najjar whether the contents of the letters he was sending out were accurate but did not say that that happened all the time.

225 Given that Mr Najjar said he was present when the letter was drafted, if that evidence is correct, it seems curious that he would not have signed it.

226 It is not clear precisely on which day Mr Najjar said he delivered the covering letter and the default notice. Mr Najjar was not sure if a copy of the default notice was made and if so whether the original or copy was given to Sophie Moutidis at the Moutidis home. He variously described the delivery as occurring on the day after Mr Dedek attended at the premises, and after finishing at the Jiminez office on 29 July (apparently an evening meeting). Mr Najjar was unsure as to what time of the day he delivered the documents. In some places, he says it was in the afternoon and at other times thought it was in the morning.

227 Mr Najjar could not recall whether the default notice and the covering letter were in an envelope. He said that he handed Mrs Moutidis the two documents and asked her to give them to George Moutidis. He said that there was not much conversation between them and Mrs Moutidis' response was "nothing much".

228 Mr Najjar initially gave evidence that he double parked and left the car running when delivering these documents to the Moutidis home and handing them to Mrs Moutidis. Later in his evidence, he thought that the only time he had left his car running outside the Moutidises was on 2 September 1998.

229 Mrs Moutidis said that the first time she saw the covering letter was at trial. She said that it was "hundred percent wrong" that Mr Najjar delivered the letter or gave her an envelope to give to George at the end of July or early August. She said that Mr Najjar never came to her house at the end of July and only visited her house once in September.

230 George Moutidis denied receiving the covering letter on or about 29 July. He did not recall Sam Najjar attending his house during this period.

231 Mr Najjar said he did not get a response from the Moutidises as a result of delivering the default notice and covering letter. In Mr Najjar's words:

"They were always persistent that they were going to be buying the freehold and it didn't seem to concern them, you know, like 'don't worry about it. We will soon own the property. You can own the business and you don't have to worry about all that. It will be our problem', you know."

232 Mr Najjar said he was continuously speaking to Louis Moutidis on a "pretty much day to day basis" and that Louis Moutidis was assuring Mr Najjar that everything would be fixed and attended to.

233 The evidence of both Sam Najjar and the Moutidises is very unsatisfactory in relation to the delivery of the notice and covering letter to the Moutidis home. Were it necessary for me to make any finding in this regard (which it is not), I could not be satisfied that Sam Najjar delivered these documents to the Moutidis home.

234 The Moutidises were unanimous in their evidence that they did not see the original or a copy of the default notice in late July or early August 1998.

235 I find that the envelope containing the default notice was served on George Moutidis on 30 July. It is possible that the Moutidises were unaware of the contents of the envelope, because they did not open it.

236 Mr Moutidis said that if such a notice had been received, he would have fixed it because he would not have wanted to risk his business. He said if he had seen it around that time he would have seen his solicitor and tried to resolve that matter because "this is a serious letter". I do not accept this is necessarily the case. As I have previously mentioned, it is clear on the evidence that the Moutidises were regularly late in paying bills and frequently bounced cheques. There is also clear evidence that Sophie and Louis Moutidis have over the years been sued by more than a handful of people in respect of unpaid bills. Ignoring or not attending to letters of demand appears to be their regular practice. Further, if they thought they had in fact complied with the default notice by George giving Mrs Dedek the cheques for water and council rates, they may not have given the default notice a second thought.

237 On 17 August 2004, the 19th day of the trial, the Najjar defendants produced nine boxes of undiscovered documents which had apparently been sitting in the chambers of their junior counsel for more than a year. Amongst those documents was a copy of the default notice with certain additional annotations imprinted by a fax machine and several handwritten annotations. That document was formally tendered by the Najjar defendants as exhibit N54.

238 Exhibit N54 occupied a significant amount of time at the trial, for several reasons. If the authenticity of its fax header could be established, that would prove that the default notice was in existence on 29 July 1998 and thereby destroy Beamer's conspiracy claim. Conversely, if it could be proven to be a forgery, that would bolster the conspiracy claim. Understandably, the production of this document at such a late stage of the trial caused much consternation amongst the parties, and witnesses were called or recalled to give evidence as to their knowledge or recollection of N54.

239 When N54 was produced, it caused Mr Najjar to modify his evidence as to what he had done when he received the default notice, and to start some serious reconstruction, which was itself proven to be wrong when some Telstra records were produced later in the trial.

240 Counsel informed me that N54 was found in an orange folder amongst the boxes of documents returned to Western Lodge by its receiver, Mr Vince. However, Mr Vince's affidavit of 15 January 2002, in which he listed the books and records which he had taken into his possession at the premises, does not refer to this document or to any orange folder. No evidence was led as to the provenance of N54, how it came to be in the orange folder or where the orange folder came from.

241 There is no dispute that N54 existed in January 1999 and was faxed at that time to the defendants' then solicitor, Mr Phillips, and barrister, Ms Richards.[10] But when and in what circumstances was it created?[11]

242 Exhibit N54 bore the following fax markings at the top of the page:

243 The fax header had a distinctive pattern on the left-hand corner ("the police checks"), overlapping the number "2" in the date. There was also a small north-facing triangle at the top of the page and a west-facing triangle on the left hand side of the page ("the triangles").

244 At the bottom of the page, a handwritten notes says "ATTN Peter Cohen".

245 The number 03 9396 1329 was the fax number of the business at that time. Mr Najjar gave evidence that the fax machine used by the business had the capacity to have the words "Star Lodge SRS" typed in the centre of the fax header and he remembered putting the fax header details into the fax machine. He said he did not amend the fax header once Najjar SAS took over the business, only after Mr Jiminez became involved. Mr Najjar was not sure whether the fax machine at Star Lodge generated the triangles or was capable of generating the police checks. The fax machine used in 1998 was no longer at the premises at the time of the trial and could not be produced for inspection.

246 Mr Jiminez identified the words "ATTN: Peter Cohen" as being his handwriting. Peter Cohen was the solicitor for the Najjar and Jiminez interests.

247 When asked what he did with the default notice, Mr Najjar initially only mentioned taking it around to the Jiminez office. Exhibit N54 was produced after Mr Najjar had given that evidence. When he was shown N54, he said for the first time that he received and faxed the default notice to Mr Jiminez on 29 July 1998.

"Because when I received this I had a lot of problems with this letter. I rang the Moutidis home and I rang Manuel and I spoke to Manuel and I faxed it over to him straight away and then I went around to his office after that."

248 Mr Najjar could not explain why he took a copy of the default notice to the Jiminez office, if he had already faxed a copy to Mr Jiminez.

249 Mr Jiminez joined in the reconstruction and agreed that Mr Najjar had faxed the default notice to him on 29 July. Initially, he could not say whether it was faxed before or after he spoke to Mr Najjar about the notice. Then Mr Jiminez said that he asked for the notice to be faxed to him after he discussed it with Mr Najjar.

250 Mr Jiminez was unable to say whether the document that was delivered to the Moutidises with the covering letter was a photocopy of the fax or the original version of the default notice.

251 Mr Hevey submitted that N54 was "manna from heaven" and "a lifebuoy" that Mr Jiminez reached for in his evidence. Whilst that language may be more colourful than I would use, I do not disagree that both Mr Najjar and Mr Jiminez clearly seized upon N54 to bolster their case that the default notice existed as at 29 July. Unfortunately for them, their reconstruction was exposed when the Telstra records were produced. The Telstra records clearly established that no fax was sent from the Star Lodge fax machine to the Jiminez fax machine on or around 29 July.

252 The Telstra records did show that on 29 July a fax was sent from the Star Lodge fax machine to Mr Dedek's home fax number around 4.02 pm. The fax lasted for 57 seconds. Short telephone calls were made between Star Lodge and the Dedek home number a few minutes before and after this transmission.

253 When faced with the Telstra records, Mr Najjar changed his evidence yet again, and said that he had faxed N54 to Mr Dedek's home, as some sort of proof of service. Mr Najjar said he thought that Mr Dedek was testing him or putting him on the spot, by asking him to fax the default notice back to him.

254 Mr Dedek did not have any specific recollection of either receiving a fax or the short phone calls from Star Lodge. He agreed that it was possible that he had asked Mr Najjar to fax the default notice as a confirmation of receipt, but did not have any clear recollection. It would have been easy for Mr Dedek to bolster his case by being more confident in his evidence about N54 and the explanation of it as proof of service. He did not do so.

255 The difference between the Telstra records showing 4.02 pm and the N54 header showing 4.18 pm is understandable on the assumption that the Telstra and Star Lodge time clocks were not synchronised with each other.

256 A number of other faxes were examined to see whether the type face, fax header and features such as the police checks and triangles were consistent with other faxes sent from Star Lodge around this time. The exercise was inconclusive.

257 Gary Story, an expert document examiner, was asked to examine N54 and express his opinion as to its authenticity. Unfortunately, because the document is only a copy, he was not able to reach any conclusion as to authenticity.

258 In conclusion, N54 may well be the document that the Telstra records establish was faxed from Star Lodge to the Dedek home on the afternoon of 29 July. The explanation of it being faxed as proof of service is a plausible one.

259 However, the circumstances in which N54 came to light during the trial, the limited opportunity for Beamer to consider and lead evidence as to its authenticity, and the blatant reconstruction engaged in by Mr Najjar when asked what he did with the default notice, all make me reluctant to make any final finding that N54 was indeed the document faxed to the Dedek home on that day. Nor is it necessary for me to make such a finding. For the reasons already expressed, I am satisfied that the default notice was served on Star Lodge by 29 July, and that is sufficient for the defendants' case.

260 In late July and early August, the Moutidises were pressuring Mr Najjar for payment of the first monthly payment under the supplementary agreement.

261 On 5 August, Mr Najjar received a phone call from Star Lodge's bank manager at the ANZ saying that the Star Lodge account had been frozen. Mr Najjar rang Mr Jiminez and asked him to negotiate with the Moutidis family in respect of that. A meeting was also held at the offices of Mr Najjar's solicitor, Mr Cohen. Mr Cohen's discussion with Mr Najjar involved both the payment under the supplementary agreement and the freezing of the ANZ account.

262 Mr Najjar asked Mr Cohen to ring the bank and find out what was going on. The end result of those enquiries was that Sam Najjar understood that the Moutidises were attempting to stop the account and had demanded that nothing was to come out of the Star Lodge bank account. A company minute was required to enable the bank account to reopen again.

263 During the course of that meeting, Mr Najjar received a phone call from Mr Cuthbertson. Before returning to the premises, Mr Najjar said that he called Louis Moutidis from Mr Cohen's office. He was told that the Moutidises had taken possession of the premises and taken money from a drawer.

264 After the meeting at Mr Cohen's office, Mr Jiminez and Mr Najjar went straight to the premises. Sophie, Louis and George Moutidis, Mr Cuthbertson and Janet Borella were already there. The time according to Mr Najjar was just after 7 pm on 5 August. Mrs Moutidis thought it was in the evening. Louis Moutidis said the meeting was in the afternoon. Nothing turns on the exact time of the meeting. This was the first occasion on which Mr Moutidis had been back at the premises since 1 July.

265 Mr Najjar's recollection of what was discussed at the 5 August meeting is as follows:

"Louis was jumping up and down about needing money and needing that this agreement be signed and I was asking him about the bank account and he started going, 'just stop changing the subject', or whatever, that he wanted this agreement signed and I said we didn't agree upon it and he said, 'we're going to be taking back over the business. We run it one month and you run it another month', and I looked at him and said, 'that's ridiculous', you know, and after a lot of yelling and screaming to get him out of the premises because a lot of the residents started to get very disturbed at that time and Wayne said, 'it's got to resolve, the residents are getting agitated', so I ended up giving Louis a cheque for $10,000 just to get him off the premises."

266 Mr Jiminez agreed that Louis Moutidis was very, very upset and aggravated and that there was a lot of swearing going on. According to Mr Jiminez, at this meeting the payment of the $13,500 was demanded by the Moutidises from Sam Najjar.

"Yes, I just mediated and tried to explain there is no money. There was a lot of allegations from Mr Moutidis in regards to the money. I got them to agree to accept $10,000 and I think that left a couple of thousand dollars in the bank account. Mr Moutidis promised to remedy and to take care of the outstanding issues so the place could run because obviously if things were not fixed he was not going to get his next lot of payment or the balance of the money that he claimed and it was agreed that they would come to my office the next day."

267 A cheque for $10,000 was given to Louis Moutidis on the 5th.. Louis Moutidis gave evidence that the $10,000 was important because it enabled him to "cut" or draw cheques, in particular cheques for council rates and water rates owed to Hidek to replace the ones which had "stopped". Exhibit N5 indicates that Mr Najjar's $10,000 was deposited on 6 August 1998 and a withdrawal of $5,060 was made on that date. On the following day a deposit of $20,000 was made and it was in fact those funds that were used to fund the replacement rates cheques.

268 Considerable time was spent on evidence about a dispute between the Moutidises and Mr Najjar and Mr Jiminez as to how the ANZ bank account came to be unfrozen and how Mr Najjar came to be the sole signatory on the Star Lodge cheque account. It is not necessary for me to resolve that dispute, as nothing ultimately turns on it.

269 There was no evidence suggesting that the default notice was discussed with or shown to the Moutidises at the meetings held in early August 1998.

270 The two cheques which George Moutidis gave to Mrs Dedek for the council and water rates were not honoured. The Moutidises say this is because they cancelled the cheques after realising that they had been asked for too much money. Hidek and the Najjar defendants say the cheques simply "bounced", because there was not enough money in the Kimis bank account to honour them.

271 Mrs Moutidis said that after handing over the cheques to Mrs Dedek "She was so much in a hurry and I got suspicious. Louis came home at night and I said 'I found something suspicious.'" Mrs Moutidis said that her suspicions made her decide to check that the amounts for the two cheques were correct. I reject this explanation for making any subsequent enquiries, as I do not accept that Mrs Moutidis was present when Mrs Dedek collected the cheques.

272 Sophie Moutidis said that after making enquiries at the council and City West Water offices and ascertaining that Hidek had demanded too much money, the council and water rates cheques were stopped, not dishonoured. However, when it was pointed out to her that the Kimis bank statement showed there were simply insufficient funds to honour the cheques, Mrs Moutidis blamed that on Sam Najjar, because he had not made the first payment of about $13,000 under the supplementary agreement. She persisted in saying that they had been cancelled, in the face of clear evidence that they could not have been honoured.

273 George Moutidis said that his mother had told him to cancel the two cheques which he had given to Mrs Dedek, but could not remember any details as to how he went about cancelling them.

274 Whilst it is not entirely clear that Louis Moutidis understood the different language being used, he did say "They dishonoured because I didn't put the funds in the account".

275 The Kimis bank statement clearly shows that there were insufficient funds to honour the two cheques at the relevant time.

276 Mr Dedek said he banked Louis Moutidis' personal cheque for rent on 7 August and that cheque was honoured.

277 On 10 August, Mrs Moutidis wrote Kimis cheque No 256 for $135.20 for land tax ("the land tax cheque"). The land tax cheque was presented on 17 August 1998. Mrs Moutidis said she had not seen any land tax bill before writing the cheque.

278 The cheque butt for the land tax cheque has the handwritten annotation "land tax Footscray". Mrs Moutidis agreed that she wrote the land tax cheque. At first, she said that it was not her handwriting on the cheque butt, but conceded after further cross-examination that it was indeed her handwriting. Mrs Moutidis rejected the suggestion that the land tax cheque was for the land tax for the Richmond units.

279 It is clear from correspondence with the solicitor for the State Revenue Office that the land tax cheque does indeed relate to the Richmond units, notwithstanding Mrs Moutidis' contrary assertion.

280 I accept Mr Dedek's evidence that Hidek has never been reimbursed by anyone for the land tax totalling $222.24 which he paid in June 1998.

281 Mrs Moutidis wrote a second cheque for council rates on 10 August, in the sum of $6,313.68. According to Mrs Moutidis, that was the correct amount for the council rates. She said that the long wait between writing the two council cheques was probably because the Moutidises were awaiting funds from Mr Najjar. On 11 August the second cheque was presented by the council.

282 It is agreed that on 12 August, one or more members of the Moutidis family delivered a cheque for $1,756.35 to City West Water, being the amount then due in respect of water usage at the premises and received a receipt from City West Water. That cheque was subsequently presented by City West Water and honoured. However, they did not pay the amount outstanding for water rates, as opposed to water usage, until 28 August 1998.

283 Mr Jiminez said that Mr Najjar asked him to write a series of letters to George Moutidis dated 11 August 1998 ("the 11 August letters"). The 11 August letters dealt with the following topics: a visit from community health, outstanding planning permit issues, and the removal of a boat and birdcage from the premises. The 11 August letters were drafted by Mr Jiminez and typed by Mr Doslakoski.

284 Mr Najjar said that he personally delivered the 11 August letters to the Moutidis home on 11 August.

285 Only the 11 August letter about the planning permit bears Mr Jiminez' handwritten annotation "11/8/98. SN hand delivered". Mr Jiminez explained that not all hand delivered letters bear the annotation. If he was dictating several letters to the same person he only wrote the handwritten annotation on the letter placed on the top, so that the office staff knew what to do with it. The handwritten annotations were a method of tracing when and how the letters had gone out for costs purposes, and were not intended to constitute proof of service.

286 At least four further letters from Star Lodge to George Moutidis about similar operational matters were prepared by Mr Najjar and Mr Doslakoski on 14 August 1998 ("the 14 August letters"). They addressed the following issues: the environmental liaison officer, insurance, the MFB notice, utilities, and a reminder to remove the boat and birdcage.

287 Mr Najjar said he left the Jiminez office with the 14 August letter in an unsealed envelope and took it around to the Moutidis home. He said he gave the documents to Mrs Moutidis, who asked him what they were. He told her "Just read through them and they are all pretty self-explanatory, you know, you understand them all". This occurred before lunch on the 14 August, and before service of the re-entry notice.

288 In contrast, Mrs Moutidis said Mr Najjar did not attend the Moutidis home on 14 August and definitely did not give her the 14 August letters.

289 Louis Moutidis' evidence in relation to receipt of the 14 August letters was self-serving and implausible. He said that he only received two of the 14 August letters. He said he received the insurance letter by post on 14 August and collected the boat and birdcage letter from his letterbox on Saturday morning, the 15th. He said he was quite sure that he only received the two letters "because it is only two letters that I received from Sam Najjar, that's all, because I'm positive 100% that I never received any other letters from Sam Najjar except the two letters".

290 I accept the evidence of Mr Doslakoski, Mr Jiminez and Mr Najjar that the 14 August letters were prepared together and put in the same envelope for delivery. Their evidence is generally consistent and their explanation seems eminently plausible, having regard to the contents of the letters, none of which called for special attention in terms of delivery.

291 Louis Moutidis denied receiving the two letters which appeared most harmful to the Moutidis case. He was also categorical that he collected the boat and birdcage letter from the mailbox on the Saturday morning, no doubt because such evidence would bolster his claim that he collected those items the next day, at which time he said the re-entry notice was definitely not posted at the premises.

292 Although the addressee of the 11 and 14 August letters, it does not appear that any of them were shown to George Moutidis by his parents or discussed with him.

293 Around 1.00 to 2.00 pm on 10 August, the premises were inspected by council and DHS staff, including Mr Gibcus, Ray Richards and Mr Siebuhr.

294 That evening, Mr Gibcus warned Mr Dedek that an emergency order was going to be served. Mr Dedek told Mr Gibcus that it was not his responsibility, it was the tenant's. Mr Gibcus said he did not care, as long as somebody fixed it. His main objective was the safety of the residents and that the problems were fixed within 48 hours.

295 If not attended to, an emergency order would require the closure of the SRS and the removal of all residents to other accommodation. This would obviously have been a very serious step to take, given the number of residents, their special needs and the practical problems of finding them alternative special needs accommodation at short notice. The fact that an emergency order was issued is an indication of how bad conditions at the premises had become from the council and DHS's point of view, in terms of risks to the residents.

296 On the 11th of August, an emergency order was served by Mr Gibcus. After service of the emergency order, Mr Dedek and Mr Gibcus toured the premises and Mr Gibcus pointed out various items that required remedial attention. Certain actions were taken swiftly, for example, the removal of barbed wire from the back gates and of chains from an emergency exit door.

297 There was a meeting at the premises on 12 August, which was arranged by the council and DHS and attended by people from DHS, the MFB, the council and GEM, as well as Mr Dedek and Mr Najjar.

298 Mr Najjar said that he notified Louis Moutidis of this meeting prior to its occurrence. According to Mr Najjar, Mr Moutidis did not seem to care and said that "If the landlord is there, there is no need for me to be there". On the other hand, Louis Moutidis denied that Mr Najjar had told him of the meeting or any similar meeting a few days before 14 August.

299 Mr Dedek first learned of the MFB notice around 12 August, after service of the emergency order. It was mentioned to him at the premises by one of the MFB representatives. Mr Dedek agreed that finding out about the MFB notice, and the fact that nothing had really been done to attend to it since late May, did have an impact on his decision to re-enter on 14 August.

300 Mr Dedek agreed to buy about $2,000 worth of new fire extinguishers to satisfy the council requirements and attended to a number of the outstanding tasks himself.

301 GEM prepared a quote for the works which would be necessary to comply with all the outstanding fire orders. The quote was slightly in excess of $100,000. Mr Najjar first saw the GEM quote on 13 August.

302 During the week leading up to 14 August, Mr Dedek said he tried, unsuccessfully, to ring Louis Moutidis up until the time the emergency order was served and then he gave up. Mr Dedek said that he had had enough of "bouncing cheques, dishonoured cheques, emergency orders, people insecure. There are a 100 people which you are taking responsibility for if you let them in the building and that responsibility was on me as well".

303 On 13 August, Mr Dedek called Mr Bock and told him about the severity of the emergency order and asked him to ring the council and handle it. Mr Bock subsequently wrote to the council challenging the validity of the emergency order and Hidek's obligations under it.

304 When he modified Mr Bock's re-entry and police notices, Mr Dedek left the firm's former name, Chrapot Bock & Co, on both notices. Mr Hevey submitted that Mr Dedek's use of the firm's name on a document which he prepared constituted an uttering or a forgery. Mr Hevey made much of this in cross-examination because in his submission it went to the very heart of the credit of Mr Dedek and what he was prepared to do in relation to the preparation of documentation. However, that proposition presupposes that Mr Dedek had some knowledge that what he was doing was wrong. Mr Dedek said that he thought his lawyer had authorised him to do this. Mr Bock certainly knew that Mr Dedek had a practice of scanning and modifying his documents and seemed to have no problem with that. Whilst perhaps not a good practice for a lawyer to permit, I do not believe what happened reflects on Mr Dedek's credit.

305 Mr Dedek said that he did not serve the re-entry notice on 12 or 13 August in part because he did not have the time to do so because "We were running around to the emergency orders". He said he did not have the time to think about who he was angry with and "just tried to save the building".

306 After further meetings with relevant authorities and considerable work on the part of Mr Dedek, Mr Najjar and the staff over the next few days, the crisis posed by the emergency order was averted and the council was satisfied that it would not have to shut down the facility. The emergency order was formally lifted on Monday 17 August.

307 Hidek says that the re-entry notice was prepared on 10 August and served at the premises on Friday 14 August 1998. Sam Najjar confirms Paul Dedek's evidence in relation to service.

308 Either service on the tenant at the premises or affixing to the building would constitute sufficient service. Paul Dedek says he did both.

309 The Moutidises deny that the re-entry notice was prepared or served at that time.

310 Paul Dedek said that although he prepared the re-entry notice a few days earlier, he dated it 14 August as he always proposed to serve it at the end of the week. He said he did so on the advice of Mr Bock, who had told him that serving it at the end of the week would avoid the appointment of an administrator and would give him the opportunity to notify DHS first thing when they opened on Monday. Whilst Mr Bock could not recall giving this advice, he said it was consistent with the sort of advice he would have given.

311 As events transpired, Mr Dedek would not have had sufficient time to think about or attend to the re-entry notice amidst the extraordinary demands of attending to the emergency order in those few days after 11 August.

312 Mr Dedek drove to the premises on the afternoon of Friday, 14 August. He had three copies of the re-entry notice and two copies of the police notice. Before putting the re-entry notice on the front door, Mr Dedek spoke to Mr Najjar in the office and gave him two copies of the re-entry notice and one police notice. Wayne Cuthbertson was present with Mr Najjar at the time. The third copy of the re-entry notice was used for taping onto the door.

313 Mr Najjar asked what the re-entry notice was for and Mr Dedek told him "I haven't been paid and I haven't had the land tax paid". He said that Louis Moutidis had bounced a cheque on him.

314 Because the front doors had "all sorts of notices" on them and there was no space on the inside, Mr Dedek said he put the re-entry notice on the outside of the glass front doors, on the door which was fixed. The fixed door is on the left-hand side. Mr Dedek said that he placed the notice on the upper part of the glass. Mr Dedek was not sure whether he also taped one of the police notices to the front door. He said he stuck the re-entry notice on the front door because he thought that that was the usual procedure, although he had never done anything of this type before.

315 Mr Dedek said that he did not take a copy of the re-entry notice entry or the police notice to the Footscray police station.

316 Mr Najjar agreed in all relevant respects with Mr Dedek's account of placing the notice on the front door.

317 After taping the re-entry notice to the door, Mr Dedek went back inside the premises. He said that somebody, possibly Wayne Cuthbertson, asked him who was in charge of the people, given the re-entry notice. Sam Najjar pleaded with Paul Dedek and told him that if he evicted them he would lose $100,000, which was all he had, and for which he had mortgaged his house. Mr Najjar asked Dedek if he could at least work for him. Mr Dedek said, 'It's ok with me if you stay and just in the meantime before we sort it out what we are going to do just be in charge while I'm not here...".

318 Mr Dedek then wrote a document which authorised Mr Najjar to stay on as his agent for the purposes of enforcing the re-entry notice or, as Mr Najjar described it, as "a caretaker of the business". The wording on the document was devised primarily by Mr Dedek, with some assistance from Mr Cuthbertson. Mr Dedek said that the only reason he appointed Mr Najjar as his agent, even though he was connected with Star Lodge, was because it was the only way to keep the business running. Mr Najjar did not contact Mr Jiminez to discuss the terms of the document under which he was appointed caretaker or manager.

319 Mr Jiminez said that the first he heard of the re-entry notice was when Mr Najjar called him, very upset and very concerned. Mr Jiminez said that he made contact with Mr Cohen immediately. Mr Jiminez said that Mr Najjar contacted him on the day the re-entry took place and that he was able to recall this because Mr Najjar said to him "The landlord is here. I've just been kicked out."

320 Mr Najjar said that at some stage during this conversation, he rang Louis Moutidis and told him what was happening. He said that Louis replied "It doesn't matter, you know. Don't worry about it. I will still buy the premises and you will still have the business any way." Mr Moutidis denied that any such conversation occurred. Mr Dedek did not recall being present when any phone calls were made. Mr Cuthbertson, who is alleged to have been present when Sam Najjar says he spoke to Louis, was not called as a witness. I am not able to resolve this factual dispute, given the unreliability of both Mr Najjar and Mr Moutidis as witnesses and in the absence of any independent evidence. In fact, I do not need to resolve this issue because I a satisfied, based primarily on Mr Dedek's evidence, that re-entry was validly effected on 14 August. Whether or not the Moutidises were aware of it is not relevant.

321 The meeting between Mr Dedek and Mr Najjar lasted between 30 and 40 minutes according to Sam Najjar, and for no more than 15 to 20 minutes according to Mr Dedek. Mr Najjar thought that the meeting occurred at approximately 3 o'clock, but wasn't sure. Mr Dedek says that he was at the premises after 4.00 pm but before 5.00 pm, and at no stage did he see Louis Moutidis, Denis Koutsantonis or Walter Russell. I accept that service was effected during the middle of the afternoon of 14 August. It is not necessary for me to make a more specific finding as to time.

322 A few days after receiving the ESR on 5 August, Louis Moutidis rang his friend, Denis Koutsantonis, to ask him to arrange a meeting with Mr Russell, to have a look at what needed to be done to comply with the report. Although there is some discrepancy between the evidence of Mr Moutidis, Mr Russell and Mr Koutsantonis, as to when they all visited,[12] I will assume for present purposes that they all attended in the late afternoon or early evening of 14 August, for a scheduled meeting.

323 It is not disputed that Louis Moutidis attended the premises later on 14 August. Louis Moutidis was absolutely adamant that he turned up at 5.30 pm, that it was dark and there was no sign on the front door when he entered the building. For reasons which will be discussed later, I do not accept that Mr Moutidis would necessarily have noticed the re-entry notice or anything else stuck on the front door.

324 Mr Koutsantonis said he also entered through the front door, and did not see a re-entry notice. Given the purpose of his visit and the lack of any evidence that there was outside lighting which would have made such a notice legible in the dark, it is perfectly plausible that Mr Koutsantonis would not have seen or read the re-entry notice if indeed he attended on the 14th (and not in the previous week, when he thought he had attended).

325 Mr Najjar said that at some stage during this visit by Mr Moutidis, he asked him: "Louis, what are we going to do about the situation and all of these problems?" He also said that Louis Moutidis got very upset and said "don't you fucking worry, we are going to be fucking suing everybody. We are going to be doing this and that". Interestingly, in his witness statement Mr Moutidis said that he was cross and had threatened to sue everybody. However, in his oral evidence, Mr Moutidis denied that he had been at all angry on this occasion. Given his behaviour on other occasions, and the contents of his own witness statement, I think it more probable than not that Mr Moutidis was indeed angry and threatening to sue everybody.

326 But Mr Moutidis and Mr Najjar differ fundamentally as to what prompted Mr Moutidis' anger and threats. According to Mr Najjar, they were prompted by him asking "Louis, but we've just been kicked out. What are we going to do about that?" According to Mr Moutidis, his anger arose out of finding out for the first time about the emergency order and related events of the past few days; he vehemently denied discussing the notice of re-entry with Mr Najjar on 14 August.

327 George Moutidis did not attend the premises between 6 August and 2 September 1998. I accept that during that time he had no idea that Beamer had been evicted from the premises. George Moutidis' memory of the events surrounding the re-entry of the premises, like his other evidence, was very poor.

328 Mr Dedek was aware by 28 August that the water rates had finally been paid. The fact that the Moutidises paid the water rates on that date is consistent with their being ignorant of the fact that re-entry had occurred on the 14th.

329 The next contact Mr Dedek had with the Moutidises was when he met them by chance at the Victoria Market towards the end of 1998 or the beginning of 1999.

330 There is no legal requirement that the re-entry notice remain posted for any particular period of time. Mr Dedek did not know for how long the re-entry notice remained on the front door of the premises. Although he was there almost every day, he was coming through the back gate where he parked his car because it was full of tools. Mr Najjar could not be certain how long the re-entry notice stayed on the door, saying variously that it was from a few weeks to at least a month and a half, maybe even two months. He said that the re-entry notice would definitely still have been on the door on 2 September. Mr Najjar was so bad in his estimation of time and dates, that I cannot make any finding in this regard.

331 Neither Mr Gibcus nor Mr Siebuhr saw the re-entry notice affixed to the front door. I accept their evidence that they would have made enquiries or been concerned had they been aware of the notice. Beamer urged me to conclude from their evidence that the re-entry notice was never posted on the front door, thereby strengthening the conspiracy claim. Whilst I accept the evidence of Mr Gibcus and Mr Siebuhr, it does not necessarily lead to the conclusion which Beamer urges. It is clear that visits to the premises by DHS and council staff dropped off significantly after the withdrawal of the emergency order. It is also not clear precisely when Mr Gibcus and Mr Siebuhr next attended the premises themselves; that may not have been for some weeks or even months. Their evidence does not disprove that the notice was served and affixed to the front door.

332 Louis Moutidis said that he and his son Chris turned up to the premises on Sunday 16 August, to remove a boat and birdcage which were in the backyard. Chris Moutidis, who was only 13 or 14 years old in 1998, remembered attending with his father and a friend to remove those items, but could not remember the date when that occurred.

333 Mr Moutidis went to elaborate and not particularly credible lengths to try to establish that this visit occurred on the 16th, and not at some other time. He was adamant that the re-entry notice was not on the front door on 16 August. Clearly he thought this would help establish the conspiracy claim.

334 Louis Moutidis said he went there in response to a letter from Star Lodge, which requested the removal of the birdcage and boat. The letter was, according to Louis Moutidis, received from his letterbox in the morning of Saturday 15 August, and bore no stamp. For the reasons already discussed, I do not accept that the 14 August letters were delivered in the manner and at the times alleged by Mr Moutidis.

335 Louis Moutidis said he entered the premises through the front door, collected the keys from the front desk and went through the building to open the back gate. He said the back gate was locked at the time of this visit. He said the re-entry notice was not on the front door that day.

336 Louis Moutidis said that he thought he was there around 11.00 a.m. or noon, but did not see a residents' barbecue which was held some time on that day. He said that neither Mr Dedek nor Mr Najjar were present at the time of his visit.

337 Mr Dedek was at the premises for part of the weekend of 15 and 16 August. He had been asked to join the residents for a barbecue but did not do so. He did not see Mr Moutidis at the premises that weekend and could not recall when the birdcage and boat were removed from the premises. Nor could Mr Najjar shed any light on the topic.

338 At some stage, Mr Gibcus had required the back gates to be unlocked and left open and the boat and birdcage which were sitting in the backyard to be removed. There was some dispute as to precisely when the gates were indeed unlocked, as required by Mr Gibcus, but it is not necessary for me to make any final determination as to when that occurred.

339 Whilst I accept that Louis and Chris Moutidis removed the birdcage and boat from the backyard of the premises some time after 14 August (and presumably prior to 2 September), I cannot be satisfied that they did so on any particular date. Assuming in their favour that they did indeed remove those items on Sunday 16 August, and that Louis Moutidis went through the front door as he alleges, the fact that he did not see the re-entry notice does not prove that it was not there at the time. Given his very poor reading abilities[13], his general disinterest in paperwork, the small print and legal language on the notice, and the purpose of his visit, I think it improbable that he would have noticed or comprehend the re-entry notice. For similar reasons, I think it improbable that he would have noticed the re-entry notice on the front door on the evening of the 14th.[14]

340 Of course, if Louis Moutidis went through the back gates on the 16th, he would have had no opportunity to notice whether the re-entry notice was on the front door.

341 It is common ground that the Moutidises did not visit the premises between collecting these items and 2 September 1998.

342 On 1 September a letter was written to Adkins Security Services employing security guards at the premises from the following day. The letter was written on ALDC letterhead and purported to be written on behalf of Paul Dedek. I accept that at no time did Mr Dedek authorise Mr Najjar or Mr Jiminez to engage security guards on his behalf.

343 Mr Jiminez arranged the security guards. He said that Bobi Doslakoski worked for Adkins Security Services, so he was able to secure a good rate. He thought that Mr Dedek should be responsible for payment of the cost of security guards, because Mr Najjar was only there in the capacity of "manager". He said that is why he purported to write on behalf of Mr Dedek. Precisely which legal entity was running the SRS and in possession of the premises in the days or weeks following 14 August was never satisfactorily explored in the evidence. It is possible that nobody really turned their mind to that fact for some time.

344 According to Mr Jiminez, Mr Najjar instructed him to arrange for security staff to be present at the premises in early September. Mr Jiminez said that Mr Najjar required the security guards because he had received threats from the Moutidises that they were going to come and bash him up or take over the place. This evidence of a threat to bash anybody up was not supported by Mr Najjar or put to the Moutidises. It is consistent with Mr Jiminez' habit of saying whatever he thought put his actions in the best possible light as well as portraying Mr Najjar in the improbable role of the decision-maker in their relationship.

345 On the other hand, Mr Najjar gave evidence that Mr Jiminez arranged the security guards and he had not required or asked for them.

346 I accept that the security guards were arranged by Mr Jiminez in anticipation of a negative response by the Moutidises to a demand which he knew was about to be served on them.

347 On 2 September, Mr Najjar's solicitors, Cohen Woolf & Weinberg, wrote a letter to Kimis ("the Najjar demand"). It claimed that representations made to Najjar SAS were false and misleading and in breach of the TPA and demanded repayment of the $100,000 paid by Najjar SAS.

348 There is no dispute that the Najjar demand was hand delivered by Sam Najjar to Mrs Moutidis at the Moutidis home on 2 September. She said that prior to receiving the Najjar demand, she was not aware that Mr Najjar was upset with her or her family. She said she received the letter around 1.00 or 2.00 pm.

349 George and Sophie Moutidis went straight away to the premises. They met Louis Moutidis some 20 to 30 minutes later, after he had been called by them. When Louis arrived, they tried to enter the building, but there was a security guard outside the door and the doors were locked. The guard prevented the Moutidises from entering the building.

350 Mrs Moutidis said that the security guard showed her the re-entry notice. According to Louis and Sophie Moutidis, they could see Mr Najjar inside the building, laughing at them, after the security guard told them they could not enter. Mr Najjar denied that he smiled or laughed at the Moutidises from behind the glass door. Whether or not Mr Najjar was laughing, all those present agreed that Louis Moutidis became very angry and started swearing, yelling abuse, kicking the doors and yelling at Mr Najjar to come outside.

351 The security guard told the Moutidises that he could not let them in and if they had a problem with that, they should go and see the police. The Moutidises then went to the Footscray police station.

352 The Telstra records show that a short fax was sent from the Star Lodge fax machine to Footscray police station on 2 September. Mr Najjar said he did not fax the re-entry notice or police notice to the police station, and nobody else gave evidence as to what was faxed on that day or by whom. It may be that one of the staff members faxed one of the notices either in anticipation of or after there was an angry response from the Moutidises to being locked out.

353 Louis Moutidis also rang his accountant Mr Mitsios and discussed the problem with him. Mr Mitsios advised him to seek legal advice, which he did the next day.

354 In the first few weeks of September, Pryles & Defteros, the solicitors for the Moutidis entities made a number of enquiries and wrote letters of demand to various parties. When their demands were not met, the Moutidises seem to have done little by way of follow up. The Moutidises had numerous options open to them in terms of issuing proceedings seeking urgent relief against the Najjar entities, Hidek and/or DHS. Had the Moutidises carried through on the threats in any of their letters of demand, six years' worth of expensive and protracted litigation might have been avoided.

355 As will be discussed in more detail shortly, on 3 September Pryles & Defteros telephoned DHS on behalf of the Moutidis interests. On 11 September, Pryles & Defteros wrote to DHS pointing out that the transfer of the DHS registration to Najjar SAS had been made without authorisation.

356 On the same day, Pryles & Defteros also wrote on behalf of Star Lodge and George Moutidis to Hidek. The letter asserted that all outgoings referred to in the re-entry notice had been paid, and that the notice was not in accordance with clause 4.1 of the Star Lodge lease or s. 146 of the PLA. A copy of the letter was sent to Hidek's solicitor, Mr Bock.

357 On 14 September, Mr Bock wrote to Mr Dedek, confirming receipt of the Pryles & Defteros letter. He also confirmed Mr Dedek's advice that the default notice was left at the premises "on or about the 29th day of July, 1998." Mr Bock advised that only Star Lodge could claim an interest in the Star Lodge lease and it may not be competent for George Moutidis alone to give instructions on its behalf.

358 A decision was eventually made to replace Star Lodge as trustee of the Star Lodge trust. Rather curiously, Star Lodge was replaced by two trustees, one appointed to represent the Najjar interests, and the other to represent the Moutidis interests. How it was thought that this might break any deadlock between the Najjar and Moutidis interests is not apparent to me.

359 One evening in late September, a lengthy meeting was held at the office of Jack Feldman. Mr Feldman, like Mr Mitsios, is an accountant by training. It was attended by Mr Feldman, Mr Mitsios, Mr Najjar, Mr Jiminez and either Sophie or Louis Moutidis and their solicitor, Peter Pryles. The meeting was initiated to try and resolve the dispute between the parties. After lengthy discussions, it was resolved that the two accountants - one representing each side - would be installed as trustees of the Star Lodge trust.

360 On 9 October, Coldrey J ordered that Star Lodge be removed as trustee of the Star Lodge trust and appointed Mr Mitsios and Mr Feldman as trustees.[15] The assets of the Star Lodge trust were vested in the new trustees.

361 On 12 October, Pryles & Defteros wrote to Mr Mitsios and Mr Feldman on behalf of Beamer. The letter concluded as follows:

"Our client considers that Mr Najjar may have committed serious breaches of his fiduciary obligations to Star Lodge and the Trust, his obligations as a director at common law and his obligations as a director pursuant to the Corporations Law. Further, our client considers that [Star Lodge] may have participated in, allowed to occur or otherwise procured of [sic] facilitated the conduct of Mr Najjar and in those circumstances may itself be liable to the beneficiaries.

In our view, proceedings should be commenced against Mr Najjar, Najjar [SAS] and, possibly, Star Lodge urgently to recover the asset of the Trust, namely the business of the Star Lodge Special Accommodation Home.

Our client requests that, in your capacity as the new trustees of the Trust, you consider whether such proceedings should be commenced urgently and advise us of your decision on or before 4pm on 16 October 1998."

362 Messrs Mitsios and Feldman did not issue any proceedings on behalf of the Star Lodge trust.

363 Once it became apparent that the new trustees were not going to act, Beamer could have immediately issued proceedings in the Practice Court, seeking relief against forfeiture. One of the most curious features of this entire case is why Beamer did not do so. Had it acted quickly and tendered the small amount then outstanding, relief against forfeiture may well have been available in late 1998.

364 The Moutidises never fully explained why they did nothing to follow up on the threats contained in their solicitors' various letters of demand. The highest that they put it was to say in the most general terms that, after 2 September, they acted in accordance with legal advice.

365 Finally, on 15 December 1998, the Beamer proceeding was commenced. Hidek and Western Lodge were joined as defendants in January 1999, at which time relief from forfeiture was added to the prayer for relief. Beamer did not pursue a speedy trial, allowing these proceedings to drag on for 6 years.[16] In the meantime, the Moutidises stood by and watched whilst others ran the SRS and occupied the premises.

366 On the afternoon of 1 September 1998, Mr Najjar attended the DHS offices for approximately 30 to 40 minutes and passed his second DHS interview. The scheduling of this interview appears to be unrelated to the subsequent registration of Najjar SAS on 2 September, and simply a rescheduling after his unsuccessful interview on 7 July.

367 Mr Najjar said he personally notified Mr Siebuhr of the re-entry two or three days after 14 August. On the other hand, Mr Siebuhr's evidence was that DHS was not informed of the re-entry until 1 September. On that day, Mr Siebuhr was told that the landlord had terminated the Moutidises' lease due to the non-payment of bills. I prefer Mr Siebuhr's evidence in relation to the timing of this, for several reasons. Firstly, Mr Najjar was generally an unreliable witness in relation to dates. Secondly, Mr Siebuhr's evidence is more consistent with the DHS file[17] and with DHS's actions in early September.

368 When notified in early September that the Moutidises had been evicted, DHS thought its options were to urgently appoint an administrator or rapidly complete the documentation and sign off on the transfer.

369 On 2 September, the day after Mr Najjar's interview, a certificate of renewal of registration was issued to Najjar SAS ("the Najjar DHS certificate"). The Najjar DHS certificate had the same expiry date as the Kimis DHS certificate, namely 31 December 2000. The transfer of registration was effected by the use of the DHS transfer form, which had been signed around late June by George and Kim Moutidis.

370 DHS clearly did not appreciate that the DHS transfer form had been signed and lodged to effect a transfer of registration from Kimis to Star Lodge, not to Najjar SAS. Even though DHS had for some time been receiving correspondence on Star Lodge letterhead, it seems to have understood Star Lodge to be the name of the Moutidises' business and not a separate legal entity. DHS was aware prior to 2 September that Mr Najjar was the manager and day-to-day operator of the business and had been so for some weeks, if not slightly longer, but does not seem to have turned its mind to the legal entity for whom Mr Najjar had been working. DHS's confusion would not have been assisted by its dealings with Sam Najjar or the Moutidises, none of whom drew clear distinctions between themselves and their various companies.

371 On 1 September, Manuel Jiminez spoke to Dale Siebuhr and advised him that he had been appointed as financial controller of Najjar SAS. An e-mail sent by Mr Siebuhr to his manager, Andrew Fleming, on 2 September suggests that it was Mr Jiminez who informed DHS of the identity of the transferee. On the following day, Mr Jiminez provided DHS with written confirmation of that fact and certain information about the Najjar financial situation. Although Mr Jiminez denied that he was the person who told DHS that Najjar SAS was the legal entity to which the DHS registration should be transferred, the documentary evidence suggests otherwise.

372 One of DHS's requirements for registration was a letter confirming the financial viability of the operator. Accordingly, Mr Jiminez prepared two letters to DHS on the letterhead of his business, ALDC, both dated 2 September.

373 One letter attached a statement of financial position for Sam Najjar, which Mr Najjar apparently signed on 1 September. The statement presents a rosier picture of Mr Najjar's finances than the reality[18], but it is not necessary for me to make specific findings about Mr Najjar's actual financial position at this time.

374 In the second letter, Mr Jiminez said that he had been appointed as financial controller of Najjar SAS, the company was "financially sound" and the company's current capital cash reserve was "$35,000 with not [sic] liabilities".

375 There was a dispute between Mr Najjar and Mr Jiminez as to whether Mr Jiminez had in fact been appointed as financial controller of Najjar SAS and as to the source of the information in the correspondence. The dispute is illustrative of a number of situations in which Mr Jiminez tried to distance himself from any responsibility and portray Mr Najjar as the driving force behind events.

376 Mr Najjar did not think that Mr Jiminez had been appointed as the financial controller of Najjar SAS and there is no documentary evidence of any such appointment.

377 Mr Jiminez was initially unable to identify the corporate entity of which he was financial controller, guessing that it might have been Star Lodge. After being shown his letter of 2 September, he confirmed that it was Najjar SAS. Mr Jiminez said that his appointment as financial controller arose because Mr Najjar wished to retain him and required his assistance. Mr Jiminez said that he was appointed to that position in writing, although no such document was ever produced. He said his term as financial controller of Najjar SAS commenced before DHS registration was obtained and ended within 60 days. He said he received $1,000 per month for this role. I have no doubt that Mr Jiminez was engaged and paid to assist the Najjar entities, but do not accept that Mr Najjar ever gave his role a formal tile. In the course of dealing with this issue, Mr Jiminez characterised the relationship of being one of "boss and worker", with Mr Jiminez being the worker. For anybody who listened to Mr Najjar and Mr Jiminez in court over many days, the idea of Mr Najjar being the boss and Mr Jiminez being the worker defies credulity.

378 Mr Jiminez said the statement that Najjar SAS had current cash reserves of $35,000 with no liabilities was information provided by Mr Najjar. He said that Mr Najjar had informed him that his family had promised or would back him up with $35,000, and that was what he meant by the term "current cash reserves". On the other hand, Mr Najjar said the company never had $35,000 and he had no idea where Mr Jiminez obtained this information from. Mr Najjar also said, and I accept on the evidence, that Najjar SAS was not financially sound as at 1 or 2 September. The fact that Mr Jiminez was prepared to represent to DHS that the company was "financially sound", without any factual basis for so doing, is typical of his willingness to say whatever suited him in the situation before him.

379 Mr Jiminez said he could not recall whether he showed Mr Najjar the letters he sent to DHS. I accept Mr Najjar's evidence that he did not see the letters at any relevant time.

380 Mr Siebuhr acknowledged that at the time Najjar SAS was being registered as an SRS, he did not turn his mind to Najjar SAS's right to occupy the premises. He also acknowledged that, with the benefit of hindsight, the transfer of registration to Najjar SAS was irregular.

381 On 11 September, Pryles & Defteros wrote to DHS on behalf of Kimis and George Moutidis, and purportedly also on behalf of Star Lodge. The letter told DHS that the business had not been sold to Najjar SAS and at no time had Kimis or George Moutidis authorised any person to insert any name on the transfer of the registration to conduct the business other than the name of Star Lodge. The letter demanded confirmation by 4.00pm on 16 September that DHS would not effect the transfer of registration to Najjar SAS, failing which legal proceedings were threatened.

382 It is clear from their letter that Pryles & Defteros had been aware since 3 September that an application had been received to transfer the registration to Najjar SAS. There is no evidence as to why they waited more than a week before they wrote to try to stop the transfer. Still, their delay pales into insignificance against DHS's delay in responding. It took DHS until February of the following year to reply to this letter of demand. In the meantime, Kimis and the Moutidises issued no proceedings against DHS and did nothing more to try to prevent Najjar SAS's registration from either proceeding or continuing.

383 After receiving the Pryles & Defteros letter, DHS started an internal examination of what had happened with the transfer from Kimis to Najjar SAS. Within a few weeks, internal DHS communications were starting to query whether the Moutidises were "fit and proper" persons to run an SRS. Much of this internal correspondence has the flavour of departmental officers trying to justify what was undoubtedly - to use one officer's own language - a "stuff up".[19] DHS was clearly concerned about the validity of the transfer.

384 On 19 October, an internal DHS memorandum records legal advice that the transfer of registration was flawed as the scheduled form for the transfer of registration did not stipulate the transferee. This was said to create "some considerable difficulties", because of the dispute between Hidek and the Moutidis interests. Three options were canvassed: (1) the Moutidises voluntarily hand back the Kimis DHS certificate; (2) the Minister revoke Kimis' registration; (3) an administrator be appointed. The memorandum also said that "a number of other matters have emerged about the conduct of the Moutidises as Proprietors...we would wish to pursue them in a Prosecution sense". This last comment seems to be a reference to deficiencies with the fire protection system.

385 On 15 February 1999, DHS finally responded to the September letter from Pryles & Defteros. The DHS letter noted that on 2 September DHS had "purported to vary the registration of Star Lodge" so that Najjar SAS became the new registered proprietor. It is clear that the reference to "Star Lodge" is a reference to the SRS and not the company of that name. It went on to say as follows:

"The Department has reviewed this matter carefully and concluded that the purported variation to the registration is invalid.

It follows from the above that, technically speaking, Kimis is still the registered proprietor of Star Lodge. Nevertheless, I understand that Kimis no longer has access to the property ...

The Department is concerned to ensure that all legislative requirements are complied with and that the needs of the residents of Star Lodge are met in the best manner possible. With this in mind I suggest that you encourage Kimis to apply to the Secretary of the Department for the cancellation of the registration of Star Lodge ...

For completeness, I note that the Minister will give active consideration to revoking the registration of Star Lodge if Kimis does not apply for its cancellation within 14 days after the receipt of this letter. You will no doubt appreciate that the consequences of involuntary revocation are far more serious than the consequences of voluntary cancellation."

386 On the same day DHS wrote to Mr Najjar informing him that the transfer to Najjar SAS was invalid and that Kimis was still the registered proprietor of Star Lodge. The letter advised Mr Najjar that he would be able to make a fresh application for registration if Kimis applied for cancellation of the current registration. In fact, by the time this letter was sent, Najjar SAS was no longer running the SRS and Western Lodge had taken over on 1 December 1998.

387 Unsurprisingly, given the history of this case, neither Kimis nor Najjar SAS ever responded to DHS's February letters, and DHS seems to have done nothing to follow up on its threatened deregistration.

388 The legal effect of the September transfer to Najjar SAS and DHS's February letters will be considered later.

389 There is no evidence that DHS was notified when Western Lodge took over the business in December 1998. Western Lodge appears to have conducted the business entirely without DHS registration from 1 December 1998 until 27 July 2001, when it obtained its first registration. That DHS registration expired on 31 December 2002.

390 By letter dated 16 December 2003, but which should perhaps be dated 2002, DHS notified Western Lodge that its application for renewal of registration had been approved for the period from 1 January 2003 to 30 June 2005. In fact, the enclosed DHS certificate, the document which has legal effect, gives an expiry date of 30 June 2004.

391 I was informed from the bar table that an application for renewal had been lodged and processed, but that a new DHS certificate was yet to be issued.

392 Mr Dedek said that the question of a new lease was first raised with him some time in September. Initially he was not prepared to grant a new lease. He changed his mind about that when, after some months, he had not seen the Moutidises do anything or express any interest in rectifying matters and one of the new trustees, Mr Mitsios, had said that he would not take action against any party.

393 As previously mentioned, the question of precisely which entity or entities were in occupation of the premises, and on what legal basis, between 14 August and late October 1998 was not clear on the evidence.

394 On 26 October 1998, Hidek and Najjar SAS executed a lease of the premises ("the Najjar lease"). Mr Najjar said he entered into the Najjar lease because he believed that if he increased the room charges, the extra money would enable him to run the business.

395 After the lifting of the emergency order, Mr Dedek, Mr Najjar and the staff continued to work around the premises attending to some of the various fire requirements. Both parties did things that were within their capabilities, including Mr Dedek attending to the hard-wiring of a smoke detection system. It seems that neither Mr Dedek nor Mr Najjar had any discussion as to who was to pay for any fire works that were or remained to be performed. The issue first came up after Najjar SAS entered into the Najjar lease.

396 Mr Najjar said that the landlord did "a back flip" and required Najjar SAS to pay the cost of complying with the fire orders, which was going to be in the vicinity of $100,000. Mr Najjar had understood that Mr Dedek was going to pay the costs or fix the problems himself. Mr Najjar said the "back flip" occurred towards the end of November.

397 In fact, under the terms of the Najjar lease (as with the earlier Kimis and Star Lodge leases) most of the work required as a result of the emergency order and later building notice were the tenant's responsibility. Mr Najjar seems to have been unaware of this obligation when executing the Najjar lease and proceeded on the basis of an erroneous understanding.

398 Following an inspection of the premises on 8 October 1998, Mr Gibcus served a building notice dated 21 October on both Hidek and Mr Najjar ("the October building notice"). The October building notice was issued pursuant to s. 106 of the Building Act 1993 and recorded Mr Gibcus' opinion that the building was a danger to life and unfit for occupation, in that the sprinkler control valves, fire sprinkler system, fire hydrant hose reel system, fire alarm system and water supply mains were defective. The recipients of the notice were given 20 days to "show cause".

399 On 2 November, Mr Bock wrote to the council on behalf of Hidek, seeking a 30 day extension of the time for compliance with the October building notice. Mr Gibcus responded on 6 November. Although Mr Gibcus did not grant an extension, he noted that, pursuant to the Building Act, a building notice would be followed by a building order, which would in effect give Hidek until 16 December for all remedial works to be completed.

400 At some stage, it became apparent to Mr Najjar that he would not be able to fund even a half share of such works. Mr Najjar said he could not cope anymore, was fed up and had had enough of everything that had happened. "You know, what I went through in those four or five months, you know, it's not worth a lifetime." He also said:

"By that stage I'd had enough and I didn't want to be involved in the business or in any part of the business, I was just pretty much happy to go and work 9 to 5 type of thing. So Manuel said, 'If you stay on and work for me" - he will come up with all of the costs and I would stay on as an employee - which I then agreed."

401 Following discussions between Mr Dedek and Mr Jiminez, the Najjar lease was transferred to Western Lodge on 1 December 1998. Mr Najjar remained on as manager of the SRS, employed by Western Lodge. Mr Najjar said that he was paid $435 net per week in addition to having his mortgage paid by Western Lodge at the rate of $1,000 per month.

402 Ever since then, Mr Najjar has continued to be employed as manager of the SRS and Western Lodge has continued to pay off his mortgage. The basis of his employment has not always been transparent. For example, on 9 July 2001, an unsigned letter from Western Lodge to Mr Najjar as "Manager" curiously says: "Further to our conversation today, I confirm that I welcome your decision to take up your position on a full-time basis with us. As agreed your remuneration will be $550.00 Gross per week." There is also the mystery surrounding a missing agreement which was described by Mr Vince, the interim receiver and manager of Western Lodge, in an affidavit sworn by him, but which could no longer be located. Mr Najjar said that this was some sort of wage agreement.

403 There are a number of curious and unexplained features about Western Lodge's involvement with the business, and Mr Jiminez and Mr Najjar's intentions in this regard. The gaps and unsatisfactory features about this evidence are perhaps explicable in part by the limited basis on which counsel for the Najjar defendants perceived that the case was being put against them.

404 The company called Western Lodge did not actually acquire an interest in the premises until December 1998. However, as early as 7 September 1998, the SRS was using new letterhead in the name of "Western Lodge". Who decided to adopt this change of name and why is not apparent to me.

405 A shelf company known as Unidek Pty Ltd was acquired in September 1998. Mr Najjar and Mr Jiminez both became directors on 10 September. Its name was changed to Western Lodge on 23 September. It was Mr Jiminez' idea to acquire a shelf company. Although both Mr Jiminez and Mr Najjar were supposed to be equal shareholders, that did not happen. All shares were put in the name of Mr Jiminez and then in one of his companies.

406 Mr Jiminez said he could not recall the exact date on which he began discussions with Mr Najjar on the structuring of the business run through Western Lodge. He said that the original idea was for Western Lodge to obtain a lease in its own right, for Mr Najjar to run the day to day operation and for Mr Jiminez to run the administration from his office, but that never occurred because, according to Mr Jiminez, there was no money.

407 At some stage, it was proposed that Mr Najjar and Mr Jiminez were each going to come up with $50,000 to reimburse Hidek for the money it was going to spend in complying with the various fire orders. In fact, such reimbursement never occurred because Mr Dedek did the majority of the work on his own and the cost was considerably less because he put his labour into it. Although GEM's original quote was in excess of $100,000, Mr Dedek was aware that the work could be done far more cheaply. Ultimately the work cost him about $30,000.

408 Mr Jiminez says that when Mr Najjar was not able to come up with his $50,000, Mr Jiminez was not interested in pursuing the arrangement. By the time Western Lodge finally took over the lease in December, Mr Jiminez had negotiated a very favourable deal with Mr Dedek, under which Western Lodge and Hidek would share the fire costs and Western Lodge would not have to pay its half share unless and until it ever sold its SRS business. Mr Najjar ceased being a director of Western Lodge on the day the lease of the premises was transferred from Najjar SAS to Western Lodge.

409 A number of questions remain unanswered, including the following. Which legal entity or entities was or were in possession of the premises between 14 August and 26 October, and on what legal basis? Why did Mr Jiminez not give Mr Najjar any shares in Western Lodge, even though they were supposed to be partners? Why did Mr Jiminez arrange for the DHS registration to be transferred into Najjar SAS's name in early September? Why did Najjar SAS enter into the Najjar lease in late October, at a time when Western Lodge the company had been set up more than one month before and could have taken on the lease? How and when did it become apparent to Mr Jiminez that he could do a much better deal with Hidek than the one he had agreed with Mr Najjar? Why did Najjar SAS retain some liability to Hidek, apparently under a deed of indemnity which was never produced, even after it had ceased to have any interest in the business? How was Western Lodge able to operate for so long without any DHS registration? Given the view that I take about the scope of the issues in dispute in the Beamer proceeding, it is not necessary for me to answer these questions.

410 I do not disagree with Mr Hevey's suggestion that Mr Jiminez was the principal beneficiary and the driving force behind much of what happened in late 1998, notwithstanding his various attempts to portray himself simply as Mr Najjar's assistant and then some sort of generous "white knight" who rescued a friend in trouble. Mr Jiminez did not strike me as somebody who would enter into a business opportunity without careful consideration of what he could get out of it. Even though I find that Mr Jiminez was really only concerned to look after his own interests, and was a most unsatisfactory and self-serving witness, it does not follow that he had been plotting to remove the Moutidises since earlier in the year or been party to some sort of conspiracy, as alleged by the Moutidises.

411 Western Lodge has run the SRS ever since December 1998. Ironically, the council and MFB have continued to experience problems which are not dissimilar to those they experienced under Kimis and Star Lodge. As early as the first week of December 1998, a building order was issued by the council in respect of the premises. The building order gave Mr Dedek, as director of Hidek, 24 days to "show cause". On 21 January 1999, a fire occurred in one of the resident's rooms at the premises. This led to yet another council notice being issued. Throughout the time that Western Lodge has been running the business, the premises have continued to be the subject of defect notices and orders from MFB and the council.[20] These have included notices to show cause why occupation of the building should be permitted. GEM also ceased testing Western Lodge's fire equipment, due to non-payment of accounts.

412 In perhaps the final irony, Western Lodge has at some stage also fallen into arrears in relation to rates and Mr Dedek considered issuing a notice of re-entry against it.

413 Although the Star Lodge lease expressly provided a right of re-entry upon default, it was still not possible to enforce a forfeiture by recovery of possession or to re-enter peaceably unless notice had been served in accordance with s. 146(1) of the PLA.

414 Section 146(1) provides that before enforcing a right of re-entry the lessor must serve upon the lessee a default notice specifying the particular breach complained of, requiring the lessee to remedy the breach if it is capable of remedy, and requiring the lessee to pay compensation for the breach.[21] Such a default notice is intended to give the person whose interest it is sought to forfeit the opportunity of considering the position before an action is brought to effect that result.[22]

415 The requirements in s. 198 of the PLA for service of such a notice have already been mentioned. Relevantly, such a notice must be in writing and will be sufficiently served if it is left at the last-known place of business in Victoria of the lessee, or is affixed or left for it on the land or any building comprised in the lease.

416 In the present case, the default notice specified the three alleged breaches of covenant, detailed the appropriate mechanism for remedy and compensation, and warned of the consequences of Star Lodge's failure to remedy the breaches.

417 The default notice specified as owing for council rates a sum that was greater than that which was actually owing by Star Lodge. The extent to which an error in specification might vitiate the validity of the notice is not entirely clear, although a reasonably liberal approach has been adopted in respect of a similar type of notice required to be given by a mortgagee to a defaulting mortgagor.[23] In any event, the existence of the remaining defaults (being land tax and water rates) which were correctly quantified is sufficient to preserve the validity of the default notice.[24]

418 As at 14 August, the land tax and water rates referred to in the default notice had not been paid. On that day, Hidek exercised its right of re-entry and terminated the Star Lodge lease. The re-entry notice was not required to and did not specify which breaches of covenant were relied upon. By attending at the premises, serving Mr Najjar and affixing the re-entry notice to the door of the premises, Hidek performed the unequivocal act of demanding possession and effecting re-entry and the Star Lodge lease was consequently determined.

419 The re-entry by Hidek was "peaceable" in the relevant sense because Star Lodge, through its director Mr Najjar, did not object to the re-entry. Therefore, Hidek was not required to commence proceedings to effect forfeiture.

420 Beamer pleads that the default notice did not give Star Lodge sufficient time to remedy any alleged defaults. Clause 4.1 of the Star Lodge lease enabled Hidek to give Star Lodge 14 days' notice to remedy the stated breaches. Was the number of days specified not "reasonable" for the purposes of s. 146(1) and thus capable of invalidating the re-entry notice?

421 It is for the court to determine what is or is not a reasonable time, taking into account those things that are necessary to remedy the breach.[25] Here, all that was required to remedy the relevant breaches was the payment of the amounts specified in the default notice. Given the relatively insignificant sums owing on 14 August and the length of time that they had been outstanding, I find that the time specified was reasonable.

422 Beamer pleads that neither the default nor the re-entry notice was created or served on the dates which it bears or at any time prior to 1 September 1998. It was argued that Mr Dedek, Mr Najjar and Mr Jiminez (and possibly others) were involved in some sort of conspiracy to remove the Moutidises from the business, and were directly or indirectly involved in the creation of false documents. Given the nature of that allegation, it was common ground that such allegations attracted the operation of the Briginshaw principles.

423 The seminal judgment on this subject was delivered by Dixon J (as he then was) in Briginshaw v Briginshaw[26]:

"The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding, are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inference."

424 The High Court further explained the Briginshaw test in the following terms[27]:

"On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct."

425 There is not a third standard of proof. The civil standard of proof applies, though the gravity of the allegations and issues must be borne in mind.

426 Beamer has not satisfied me on the balance of probabilities that the default notice was not served on Star Lodge on 28 or 29 July 1998. On the contrary, I find that the default notice was prepared by Paul Dedek by 28 July 1998 and was personally served by him on Sam Najjar at the premises on or by 29 July 1998.

427 Whether or not the default notice was also served on the Moutidises is not an issue in relation to which I need to make any finding. Were it necessary for me to make such a finding, I would find that it was in an envelope which was served on George Moutidis by Mrs Dedek on or about 30 July 1998.

428 As at 14 August 1998, the amounts referred to in the default notice had not been paid in full. The land tax and at least some of the water rates remained outstanding. Hidek was entitled to terminate the Star Lodge lease for non-compliance with the default notice, no matter how small the amount outstanding.

429 Beamer has not satisfied me that the re-entry notice was not served on Star Lodge on the afternoon of 14 August 1998. On the contrary, I accept that Paul Dedek did personally effect service of the re-entry notice at that time by handing a copy of the notice to Sam Najjar and taping a copy to the front door of the premises.

430 I accept that the re-entry notice may not have been brought to the attention of the Moutidis family before 2 September. Certainly, nobody has suggested it was served on them. I am not persuaded that Mr Najjar mentioned the notice to Louis Moutidis on 14 August. Even if Louis Moutidis went through the front door of the premises around 5.30 pm on 14 August and on Sunday 16 August, I am not satisfied that he would have seen or paid any attention to the notice. The Moutidises did not otherwise attend the premises until 2 September, so would not have seen whether or not the notice was there. It does not matter in law whether the re-entry notice was brought to the attention of the Moutidises, given that it was validly served on Star Lodge.

431 I find that Hidek's conduct constituted a valid exercise of its right of re-entry and effectively terminated the Star Lodge lease.

432 Hidek and the Najjar defendants argue in the alternative that if the conspiracy case is established, then by 2 September, Star Lodge had breached clause 2.15 of the Star Lodge lease by failing to comply with the MFB notice and the ESR, which required the undertaking of substantial works and the expenditure of significant moneys. They say that the failure to comply gave rise to the emergency order. The court should infer from Star Lodge's failure to comply with the MFB notice and the ESR that it lacked the funds to do so.

433 They argue that Star Lodge thereby manifested an inability to honour its contractual obligation in the Star Lodge lease to use the premises only as a guest house and/or SRS and not to allow the premises to become vacant. Such conduct amounted to a repudiation of the lease and conferred upon Hidek the elective right to accept the repudiation and terminate the lease. The works had not been done by 2 September, by which time Hidek accepted the repudiation by re-entering the premises.

434 I do not need to consider this alternative claim, because I find that the conspiracy claim has not been made out and the Star Lodge lease was validly terminated.

435 In the event that the Star Lodge lease has been forfeited, Beamer seeks relief against forfeiture. It does so as a beneficiary acting in place of the unwilling trustee of the Star Lodge trust.

436 As has already been mentioned, the claim for relief against forfeiture was first pleaded almost five months after the lease was determined.

437 Hidek and the Najjar defendants say that such relief should be denied for a number of reasons including the following: the term of the Star Lodge lease expired in any event on 26 September 1999; Beamer failed to promptly apply for relief in the Practice Court in 1998; the grant of the Najjar SAS lease on 26 October 1998 destroyed any entitlement which Beamer had.

438 Jurisdiction to grant relief against forfeiture in respect of breaches of covenant other than the payment of rent is conferred by s. 146(2) of the PLA. The jurisdiction is exercisable, inter alia, in the case of a forfeiture already enforced without curial action.[28] As is evident from the wording of s. 146(2), this court is vested with considerable discretion in considering whether or not to grant or refuse such relief. Where a court grants relief, it may grant it on such terms as to costs, expenses, damages, compensation, penalty and otherwise as it thinks fit. The rights and powers conferred by the legislation are in addition to and not in derogation from any inherent right to relief or power to grant relief within the Supreme Court's inherent jurisdiction.

439 The grant of this relief is not to be constrained by precedent.[29] Cases in this area generally turn on their particular circumstances.[30] The court will also take into account the general justice of the situation.[31]

440 What then are some of the relevant factors in exercising the discretion? The basis of equitable intervention in these cases is said to be relief against overreaching and unconscionable dealing.[32] The seminal judgment on relief against forfeiture is that of Lord Wilberforce in Shiloh Spinners Ltd v Harding[33]:

"It remains true today that equity expects men to carry out their bargains and will not let them buy their way out by uncovenanted payment. But it is consistent with these principles that we should reaffirm the rights of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result. The word 'appropriate' involves consideration of the conduct of the applicant for relief, in particular where his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach."

441 In Legione v Hateley, Mason and Deane JJ endorsed the view that when the equitable jurisdiction is invoked to relieve against forfeiture, equity looks to unconscionable conduct especially when unconscionable conduct is associated with fraud, mistake, accident or surprise.[34]

442 The test to be applied is one of unconscionability - that is, whether in the light of the tenant's remedying breach of covenant, resort by the landlord to the strict legal right of re-entry would be unconscionable.[35] Various cases illustrate that even if the breach is remediable because of its minor nature, it is not always unconscionable for a landlord to rely on its strict legal rights. The court must be satisfied in relieving against forfeiture that there is a reasonable expectation that the tenant will honour the lease obligations in the future. Certain circumstances may arise where the court cannot be so satisfied. In particular, the tenant may be guilty of "serious misconduct" beyond the breach of covenant. This being conduct of such gravity that, even accepting the default for which the right of re-entry as security has been satisfied, it would not be unconscionable on the landlord's part to insist on strict legal rights.[36]

443 Therefore, much of the court's consideration of whether or not to grant relief will focus on the conduct of the tenant. A tenant must, so far as possible, attempt to remedy the breach or breaches alleged in the notice served and pay reasonable compensation for the breaches which cannot be remedied. The tenant must come to court with clean hands and ought not to be relieved if evincing an intention to continue or to repeat the breach of covenant.[37] Where the conduct of the tenant reveals a clear history of wilful breaches of more than one covenant, a case of contumacious disregard by the tenant of the landlord's rights over a period of time, and a total lack of evidence as to the tenant's ability to speedily and adequately make good the consequences of the default, relief against forfeiture will not be granted.[38]

444 Equally so, if the essentials of the bargain can be secured for the landlord, it is fair and just to prevent the landlord from exercising strict legal rights. Thus, if the landlord has suffered no appreciable damage from a breach, if the breach was not wilful, or if the breach was otherwise remediable because of its minor nature, consideration will be given to granting relief.[39]

445 With those factors in mind and conscious of the discretionary nature of this equitable remedy, the existence of the following circumstances may be relevant in the present case: the fact that the land tax has still not been paid or offered to be paid; the expiry of the Star Lodge lease and the failure of Beamer to purportedly exercise any of the options to renew; fire safety issues; the delay in applying for relief and the prejudice occasioned to Hidek and the Najjar defendants; and the practical effect of granting relief.

446 Hidek has never been reimbursed for the land tax and no undertaking to pay it was proffered at trial or any earlier time. Beamer's failure to remedy the breach thus far is surprising when one considers that the outstanding amount is so small, and the time in which payment could have been made is so great.

447 Still being in breach of a covenant at the time of the hearing does not automatically prevent a tenant from obtaining relief against forfeiture,[40] but it is one discretionary factor.

The expiry of the Star Lodge lease and options to renew

448 Beamer's prayer for relief seeks "relief against forfeiture of the said lease and/or the options to renew the lease".

449 Counsel for the Najjar defendants submitted that there is nothing against which Beamer can now seek relief against forfeiture. They argued that the Star Lodge lease expired by effluxion of time on 25 September 1999 and therefore ceased to exist years ago. I agree with that submission. It goes without saying that relief is available only against forfeiture. Where a lease for a term expires by the effluxion of time, there is no jurisdiction to grant equitable relief.[41]

450 As the time for expiry of the Star Lodge lease approached, Beamer took no interlocutory action to preserve the lease, whilst maintaining its position that the lease had not been forfeited.

451 Beamer's counsel focussed on the options to renew contained in the Star Lodge lease. Clause 4.7 of the lease granted an option to renew for four further terms of five years each. The last day for the exercise of the first option was 25 June 1999. In support of the contention that Beamer was entitled to relief against forfeiture of these options to renew the lease, Beamer's counsel put the following propositions: that options to renew leases create an equitable interest in land upon grant, notwithstanding that the option may not have been exercised by the grantee; and, that an option to renew a lease does not have to be exercised before equity can grant relief against forfeiture.

452 With regard to the first proposition, it is not necessary for me to decide whether an option to renew a lease creates an equitable interest in land. I proceed, for reasons that will become apparent, on the footing that such an option, if forfeited, can be the subject of relief against forfeiture.

453 Turning now to the second proposition, Beamer's counsel referred me to three authorities which were said to support the principle that even though Beamer did not exercise the first option before 25 June 1999 it can still seek relief against the forfeiture of that option.[42] Those authorities may be readily distinguished. In Melacare Industries of Australia Pty Ltd v Daley Investments Pty Ltd the time for exercising the option which was purportedly terminated had not elapsed. In both Bezden Pty Ltd v A Castellano Nominees Pty Ltd and Hiller v Goodfellow, the optionee attempted to exercise an option after the date for its exercise had expired. The most significant distinguishing feature is that an attempt to exercise the option was made at all. Also, in both those cases, the purported exercise of the option was made a matter of days after their expiry; here, there has never been a purported exercise. Finally, in those two cases, the optionee gave the grantor of the option clear indication of its intention to exercise the option prior to expiry. In the present case, Beamer gave Hidek no indication of its intention to exercise the option. None of these cases are authority for the proposition contended for.

454 I turn to consider whether equitable intervention could ever be justified in circumstances where the optionee never attempted or indicated an intention to exercise its option before its expiry.

"That is not to say that if because of fraud, representation or request the optionee (purchaser) fails to declare himself before the due date, he could not be entitled to relief. Clearly he would have an equity, but if, simply by his own decision, unilateral mistake, misjudgement or even sheer incompetence, he does not in fact exercise his legal entitlement, then in my view it is doubtful whether Equity would come to his aid."

456 Here, Beamer's failure to exercise its legal entitlement was not a result of fraud or other nefarious conduct on Hidek or anyone else's part.

457 Furthermore, I think it doubtful that equity would intervene to grant relief against forfeiture of an option if the optionee was still in breach of covenant at the time of its purported exercise (or on the last day available for exercising). In Amev Investments Pty Ltd v Eighty Fifth Tribute Pty Ltd & Ors[43], the tenants of an unexpired lease sought relief from forfeiture for non-payment of rent. The lease was due to expire in two months and the lease contained an option to renew exercisable at least three months before expiration of the lease. The tenants also sought relief against the loss of the right of renewal by the failure to exercise it in time. According to Brooking J:

"As to the option, there are a number of matters. The defendant company is out of time so far as exercise is concerned. My strong impression is that performance of the covenants is a condition precedent to the exercise in that there must be no breach at the time of exercise and so, had the company tried to exercise its option, it would very likely have been unable to do so.

If relief is to be sought the lessee will have to address itself to two matters: its failure to apply in time and the question of breaches, performance being, as I have said, as it presently seems to me, a condition precedent. Moreover there is nothing in the material before me to suggest that any ground could be established for the intervention of equity, assuming equity can relieve against a failure duly to exercise an option of this kind."

458 During all material times for the exercise of the options to renew, Star Lodge has remained in breach of its obligations to pay the land tax and to comply with relevant orders from municipal bodies. There is no identified basis upon which equity should be invoked to relieve against the failure to remedy those breaches.

459 Finally, there is the very real question of whether the construction of the lease would allow the option to be exercised after the lease had been determined. In Lo Giudice v Biviano (No 2)[44], a lease provided that the tenants had an option to renew, to be exercised in writing no earlier than 18 months before and at least three months before expiration of the agreement. According to Adam J:

"[A]s a matter of construction of the lease, the option of renewal (which was required to be exercised by notice in writing at least three months before the expiration of the agreement) ceased to be exercisable after the lease had been duly terminated. What was contemplated was renewal during the term to operate as from the expiration at its appointed date, not the grant of a new lease to take effect after the lapse of an interval of time from the determination of the original lease."[45]

460 It is clear that equity will not intervene to relieve against forfeiture of the Star Lodge lease, nor the options to renew contained therein. However, if I am wrong and Beamer does have an interest in the Star Lodge lease capable of being relieved, I turn to consider whether there are factors that would warrant the granting of that relief.

461 The general rule is that it is not open to a landlord, when opposing the exercise of the discretion of the court to grant relief against forfeiture, to adduce evidence of other breaches by the tenant which have not been the subject of a statutory notice.[46] However, extraneous breaches of covenant may be taken into consideration when there are "special" or "exceptional" circumstances.[47]

462 It is suggested by the author of "Commercial Leases in Australia" that special circumstances may arise if the extraneous subsequent breach was more serious than those breaches relied upon to found the right of re-entry.[48] Further guidance, particularly for present purposes, can be found in the decision in Stieper v Deviot Pty Ltd.[49] In Stieper, Moffitt P (with whom Glass JA and Hutley JA agreed) found that the evidence established that the tenant had a repeated disregard for the law regarding the storage of flammable liquids, and a lack of ordinary care to minimise the risk of the danger of fire.[50]

"Apart from this already accrued detriment due to past lack of care, there is the prospect of continued lack of care in the future. Lack of care may be more than an isolated act. Evidence may show it is a continuing attitude, so that a court, for particular purposes such as the present, may not be satisfied that repetition, with possibly disastrous consequences for one party, can be prevented securely either by an undertaking or an injunction. The lack of care was of that description.

There was thus a relevant legal obligation owed by the lessee to the lessors and the lessee was in breach of this obligation in a way, which, in my view, provided, in accordance with principle, an equity justifying refusal of equitable relief and in any event, whatever test be applied, this case was exceptional and such that it would be unjust to the lessors to grant relief against forfeiture."

463 The NSW Court of Appeal concluded that the trial judge was correct in refusing relief against forfeiture by reason of the tenant's conduct and circumstances other than the breach of covenant to pay rent.

464 Star Lodge's record with regard to fire safety and maintenance orders is of great concern to me. The Moutidises have not demonstrated a capacity or willingness to respond to and rectify serious breaches of municipal fire standards. At times their conduct demonstrated a reckless indifference to the safety of residents. The grave consequences of continuing that pattern of conduct are all too obvious. People's lives are at risk and I cannot be satisfied that any commitment offered by Beamer to comply with fire orders and safety in general, would be kept on a continuous basis.

465 There is in equity a six month equitable limitation on bringing claims for relief against forfeiture.[51] Although statute enshrines this limitation in cases involving forfeiture due to non-payment of rent, I see no reason why it should not be considered by analogy in cases of forfeiture involving breach of other covenants of a lease.[52]

466 An application for relief against forfeiture is usually brought by summons without pleadings, returnable in the Practice Court. Had Beamer made an application for relief in the Practice Court six years ago, paid the land tax, reimbursed Hidek for the fire works performed and if the court was satisfied that they would comply with the lease and not infringe in future, it may have been a relatively straightforward matter for relief to have been obtained.

467 In fact, Beamer has offered no satisfactory reason for not seeking relief against forfeiture in the Practice Court six years ago. Counsel for the Najjar defendants submitted that the reason for Beamer's inactivity does not matter and the mere existence of inactivity in circumstances where the potential plaintiff has knowledge of all of the relevant facts is enough to bar the grant of the claimed equitable relief. I do not accept that the principle may be stated as baldly as that.

468 The starting point is the equitable maxim that "equity assists the diligent not the tardy". This maxim finds its modern expression in the concepts of laches, acquiescence, and the analogies which equity drew to the statute of limitations.

469 The equitable doctrine of laches provides a defence to an equitable claim if the defendant can demonstrate that the plaintiff, by delaying the institution or prosecution of its case, has either acquiesced in the defendant's conduct, caused the defendant to alter its position in reasonable reliance on the plaintiff's acceptance of the status quo, or otherwise permitted a situation to arise which it would be unjust to disturb.[53] Mere delay, of itself, is not enough to constitute either laches or acquiescence.[54]

470 Two circumstances which are always important in such cases are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking one course or the other, so far as relates to the remedy.[55]

471 In cases involving applications for relief against forfeiture of a lease, courts have generally been strict in requiring parties to institute and prosecute their claims expeditiously. For example, in Sharma v The Magistrates' Court of Victoria[56], Beach J considered an application brought in the Practice Court two months after the re-entry notice was served. He held that the delay on the part of the plaintiff in instituting the proceeding seeking relief against forfeiture was of itself sufficient to disentitle him to the relief.

472 Delay by the tenant in making the applicant for relief, especially if this causes prejudice to a third party, is relevant but not necessarily fatal.[57]

473 Although the fact that a third party has acquired an interest in the premises since the forfeiture will not necessarily defeat the application, it is to be taken into account.[58] Even if I assumed in favour of Beamer that the Najjar and Western Lodge leases were obtained in circumstances upon which equity might frown, Hidek's position must be considered. By the time the matter came on for trial, Hidek had been in a position of uncertainty for almost six years, for no reason other than that Beamer chose not to seek urgent relief against forfeiture. Hidek has also invested money in ensuring the premises comply with various fire orders, expenses that should have been paid and incurred by Star Lodge. In my view, it would be wholly unreasonable and quite inequitable to grant relief in those circumstances.

474 On 26 October 1998, Hidek granted the Najjar lease. That lease was assigned to Western Lodge on 1 December 1998. The Western Lodge lease has expired and the premises are occupied on a month-month tenancy. It is not necessary for me to decide whether the relief granted would have been a monthly tenancy or for the term covered by the option to renew the Star Lodge lease.

475 In October 2003, Hidek transferred the premises to the Dedeks for no consideration. At trial, the Dedeks undertook to comply with any order that the court might make against Hidek by way of relief against forfeiture. The parties proceeded on the basis that the transfer was therefore not relevant to my consideration of the application for such relief.

476 In conclusion, for all of the above reasons, this is not an appropriate case for relief against forfeiture.

477 Beamer pleads that between 9 June and 9 October 1998, Star Lodge as trustee of the Star Lodge trust owed certain fiduciary and statutory[59] duties to the unit holders, and to Beamer and Najjar SAS as beneficiaries of the Star Lodge trust ("the trustee's duties"). The trustee's duties relevantly include acting honestly and in the best interests of the beneficiaries, only to apply trust assets in good faith and for the purposes of the trust, not to prefer the interests of one beneficiary over another, to preserve and protect the trust assets, and to take all necessary steps to recover any loss suffered by the trust as a consequence of any negligence, misconduct or other wrongful conduct of any person in connection with the Star Lodge trust. Obviously, Star Lodge did not owe any duties to the beneficiaries after it ceased to be the trustee on 9 October.

478 Although the Najjar defence did not admit the existence of any of these duties, counsel for the Najjar defendants did not address the matter in submissions. I find that Star Lodge did owe relevant trustee's duties. The real dispute is as to whether there was any breach of those duties.

479 In the first few days of the trial, Beamer sought leave to deliver an eighth amended statement of claim, which alleged for the first time that Sam Najjar owed duties to Star Lodge, which he breached.

480 Beamer pleads that as a director of Star Lodge, Sam Najjar owed various fiduciary and statutory duties to Star Lodge and to Beamer as a beneficiary of the Star Lodge trust ("the director's duties"). The statutory duties included duties of honesty, reasonable care and diligence, and not to make improper use of information or position acquired as a director to gain a personal advantage or cause detriment to Star Lodge.[60] The fiduciary duties included duties to act honestly and in the best interests of Star Lodge, and to avoid conflicts of interest.

481 Once again, the Najjar defence denied the existence of these duties, but no submissions were made in this regard. I find that Sam Najjar did owe the director's duties to Star Lodge, throughout the period that he was a director of Star Lodge.

482 By his own admission, Mr Najjar was completely unaware that he owed the director's duties to Star Lodge. Unsophisticated and inexperienced in the running of a company, Mr Najjar did not appreciate, for example, that he had a duty not to prefer his own interests to those of Star Lodge as a whole.[61] When the premises were re-entered on 14 August, he should not have thought simply about protecting his own investment and job. Even if he thought that the Moutidises were no longer interested in the business, or had caused all the problems, or were people he wanted nothing more to do with, he ought to have had regard to their interests in Star Lodge and the Star Lodge trust. Be that as it may, it is still necessary to consider the specific breaches alleged against Mr Najjar.

483 Paragraph 16 of the Beamer claim pleads that Star Lodge breached the trustee's duties. The only particulars of breach ("the breach particulars") are as follows:

(a) Ensure that the terms of the [contract of sale] were carried out and, on a date [Beamer] cannot specify until after discovery and interrogation but between 1 July 1998 and 3 September 1998, the registration of the business pursuant to the [HS Act] was lodged in the name of [Najjar SAS];

(b) Ensure that the transfer of the registration to conduct the business ... was effected in the name of Star Lodge;

(c) Comply with the notice [which Beamer defines as the re-entry notice of 14 August] within the time prescribed or at all;

(d) Commence proceedings against Hidek seeking relief against forfeiture or to challenge the [re-entry] notice."

484 It is then said that, by reason of the breach of the trustee's duties referred to in paragraph 16, Beamer has suffered loss and damage. The particulars of loss and damage are said to be the dissipation of the assets of the Star Lodge trust and, "alternatively", from a date unknown to Beamer but some time after 1 July 1998, Sam Najjar and Najjar SAS have assumed control of the business and/or the lease of the premises. It is not pleaded that the dissipation of assets or assumption of control by Sam Najjar or Najjar SAS were in themselves wrongful or constituted a separate breach of duty, merely that they are consequences of Star Lodge's inactivity.[62]

485 Further or in the alternative, paragraph 24A pleads that Sam Najjar breached the director's duties "by reason of the matters alleged in paragraphs 9 to 17" of the Beamer claim. In fact, the only breaches alleged in those paragraphs are those set out in the breach particulars, which have just been considered.[63] So it is said that Sam Najjar breached the director's duties "by reason of" the fact that Star Lodge did not do the things specified in the breach particulars.

486 The breaches pleaded in paragraphs (a) and (b) of the breach particulars ("the DHS breaches") overlap and are conveniently considered together. The terms of the contract of sale required the DHS registration to be transferred to Star Lodge, so particular (b) adds nothing to particular (a). Particular (a) includes the additional positive allegation that the DHS registration was lodged in the name of Najjar SAS.

487 The breach in paragraph (c) adds nothing to the breach in paragraph (d) of the breach particulars (collectively, "the lease breaches"). The "notice" referred to in paragraph (c) is defined elsewhere[64] as the re-entry notice of 14 August, not the earlier default notice. The allegation that Star Lodge did not "comply" with the re-entry notice goes nowhere. The lease was forfeited on 14 August for non-compliance with the default notice of late July. The re-entry notice did not require "compliance" within a prescribed time. The essence of both of the lease breaches seems to be that Star Lodge did not commence proceedings seeking relief against forfeiture or to challenge the validity of the re-entry ("lease proceedings").

488 Unfortunately, Beamer's claim in relation to the alleged breaches of duty and consequential relief is poorly pleaded and hard to follow in many respects. Its current lawyers were only retained a few weeks before the trial commenced, and inherited poor pleadings which had already been the subject of multiple amendments.[65] Beamer's claim was amended on three separate occasions during the trial, none of which remedied a number of serious defects identified by counsel for the Najjar defendants and myself over the course of almost seven weeks of trial.[66]

489 For example, counsel for the Najjar defendants repeatedly[67] described the breach particulars as allegations of "inactivity" and pointed out that there was no pleading of active wrongdoing. In fact, the assertion that DHS registration was lodged in the name of Najjar SAS is an allegation of active, rather than inactive, breach of duty. Otherwise, Beamer's pleaded case may fairly be described as one of inactivity, particularly failure to seek relief from forfeiture.

490 The extensive written submissions delivered by Beamer's counsel during closing addresses referred to various cases dealing with the principles which apply when company directors wrongfully seize for themselves or their own companies an opportunity which is available to the company to whom they owe director's duties. The written submissions did not really apply those cases to any specific facts in this case and were delivered too late for the Najjar defendants to respond to them in any meaningful way. Unfortunately, the Beamer case was not pleaded in clear "loss of corporate opportunity" terms. General assertions to the effect that "they took the business" are not reflected in specific pleadings as to precisely who took what, when and in breach of what duty. The particulars of loss do not fill in this enormous gap.

491 Had Beamer's counsel opened in greater detail or more clearly than the pleadings, I might more readily find that the Najjar defendants were on notice of the case they had to meet and accordingly be less strict about holding Beamer to its pleadings. No doubt because the Moutidis entities had only retained their current lawyers so close to the trial, and they were still getting on top of the material even as the trial commenced, the opening by Beamer's counsel on the breach of duties case was very brief and in the most general terms.

492 Beamer's pleadings simply do not deal with a number of fundamental issues. For example, the Hidek authority appointed Sam Najjar as agent to enforce the notice of re-entry, but nowhere is it pleaded that Sam Najjar accepted this appointment in breach of any director's duty. Najjar SAS did not obtain a lease until late October, after the change of trustees had occurred. Who is it alleged was in occupation of the premises from 14 August until 26 October, and on what basis? One possible interpretation of the evidence of Mr Dedek, Mr Najjar and Mr Jiminez is that Mr Najjar was there simply as a caretaker or manager for Mr Dedek in the immediate aftermath of the re-entry. If a case of "loss of corporate opportunity" is to be made out, one would need to be quite clear as to when and in what circumstances it is said that Sam Najjar or Najjar SAS first seized an interest in something which properly belonged to Star Lodge.

493 If the only relief which was sought was from Sam Najjar and Najjar SAS, the pleading deficiencies might be more easily overlooked. Furthermore, had the new trustees not been appointed, one would not have to consider the difficult causation questions thrown up by the fact that Sam Najjar and Star Lodge had no relevant duties to the beneficiaries of the Star Lodge trust after 9 October. But Beamer seeks relief from additional parties, Western Lodge and Manuel Jiminez, and relief in respect of events which occurred after 9 October. It is not possible to consider claims of "knowing assistance" or "knowing receipt" without being quite specific about what acts or omissions are alleged to have been assisted or what property received and with precisely what knowledge.

494 Putting to one side their pleading criticisms, the Najjar defendants plead a number of matters by way of defence to the breach of duty claims.

495 In relation to the DHS breaches, the Najjar defendants plead that the DHS transfer form was lodged with DHS in or about early July 1998 and Sam Najjar did all that was reasonably within his power to register Star Lodge under the HS Act. They also plead that the registration of Star Lodge was not approved because the MFB notice had not been complied with and Star Lodge was a company in which one or more members of the Moutidis family had an interest.

496 In relation to all of the breaches, the Najjar defendants say that because of a number of matters, including the outstanding fire notices and the likely costs of complying with them, the financial position of Star Lodge would have been made worse had it attempted to continue in possession of the premises.

497 Until it was removed as trustee on 9 October, Star Lodge owed the trustee's duties. If it was in the interests of the Star Lodge trust to do so, then Star Lodge ought to have commenced lease proceedings as soon as reasonably practicable after 14 August. I proceed on the basis that Sam Najjar owed an equivalent duty to the beneficiaries of the Star Lodge trust.

498 Star Lodge never commenced lease proceedings. In considering whether that constituted a breach of director's or trustee's duty, it is necessary to consider whether Beamer has established that it was in the interests of the Star Lodge trust to commence lease proceedings. It is helpful to consider first why such proceedings were not issued.

499 As one of the two directors of Star Lodge, it is clear that Sam Najjar never even considered the possibility of commencing lease proceedings. He was quite frank that when he received the re-entry notice on 14 August, he wanted to protect his own position. As far as he was concerned, the Moutidises had lost interest in the business and he no longer wanted to be in business with them.

500 The other decision maker for Star Lodge was George Moutidis, the other director. I accept that he was not aware of the re-entry until 2 September. His solicitors, Pryles & Defteros, telephoned DHS on 3 September and wrote letters of demand to DHS and Hidek on 11 September. In both of those letters of demand, Pryles & Defteros purported to act on behalf of Star Lodge as well as George Moutidis. The letter to Hidek asserted that the re-entry notice was invalid. It sought confirmation by 16 September that the notice was withdrawn, the Star Lodge lease was valid and "our client" have complete access to the premises, failing which legal proceedings would be commenced without further notice.

501 The deadline set by Pryles & Defteros passed without any reply from Hidek. No proceedings were commenced by George Moutidis or Star Lodge, as had been threatened. George Moutidis was not asked about these letters of demand or why he did nothing after the deadline passed.[68] For reasons which were never really explained to me, instead of issuing lease proceedings, the Moutidises decided to go the route of replacing Star Lodge as trustee of the Star Lodge trust. How it was thought that the appointment of two new trustees, one representing each of the Moutidis and Najjar interests, would resolve the dispute was never explained.

502 On 12 October, three days after the appointment of the new trustees, Pryles & Defteros wrote them a letter of demand, this time on behalf of Beamer. This letter alleged that Sam Najjar had breached various duties, which Star Lodge had procured or participated in. The letter did not speak of seeking relief against forfeiture or challenging the validity of the re-entry. Instead, it spoke more generally of recovering back the business. It concluded in the following terms:

"In our view, proceedings should be commenced against Mr Najjar, Najjar [SAS] and, possibly, Star Lodge urgently to recover the asset of the Trust, namely the business ...

Our client requests that, in your capacity as the new trustees of the Trust, you consider whether such proceedings should be commenced urgently and advise us of your decision on or before 4pm on 16 October 1998."

503 The new trustees did not commence any such proceedings. There is simply no evidence as to whether they responded by 16 October or at all, or as to why they did nothing.

504 Somewhat curiously, the 12 October letter also referred to two other letters dated 11 September, which had apparently been sent by Pryles & Defteros to Mr Najjar and Najjar SAS, making certain demands in relation to the delivery up of the business, the withdrawal of the application for DHS transfer and an account of profits. The letter said that there had been no reply to the 11 September letters. Unfortunately, these two earlier letters were not in evidence before me and neither George Moutidis nor Sam Najjar was asked any questions about them. I therefore do not know why the Moutidises took no steps to recover back the business from Sam Najjar or Najjar SAS, as they were apparently threatening to do as early as 11 September.

505 Counsel for the Najjar defendants argued that it was not in the interests of the Star Lodge trust to recover the Star Lodge lease or possession of the premises, in circumstances where it could not afford to carry out the works required to retain the business and comply with its obligations under the lease. At the time of re-entry, a quote in excess of $100,000 had been provided for those works. Accordingly, it is argued, Star Lodge and Mr Najjar acted for the benefit of the Star Lodge trust in not pursuing relief from forfeiture or return of possession.

506 There is no evidence before me that Star Lodge had the capacity to fund works costing such an amount or indeed any substantial amount, such that it would have been able to continue on as tenant had it managed to obtain relief from forfeiture. Even had the Najjar and Moutidis interests been able to come up with such a sum of money, it may not have been in Star Lodge's interests to pour that much money into somebody else's building, simply in order to be able to continue to operate. Absent evidence as to the actual profit margin on the business, I cannot say whether a prudent trustee would have determined to invest such a sum. Accordingly, I am not satisfied that Star Lodge was in breach of the trustee's duties in failing to issue lease proceedings.

507 Even if I am wrong in relation to that finding, any such breach would only be a breach of the trustee's duty of care and diligence, not a breach of fiduciary duty. Star Lodge would be liable for any damages flowing from the breach, but there would be no question of holding another party liable for knowing assistance or knowing receipt. Furthermore, Star Lodge would only be liable for damages suffered prior to 9 October, when it ceased to be the trustee.

508 Assuming the failure to commence lease proceedings constituted a breach by Mr Najjar of his director's duties, his duties ceased after the appointment of the new trustees on 9 October. Given Mr Najjar's bankruptcy and the way the rest of the case is pleaded, it is not necessary for me to spend much time analysing the inactivity case against Mr Najjar.

509 It is convenient to recap on what actually happened in relation to the change of DHS registration, before considering whether there was any breach of trustee's or director's duties.

510 The contract of sale required the DHS registration to be transferred to Star Lodge. When Kimis executed the DHS transfer form in or about late June 1998, it did so pursuant to the contract of sale. At the time of execution, Sam Najjar and George and Kim Moutidis understood that the DHS transfer form would be used to effect a transfer of the DHS registration from Kimis to Star Lodge.

511 It is not clear when the DHS transfer form was given to Peter Cohen, when Peter Cohen lodged it with DHS, or why the form was not processed by DHS until early September 1998. When it was processed, it was used to effect a transfer of registration from Kimis to Najjar SAS, not Star Lodge. This occurred without the consent of the transferor, Kimis.

512 Sam Najjar attended his unsuccessful first interview with DHS on 7 July. He did so in his capacity as a director of Star Lodge. He underwent his successful second DHS interview on 1 September, the day before the Najjar DHS registration was effected. There is no evidence, and I think it unlikely, that he actually turned his mind to the legal capacity in which he underwent the second interview. The date for the second interview seems to have been set by DHS some time before the re-entry.

513 Although DHS was aware that Sam Najjar was the manager and day-to-day operator of the business, DHS was blithely unaware of the existence of Star Lodge as a separate legal entity at any relevant time. When notified by Manuel Jiminez on 1 September that the Moutidises had been evicted, DHS understood its options to be to appoint an administrator or complete what it understood to be the pending transfer to Najjar SAS.

514 By 1 September, it had been decided that Najjar SAS would seek DHS registration and the DHS transfer form would be used to achieve that outcome. Who made that decision on behalf of Najjar SAS? Manuel Jiminez, in his capacity as self-described "financial controller" of Najjar SAS, had clearly determined that to be the appropriate route to adopt and told DHS that Najjar SAS was to be the transferee. Sam Najjar said in evidence in chief that he never filled in any form to have DHS registration put into Najjar SAS's name and never spoke to DHS about the issue of the certificate in his company's name. That evidence was not challenged nor was he cross-examined about the circumstances in which the DHS transfer form came to be used and what he actually knew of its use.

515 After Beamer's solicitors wrote on 11 September, DHS began to be concerned that the transfer of registration to Najjar SAS might have been irregular because it had not been consented to by the Moutidises. Thereafter DHS started to record concerns that the Moutidises might not be fit and proper persons to operate the business, because they had been locked out of the premises and no longer had a valid lease.

516 In February 1999, DHS wrote to Kimis and Najjar SAS, asserting that the Najjar DHS certificate was invalid and Kimis was still the proper holder of DHS registration. In my opinion, that assertion is wrong in law. Having granted the Najjar DHS certificate, DHS had certain statutory powers of revocation or cancellation, none of which it purported to exercise. However, DHS had no power to simply declare a certificate which it had granted to be "invalid".

517 Given these factual findings, I turn to consider whether it can be said that Star Lodge or Sam Najjar committed the DHS breaches and, if they did, what consequences flowed from that.

518 I accept that one of the pre-conditions to DHS granting registration is that the proposed transferee must have security of tenure of the premises from which an SRS is conducted. The Najjar defendants argued that because the Star Lodge lease had been terminated before the DHS transfer form was processed, Star Lodge was incapable of satisfying that pre-condition. They argued that registration in Star Lodge's name would have been of no benefit because it was not in possession of the premises when the DHS transfer form was processed. That may be so, but had Star Lodge promptly issued lease proceedings, then DHS registration would have been of value to Star Lodge. Therefore, I do not accept that DHS registration had absolutely no value to Star Lodge; it had value if coupled with security of tenure.

519 Having lodged the DHS transfer form with DHS, it is not clear to me what more Beamer says that Star Lodge ought to have done to ensure that the form was processed at any particular time. Beamer has not made out the "inactivity" part of the DHS breaches as against Star Lodge. In relation to the "active" part of the DHS breaches, Star Lodge had no knowledge of and was not privy to the misuse of the DHS transfer form, or the transfer of registration into the name of Najjar SAS, prior to or at the time they occurred. There was nothing to put Star Lodge on notice that it might lose its rights because of defects in the DHS transfer form or DHS's failure to appreciate the different legal entities involved. Beamer has not satisfied me that an honest, prudent trustee in the position of Star Lodge ought to have done anything more in the circumstances. Accordingly, I am not satisfied that Star Lodge committed the DHS breaches.

520 As far as Sam Najjar is concerned, the task of lodging the forms on behalf of Star Lodge was undertaken by Peter Cohen. In relation to the "inactivity" part of the DHS breaches, it is not clear that Sam Najjar ought to have done anything more to ensure that the transfer to Star Lodge was processed.

521 It is not clear when or how Mr Najjar first learned that Mr Jiminez had arranged for DHS registration to be obtained in Najjar SAS's name. He clearly knew some time in late 1998 that his own company, Najjar SAS, was running the business; whether he knew that it had obtained formal DHS registration on 2 September or at any time (as opposed to just thinking that he had passed his personal test) is not clear.

522 Any claim for damages or an account of profits from Sam Najjar would be worthless because of his bankruptcy. Although not in liquidation, there is no evidence that Star Lodge would be able to satisfy any judgment. Accordingly, Beamer sought to recover from Najjar SAS and/or Zenn, and from Western Lodge and/or Mr Jiminez, by way of accessorial liability or tracing claims.

523 Beamer's pleadings in relation to allegations of knowing assistance and knowing receipt are poorly pleaded, largely unparticularised and very difficult to understand.

524 Beamer's claim against Najjar SAS is quite limited on the pleadings. A general assertion is made that Najjar SAS knowingly assisted and/or induced Star Lodge to commit the lease and DHS breaches.[69] Not a single particular of that allegation is provided. The next two paragraphs allege that Najjar SAS knew or ought to have known that Star Lodge's conduct would result in the breaches of trustee's duties and "recklessly did not care" whether there were breaches of trustee's duties. Those allegations do not take the matter any further.

525 Whilst the pleading is not entirely clear, the consequences of Najjar SAS's knowing assistance are variously said to be that it "received the profits from the conduct of the business"[70], is liable to place the Star Lodge trust in the same position as if no breach of duties had occurred[71], is liable to compensate as constructive trustee of any property which it may hold or profit it has made by reason of the breaches[72] or as trustee de son tort.[73]

526 Significantly, there is no substantive allegation anywhere in the Beamer claim to the effect that Najjar SAS knowingly assisted or induced any breach of director's duty by Sam Najjar.

527 Paragraph 46A contains a further or alternative claim that by reason of the matters in paragraphs 9 to 17 and 35 to 46, various persons including Najjar SAS received property of Star Lodge and/or the Star Lodge trust "with notice and/or knowledge of the alleged breaches of directors duties contained in paragraph 24A". Unfortunately, the only particulars provided of that allegation are a reference back to paragraphs 36 and 45, both of which are concerned with the actions and knowledge of Western Lodge and Manuel Jiminez and not Najjar SAS. A similar allegation is made in paragraph 52, but it takes the matter no further.

528 For the reasons already given, Beamer has not established that Star Lodge breached any of the trustee's duties. Even if that finding were wrong, any such breach would not be a breach of fiduciary duty, so no question of "knowing assistance" by Najjar SAS would arise.

529 Zenn became the trustee of the Najjar family trust on 27 October 2003. It was not in existence at the time of or in any way involved in the events of late 1998.

530 There is simply no evidence that Zenn did any of the things alleged against it:

(a) Received the profits from the conduct of the business, for which it is liable to account;[74]

(b) Has ever held the business or the benefit of the business and/or the lease upon trust for Beamer.[75]

531 The case against Zenn arising out of the alleged breaches of director's duties and trustee's duties must fail.

532 The case against Western Lodge and Jiminez is particularly difficult to follow and ultimately futile as pleaded. The essence of it is to be found in paragraphs 36 and 45 of the Beamer claim. A number of other paragraphs refer back to or repeat those paragraphs, but take the claim no further.

533 Paragraph 36 starts of by pleading that "at all material times" Western:

(a) Had knowledge of the interest of Star Lodge and Beamer in the premises and of the business;

(b) Had knowledge of the dispute which was the subject of the trustee proceedings;

(c) Failed to pay consideration for the business and or for the transfer of the lease;

(d) Had knowledge that Beamer and/or Star Lodge were involved in legal proceedings with Najjar SAS;

(e) Since 1 December 1998 has conducted the business from the premises;

(f) Has since 1 December 1998 conducted the business from the premises allegedly pursuant to the original certificate of registration granted to Star Lodge and/or NSAS.

"Further or alternatively, Western and/or Jiminez has received the trust property (being the business and the benefit of the lease for the premises including the proceeds of the business and all of the assets and undertakings of the business) and/or with notice of the trust and/or with notice and/or knowledge of the breach of trust and/or breach of director duties and have knowingly assisted [Najjar SAS] in a wrongful and improper disposition of the said trust property in breach of trust and/or in breach of director and fiduciary duties.

(b) Western has allegedly received a transfer of the lease from [Najjar SAS].

(c) The said trust property has been transferred to Western for no consideration.

(d) The special accommodation home conducted on the premises was conducted under the name of [Najjar SAS] ... and is managed by Najjar.

(e) Western has now applied to be registered and until 30 June 2004 was registered under the [HS Act] ...

(f) Jiminez is in effective control of Western and is its alter ego.

(g) Western has applied for a renewal of registration under the [HS Act] ... and is currently awaiting confirmation of its registration."

535 Many of those allegations are simply not made out on the evidence, others lead nowhere even if established. Precisely what property was acquired when, how and with what knowledge of what breach is not identified.

536 Manuel Jiminez undoubtedly had knowledge of the interest of Star Lodge and Beamer in the premises and the business. He is in effective control of Western Lodge and may be regarded as its alter ego.

537 Western Lodge did indeed enter into the Western Lodge lease on 1 December 1998, by way of a transfer of Najjar SAS's lease. Sam Najjar has continued to work as manager of the business in the employment of Western Lodge.

538 Contrary to the Beamer claim, I have found that Western Lodge did in fact pay some consideration for the business, in so far as it agreed to pay $1,000 per month in reduction of Najjar indebtedness and assumed some of Najjar SAS's existing liabilities in relation to fire notices. I am unable to say what a market value of the business might have been in December 1998, were it necessary for me to consider the question of whether it paid a "fair market price". However, it cannot be said that Western Lodge was not a purchaser for valuable consideration.

539 As far as Western Lodge's knowledge of legal proceedings is concerned, I make the following comments. Prior to 1 December 1998, Beamer and Star Lodge were not involved in any proceedings with Najjar SAS other than the trustee proceeding.[76] The only "dispute" which was the subject of the trustee proceeding related to the appointment of the new trustees back in early October. I assume that Manuel Jiminez was probably aware of what was going on in that proceeding. The trustee proceeding was effectively over once the new trustees were appointed. What any of that has to do with the entry into of the Western Lodge lease in December was never explained to me.

540 I also do not accept the pleaded claim that Western Lodge in fact conducted the business pursuant to Star Lodge's DHS registration (which never existed) or Najjar SAS's DHS certificate. As already discussed, Western Lodge operated the SRS for the first 2½ years without any DHS registration. DHS seems to have been completely inactive in relation to the registration of the SRS after its letter of February 1999, which purported to declare invalid the Najjar SAS registration. How Beamer could "trace" into the 2001 or any subsequent registration was not the subject of clear legal analysis.

541 For the reasons already given, I have found no breach of a fiduciary duty by Star Lodge; there can therefore be no knowing assistance of such breach by Western Lodge or Manuel Jiminez.

542 Even if the obtaining of the Najjar DHS registration involved a breach of fiduciary duty by Sam Najjar, Western Lodge did not obtain or use that registration for itself and is not a knowing recipient of trust property.

543 Western Lodge obtained a transfer of the Najjar lease, which had only been entered into in late October, some weeks after the appointment of the new trustees. The circumstances surrounding the execution of the Najjar SAS lease were not pleaded or the subject of any direct attack in the Beamer claim. Neither Star Lodge nor Sam Najjar owed any relevant duty to Beamer after the appointment of the new trustees. Given that the pleaded lease breaches involve only a claim of inactivity in failing to issue lease proceedings, the basis for attacking the Najjar SAS lease and tracing through into the Western Lodge lease is not clear.

544 The parties to the supplementary agreement were Beamer and Najjar SAS. Najjar SAS was not represented at trial, but Mr Najjar effectively gave evidence on its behalf and the Najjar defendants expressly pleaded to Beamer's claim in relation to the supplementary agreement. Whilst giving the agreement a different name, and relying on different particulars, the Najjar defence did not really deny the existence of the supplementary agreement or its express terms.

545 What the Najjar defendants alleged is that there was an implied term of the agreement between Najjar SAS and Beamer that the obligation to make the monthly payment to Beamer, or alternatively the agreement itself, would only subsist for so long as Star Lodge remained in possession of the premises so as to be in a position to earn a profit from the business. In closing address, Beamer's counsel sensibly conceded the existence of such an implied term.

546 Little time was spent during the trial addressing the supplementary agreement and the consequences of any breach.

547 As already discussed, Najjar SAS paid Beamer $10,000 on 6 August, in full and final settlement of the July monthly payment. It made no further payments under the supplementary agreement. Counsel for the Najjar defendants conceded that Najjar SAS would be liable to pay two weeks' payment for the period up to 14 August 1998. Whilst he did not formally appear on behalf of Najjar SAS, I agree that Mr Collinson's concession reflects the appropriate legal characterisation of Beamer's entitlement under the supplementary agreement.

548 It is pleaded that Louis Moutidis represented to Sam Najjar that "the business was profitable". The particulars of that representation are as follows:

"9.1 The representation that the business was profitable was oral and was made by [Louis] on his own behalf and further or alternatively, on behalf of [Kimis], to [Najjar] on behalf of [Najjar SAS].

9.1.1 Commencing in or about February 1998, Louis told Najjar that the business was a good and successful cash business and a profitable business. Louis took Najjar in his car and showed him building sites which Louis said he was developing from monies generated by the business. Louis said that if Najjar bought half the business, then he too would have the money to do developments like that together with Louis.

9.1.2 In or about May or June 1998, while sitting at the Hollywood Café in Bridge Road, Richmond, Louis said to Najjar, while discussing the business with him, that 100 rooms at $80 each per week gives $8,000 and that therefore, the minimum return on full capacity would be $8,000. Louis then said that on those figures, the business should turn over annually more than $400,000. Louis then multiplied the $8,000 by four to give $36,000 as the monthly receipt. Najjar said words to the effect "what expenses are you going to get per month?" Louis said to the effect "$1,000 for electricity, $1,000 for gas, rates and the rent." Louis then said "throw in another $2,000 for other expenses." Louis said to the effect "with the money that could be put aside, we will soon be building stuff for you and stuff for us.""

549 The profitability representation is said to be untrue in the following respects:

(a) The business was not profitable as it was not generating sufficient income to pay operating expenses;

(b) Kimis failed to disclose to the Najjar plaintiffs that:

(ii) The lease tenure was susceptible to termination by Hidek;

(iii) Telephone, gas, linen and rubbish removal accounts had not been paid. The telephone was cut off and there was a threat to disconnect the gas supply;

(iv) The business made a loss for the period from 18 December 1997 to 31 May 1998.

550 It is pleaded that Louis Moutidis represented to Sam Najjar that the business was "operating satisfactorily". Initially, this representation was said to be implied from the statements which also give rise to the profitability and market value representations. During the trial, the Najjar claim was amended to plead that the representation was made expressly by Louis Moutidis to Sam Najjar on a date between April and June 1998.

551 It is pleaded that the business was not operating satisfactorily and Kimis failed to disclose to the Najjar plaintiffs that:

(a) No proper maintenance of fire fighting equipment had been carried out which jeopardised the registration of the business; and

(b) A number of orders and directions made by the council and the MFB to carry out certain expensive remedial works to the premises were outstanding which jeopardised the registration of the business.

552 Louis Moutidis is alleged to have represented to Sam Najjar that the market value of a half share of the business was $100,000. This representation is said to have been oral and made by Louis Moutidis in or about early June 1998, during a conversation in which Louis Moutidis told Sam Najjar that the business had a market value of $200,000 and the market value of the Najjar share would be $100,000. Louis Moutidis said that the business was worth at least that, because only a year or two earlier Kimis had sold Staffa House, being a smaller but cleaner facility, for $350,000.

553 The Najjar plaintiffs allege that the market value of a half share of the business was not $100,000. They say its value was nil, because it was not profitable and not operating satisfactorily.

554 Finally, it is pleaded that the Moutidis defendants represented that the disputed chattels were owned by Kimis. Initially it was pleaded that the representation was to be implied from general condition 1 of the sale contract. During the trial, an amendment was made to allege that Sam Najjar prepared a handwritten inventory of chattels for inclusion in the contract of sale in accordance with oral instructions given by Louis Moutidis.

555 This representation is said to be untrue in that many of the disputed chattels (including the cool room, chattels in the TV room and dining room, and many of the chairs and beds in the residents' rooms) were in fact owned by Hidek and not Kimis.

556 The Najjar claim also pleads that Najjar SAS had a reasonable expectation that the Moutidis defendants would disclose to them that the business was not generating sufficient income to pay operating expenses, that no proper maintenance of fire fighting equipment had been carried out and there were outstanding council, DHS and MFB orders which jeopardised the registration of the business.

557 The reasonable expectation is alleged to arise from the fact that:

(a) The representations, by implication, carried with them the representation that there were no other significant facts which had not been disclosed;

(b) The Moutidis defendants knew or ought to have known that unless they disclosed the facts, then Najjar SAS or any other purchaser of the business would not become or was not likely to become aware of those facts.

558 It is not clear whether this is effectively an allegation of a further representation by silence or how the pleading is put. In any event, the "reasonable expectations" claim was not addressed in submissions and was effectively abandoned by the Najjar plaintiffs.

559 The Najjar plaintiffs plead that Hidek re-entered the premises and discharged the lease for Star Lodge's breach, thereby rendering the value of the business and hence the value of the units worthless. The Najjar plaintiffs' loss is said to be the sum of $100,000 which Najjar SAS paid to purchase the units.

560 Sam Najjar could not remember the exact words which were used, but Louis Moutidis told him that the business generated a very good cash flow and he would never be short of cash. He said these comments were made in March or April 1998. Mr Najjar referred several times to the fact that whenever he saw the Moutidises, they always seemed to have plenty of cash. Of course, having a good cash flow and being profitable are not necessarily synonymous.

561 Mr Najjar also gave evidence of earlier discussions with Louis Moutidis, in which Louis told him "what he predicted he was going to be making out of the Footscray business." The flavour of this evidence was very much that of a prediction of future returns, not a statement as to current profitability.

562 Around May 1998, Mr Najjar alleged that he had the following conversation with Louis Moutidis at the Hollywood Café in Richmond.

"Because I was asking Louis about figures and he said 'It's very easy. You know, it's not about - it's not really about figures, you know, it's about what kind of cash you have in your pocket' and he said 'Worst case scenario, take out the rent which is $8,000-odd, take out electricity' ---

When you say '$8,000', per month or ---? Per month. So he said 'That's about $2,500 a week. Take out gas. What can the maximum of gas be? Could it be more than $1,000 a month?' and I said 'I don't know. What's coming in at the moment?' and he said 'We haven't started receiving bills but it would be about $1,000 a month' and he said 'Gas would probably be the same and rates', he also broke down in regards to rates. He just started breaking things down and said "100 rooms, 80 people, that's $8,000 a week. Times it by four, $36,000. Times it by 12, it's nearly $400,000 you know. What's the worst you can pay?' So that looked attractive to me. But the way I've always seen Louis, he's always cashed up. I go to the business and I see Sophie always cashed up."

563 Louis Moutidis agreed that he had been to the Hollywood Café on many occasions, and may have been there with Sam Najjar in May or June 1998, but denied ever discussing the business there. Initially, he was adamant that he never gave Sam Najjar any figures for the business. However, he eventually conceded that he may on some occasion have said that the business should have an annual turnover of around $400,000, that electricity and gas would be about $1,000 each per month, and he should allow around $2,000 per month for other expenses.

564 There is no significant difference in the figures which Louis Moutidis and Sam Najjar say were discussed between them, even if there is disagreement as to where the discussion occurred. It seems likely that Mr Najjar is mistaken in thinking that this discussion occurred as late as May; by that time, Kimis would have been receiving utilities accounts for more than 6 months. If one accepts Mr Najjar's version of the conversation, it presumably occurred in late 1997 or very early 1998. Even on Mr Najjar's version of the conversation, it was a fairly rough and ready sort of projection as to what the figures might look like, not a representation as to actual performance or profitability.

565 Louis Moutidis agreed that he told Sam Najjar that "it was a good and successful cash business" and "a profitable business". He could not be specific about when he said that, save that it was before April 1998, which was when Mr Najjar started working full-time at the business.

566 Having regard to this concession, I find that Louis Moutidis did represent to Sam Najjar some time prior to April 1998 that the business was profitable. However, the Najjar plaintiffs have not pleaded that any representation was made as to a specific level of profitability.

567 The Najjar plaintiffs bear the onus of proving that the profitability representation was false at the time it was made.

568 Falsity is said to be established by a number of specific matters, as well as by general assertions that the business made a loss for the period from 18 December 1997 to 31 May 1998 and was not generating sufficient income to pay operating expenses. I will consider the specific matters first.

569 I am satisfied that, as at July 1998, telephone, gas, linen and rubbish removal accounts had not been paid. It is not clear on the evidence for how long those accounts had been unpaid or whether they were unpaid at the time of the making of the profitability representation. Even if they were unpaid at the relevant time before April 1998, that does not establish that the business was not profitable. There are other reasons for the non-payment of those accounts (assuming they were in fact unpaid at the relevant time). I accept that the Moutidises were pouring income from the business into their construction projects. The Moutidises were also clearly in the habit of paying bills late, not necessarily connected with the profitability of the business.

570 The Najjar plaintiffs also allege that falsity can be established by the fact that rental and rates were in arrears and the lease tenure was susceptible to termination by Hidek. As with the other accounts, they have not established what, if any, rental and rates were outstanding at the time of the representation. Nor have they established that lack of profitability, rather than some other factor, was the reason behind any such outstanding accounts. Finally, even if the Najjar plaintiffs had established that the lease was susceptible to termination at the time of the representation (which they have not), that fact would not of itself establish that the business was not profitable.

571 I turn then to consider the more general questions of profitability. One of the problems the Najjar plaintiffs faced was that Kimis has never prepared or filed a tax return in respect of the 1998 financial year. Kimis' explanation for failing to do so was that it did not have all the necessary documents. In addition, the business had only commenced at the end of 1997, so there are no financial accounts for the business from previous years.

572 There was evidence before the court as to the income from the business during the relevant financial period. The business earned the following income in the first half of 1998: $19,500 in January, $22,260 in February, $15,473 in March, $26,438 in April, $39,813 in May and $38,619 in June. Unfortunately, ascertaining the expenses of the business during that period is more problematic.

573 The Moutidises gave evidence that most of the documents relevant to Kimis' expenses had been left in a box at the premises when Star Lodge took over the business in July 1998. They did not expect to be kicked out, so did not remove their documents at that time. Sam Najjar denied that that was so. There is no independent evidence to support either of the Najjar or Moutidis versions, and each is inherently plausible. As is apparent from other findings made in these reasons, the Moutidises and Sam Najjar were unreliable witnesses in various respects. I am not able to prefer one version over the other. Whatever the truth may be, it is simply not possible to calculate Kimis' actual expenses from documents before the court.

574 The position in relation to the expenses documents was further complicated by undoubted problems that had arisen in relation to discovery by the Moutidis defendants. Kimis' initial discovery was clearly deficient in a number of respects. In October 2003, the Najjar plaintiffs sought the production of various financial records of Kimis from September 1997 until 30 June 1998. At the hearing before Justice Redlich which commenced on 28 October 2003, counsel for Kimis announced that no such documents were produced. The hearing was re-listed for 11 May 2004. On 10 May 2004, Kimis' then solicitors advised of the existence of receipt books and financial documents which had recently been located ("the cellar documents"). The cellar documents were formally discovered on 20 May 2004. That late discovery led to orders being made for the trial to be adjourned again.

575 Mr Collinson spent much time cross-examining the Moutidises as to the cellar documents, which the Moutidises said had been located by chance under the Moutidis' house. Louis Moutidis said they had been located whilst they were looking for other documents. Mrs Moutidis said they were located during a yearly clean out. The possibility that documents were misplaced under the house and not located for some time is consistent with the Moutidises' attitude towards paperwork. At the end of the day, I do not need to make any findings about the circumstances in which the cellar documents were located.

576 I cannot infer from the evidence before me that the Moutidises have deliberately withheld from the court the documents which would show Kimis' actual expenses.

577 Absent any evidence as to the actual expenditure of the business during the relevant period, the Najjar plaintiffs called Mr Dicks as an expert witness, to try to reconstruct the financial position of Kimis in the 1998 financial year, so as to assess both the market value and profitability of the business.

578 Mr Dicks prepared two reports, dated 20 July and 1 September 2004 respectively. He had regard to Kimis' income figures in the 1998 financial year, and Western Lodge's expenses for the following year, and made certain assumptions which will be considered shortly. Mr Dicks quite properly pointed out that, based on the limited documentation available to him, he could not with any certainty determine the profitability of the business. In both reports he concluded with what he described as an "indicative assessment", based on the limited documentation and assumptions, namely that Kimis would not have made a profit as at 30 April 1998 or 31 May 1998. In his first report he estimated the losses of the business as $17,508 to 30 April 1998 and $9,901 to 31 May 1998. In his second report, he revised those estimates having regard to certain changes made to Western Lodge's 1999 accounts, being a depreciation charge and the treatment of a loan liability. His revised estimates of loss were $16,804 to 30 April 1998 and $9,037 to 31 May 1998.

579 One very important assumption upon which Mr Dicks proceeded was that the expenses of Western Lodge were indicative of the expenses of the business when it was run by Kimis. Unfortunately, evidence was simply not led such as would enable me to conclude that that was the case. For example, the evidence did not address whether key cost items such as staffing or repairs and maintenance were comparable under the different owners and in different periods.

580 Even if it had been established that the expenses under Kimis and Western Lodge were relevantly comparable, Mr Dicks proceeded on another assumption which I do not believe was made out. He assumed that Western Lodge's financial statements were an accurate reflection of Western Lodge's income and expenditure for the 1999 financial year. Based on the evidence of Mr Jiminez and his accountant, Mr Nahas[77], I have serious doubts about the accuracy of Western Lodge's financial statements, in so far as they appear to understate profits.

581 For these reasons, the Najjar plaintiffs have not satisfied me on the balance of probabilities that the business was not profitable at the time of the profitability representation.

582 Counsel for the Najjar plaintiffs opened the case consistently with the pleadings as they then were. That is to say, Mr Collinson relied only upon an implied representation and expressly disavowed any express representation.

583 In so far as this representation is alleged to be implied from the statements which gave rise to the profitability and market value representations, it must fail. As discussed below, there is simply no evidence that the market value representation was made at all. Nor is it apparent why one would imply into the statement that the business was profitable a representation that it was operating satisfactorily in the sense alleged by the Najjar plaintiffs.

584 The Najjar claim was amended to refer to an express representation, after Mr Moutidis agreed in cross-examination that he told Mr Najjar on a number of occasions between April and June 1998 that the business was operating satisfactorily. Whilst I find that such a representation was made, the fact that Mr Najjar gave no evidence of any such representation being made to him is relevant to the question of reliance.

585 The only particulars of falsity in the Najjar claim relate to inadequate maintenance of fire fighting equipment, and the existence of council and MFB orders to carry out remedial works, all of which are said to have jeopardised the registration of the business.[78]

586 Although Paul Gibcus from the council conducted his essential services inspection on 31 March 1998, the ESR was not prepared until 2 July 1998 and not served until later that month. There is no evidence that Mr Gibcus communicated his concerns to Louis Moutidis or anybody else at the premises prior to July 1998. I find that there was no council order or direction in place at the time of any relevant representation.

587 The MFB notice was prepared following the inspection on 26 May 1998.

588 Martin McNeill and Shane Gore were the two MFB officers who conducted the inspection on 26 May. When they arrived at the premises, they were met by "Lou Moutidis", who they understood to be the manager. They walked around the premises, working their way through the fire safety maintenance checklist. Mr McNeill said they told Mr Moutidis that the exit doors and some other items on the checklist had to be attended to immediately. Mr Moutidis told them he would look into it as soon as possible. Mr McNeill and Mr Gore said that nobody else was with the three of them whilst they were discussing those items or when they first saw Mr Moutidis. Notwithstanding the hundreds of fire inspections that they have performed since then, Mr McNeill in particular, was clear that nobody other than Mr Moutidis had been present and he did not see Mr Najjar there that day.

589 Louis Moutidis said that Mr Najjar was present when he received the MFB notice. He says he told Mr Najjar "This is not a big thing, big orders or dangerous order. We can fix this. They gave me 60 days to fix it." Mr Moutidis agreed that he did "not much" in response to the MFB notice and said that Mr Najjar did not express much concern. If Mr Moutidis told Mr Najjar that he had been given 60 days to fix it that was false.

590 However, Mr Najjar denied being present when this inspection occurred and said that he first saw a copy of the MFB notice on 12 August 1998. Mr Najjar did concede that according to the receipt book, he attended the premises on the day of the MFB inspection.

591 In this case, Mr Najjar's evidence should be preferred as it is supported by the independent evidence of Mr McNeill and Mr Gore who were clear that they did not meet Mr Najjar during their inspection of the building.

592 I find that this representation was false only in so far as it was made after 26 May.

593 GEM suspended the weekly testing of the fire sprinkler system on 17 June 1998 and only agreed to start re-testing on 3 August 1998 after Mr Najjar paid in advance for 12 months. In so far as the representation was made prior to 17 June, it was not false in relation to the fire sprinkler system, as the system was being adequately maintained prior to that date. Mr Najjar admitted in evidence in chief that he himself called GEM on 17 June to find out why they had stopped servicing the premises. From that time onwards, he was aware that the system was not being checked on a weekly basis. He did not rely on any misrepresentation in relation to the sprinkler system.

594 There is simply no evidence that a representation was made in or about June 1998 in the terms alleged by the Najjar plaintiffs, namely, that the market value of a half share of the business was $100,000.

595 I am satisfied that $100,000 was the agreed price which was struck by reference to the parties' respective commercial positions and not by reference to any concept of market or objective value. It is clear that throughout the first half of 1998 the Moutidis interests, including Kimis, needed cash. As mentioned earlier, the Moutidises knew that Mr Najjar could only raise $100,000, because of previous discussions when he was interested in buying into the Staffa House business.

596 It is therefore not necessary for me to consider any evidence as to what the market value of the business might have been at that time.

597 The original contracts of sale relied upon by Beamer and the Najjar defendants differ in one material respect. The document relied upon by the Najjar defendants contains a typed inventory of chattels at the end of the document ("disputed inventory"). According to the Moutidises, the disputed inventory was not attached to the contract of sale which they signed.

598 It is pleaded that the Moutidis defendants represented that the chattels in the disputed inventory were owned by Kimis. Initially it was pleaded that the representation was to be implied from general condition 1 of the sale contract. However, general condition 1 does not take the matter anywhere. It does not refer to the disputed inventory or prove that it was attached to the executed contract. During the trial, an amendment was made to allege that Sam Najjar prepared a handwritten inventory of chattels for inclusion in the contract of sale in accordance with oral instructions given by Louis Moutidis ("the handwritten inventory"). It was alleged that the handwritten inventory formed the basis of the disputed inventory.

599 This representation is said to be untrue in that many of the chattels on the disputed inventory (including the cool room, chattels in the TV room and dining room, and many of the chairs and beds in the residents' rooms) were in fact owned by Hidek and not Kimis.

600 However, before turning to questions of falsity, it is necessary to determine whether in fact the representation was ever made. Was the disputed inventory prepared in the manner alleged by the Najjar plaintiffs? If so, was it attached to the contract of sale executed by Kimis and Star Lodge?

601 There is a dispute as to how the handwritten inventory was prepared. Mr Najjar said it was prepared in the presence of Mr Moutidis, whilst the two men undertook what was effectively a stock-take of chattels at the premises. On the other hand, Mr Moutidis denied participating in such an exercise or having seen the document before.

602 Mr Najjar's evidence was that he wrote the handwritten inventory whilst he and Louis Moutidis were walking around the premises writing down what Kimis had actually bought by way of beds, tables, chairs, kitchen items such as cutlery, the cool room, microwaves, ovens and "other bits and pieces".

603 Mr Najjar said that as they went around the premises, Mr Moutidis would call things out and Mr Najjar would write them down. Whatever was in each room was included on the handwritten inventory, with the exception of broken down tables, chairs and couches and other bits and pieces which were going to be thrown out. Mr Moutidis was with him when they recorded items such as the washing machines, dryers, cool room and kitchen items. According to Mr Najjar, he then asked "What do I have to do? Go into all the rooms" and Mr Moutidis replied "No, just write down 100 chairs, 100 beds, 80 single beds because there are 80 rooms which are single and whatever the rest of the rooms which are double". If Mr Najjar's evidence is accepted, it is evident that a stock-take of the residents' bedrooms was not done physically, but rather was an approximation by Louis Moutidis of what was present in those rooms.

604 Mr Najjar did not say and was not asked when this exercise occurred. After preparing the handwritten inventory, Mr Najjar gave it to his solicitor, Peter Cohen. All of the handwriting on the handwritten inventory is Mr Najjar's, with the exception of the capitalised headings for each room, which he thought was his solicitor's handwriting.

605 Louis Moutidis said that he had never seen the handwritten inventory and did not recognise the handwriting on the document. He denied that he ever went around the premises with Mr Najjar working out which chattels were going to be acquired by Star Lodge from Kimis.

606 A comparison of the handwritten inventory and the disputed inventory shows that they are identical in substance, and almost identical in form. Exactly the same chattels are listed on both inventories. However, in the disputed inventory they have been moved into a different order and appear under more appropriate headings. In my view, this lends strong support to the inference that the typed inventory was prepared from the handwritten version. Peter Cohen drafted the contract of sale, to which he clearly envisaged that a list of chattels would be attached. Page 10 of the contract of sale lists three schedules, the first of which is described as follows:

607 In the circumstances, I accept as more credible Mr Najjar's evidence that he prepared and gave the handwritten inventory to Mr Cohen, who then used it as the basis for preparing the disputed inventory. However, the evidence does not allow me to reach any conclusion as to when the handwritten or disputed inventories were prepared, save to infer that it would have been some time before 1 July 1998.

Was the disputed inventory attached to the contract of sale?

608 Mr Najjar said that the first time he saw the contract of sale was when he went by himself to Peter Cohen's office on or about 1 July 1998. Although the contract of sale had been discussed before then, this was the first time that Mr Najjar had actually seen it. He remembered seeing three unexecuted copies of the contract of sale, which he took and later gave to Louis Moutidis to have them signed by his sons. Mr Najjar could not remember whether he gave the contracts of sale to Mr Moutidis at the premises or at Mr Mitsios' office.

609 Mr Najjar saw Mr Moutidis with the three contracts at Mr Mitsios' office on the morning of 3 July 1998. Only Louis Moutidis, Mr Mitsios and Mr Najjar were present at the time. The company seals of Kimis had already been applied, next to what appeared to be the signatures of George and Kim Moutidis. Mr Najjar signed the contract then and there. Mr Najjar said he took either two or three copies of the contract back to Peter Cohen's office.

610 Mr Mitsios agreed that Peter Cohen had drawn up the contract of sale and Mr Najjar had brought copies of the contract of sale to Mr Mitsios' office. Mr Mitsios did not recall whether the contract of sale was executed in his office. He also could not remember whether or not the disputed inventory was attached to the contract of sale when he saw it. His evidence was simply neutral in this regard.

611 George Moutidis could not remember seeing the contract of sale in any form and said that the signatures on the original contract of sale tendered by Beamer were not his. Curiously, this was not the only document which bore a signature which one or more members of his own family said they saw him sign, yet which George categorically denied was his signature.[79] I can only infer one of two things from these circumstances - either George is lying or seriously mistaken, or the relevant family member is lying or seriously mistaken (and possibly was also involved in forging George's signature). Neither inference is a helpful one for Kimis or the Moutidises.

612 Louis Moutidis said that he was present when the contract of sale was executed by George and Kim Moutidis at the Moutidis home. He identified the signatures on a version of contract of sale which included the disputed inventory as those of his sons, George and Kim. However, he was adamant that the disputed inventory was not on the document when his sons signed it and was "never given to us" with the contract of sale.

613 In the court books prepared for and used at trial, the disputed inventory was located at page 220, at the end of the contract of sale. In her witness statement, Mrs Moutidis had said that:

"Pursuant to the Sale of Business Contract Kimis also sold to Star Lodge the chattels as set out in the inventory (p.220) accompanying the contract document."

614 In oral evidence, Mrs Moutidis at first agreed that her witness statement had indeed referred in those terms to the disputed inventory at page 220 of the court book. She then switched - somewhat unconvincingly - to asserting that the first time she had ever seen the disputed inventory in her entire life was when it was shown to her during cross-examination. The reason for the discrepancy in her evidence was not explained.

615 Mr Dedek's evidence supports Mr Najjar's version of events. He did not see the contract of sale at the time it was prepared or executed. However, he gave evidence of attending the premises later in July and asking Mr Najjar who the new owner was. Sam Najjar replied "Oh you don't know, I purchased the business." Mr Dedek asked whether there were any purchase contracts and Mr Najjar proceeded to show him a contract of sale which include the disputed inventory. At that point Mr Dedek informed Mr Najjar that the chattels on the disputed inventory belonged to Hidek.

616 The Moutidis evidence about the disputed inventory and the contract of sale was contradictory and most unsatisfactory. The Najjar and Dedek evidence was consistent, plausible, not seriously challenged in cross-examination and inherently more probable. Accordingly, I am satisfied that the disputed inventory was attached to and formed part of the executed contract of sale.

617 It follows that I find that the chattels representation was made, at least in the disputed inventory attached to the contract of sale. I also accept Mr Najjar's evidence that he and Louis Moutidis undertook the stock-take exercise described earlier, but am unable to make any finding as to when that occurred, save that it was before 1 July 1998. The failure to establish even an approximate date for any oral representation by Louis Moutidis may cause problems for the Najjar plaintiffs in relation to the question of reliance.

618 The contents of the disputed inventory are described in the following terms. General: Washing Machine - Clean America Commercial Washer, Dryer - General Electric Commercial Dryer, Cool Room, 1 x Sharp Fax, 2 x TVs - Black & White, 3 x TVs - Colour, Unicom Intercom System: TV Room: 3 Tables, 4 Large 3 seater chairs, 6 Chairs; Dining Room: 6 Dining Tables, 55 Chairs; Kitchen: 1 x Goldstein 6 Burners Oven, 1 x Microwave, 2 x Freezers, 3 x Toasters, 2 x Electric Kettles, 1 x Urn, 1 x Gorenje Pacific Fridge, Plates 100, Bowls 80, Coffee Cups 90, Assorted Cutlery 350; Residents Rooms: 100 Chairs, 80 Single Beds, 40 Double Beds.

619 The evidence as to what chattels were purchased and by whom was most unsatisfactory in a number of respects. The parties could not even agree on the state of the premises and which chattels were on the premises when Kimis commenced the business.

620 It is not necessary for me to describe the disputed evidence as to who did precisely what renovation or repair work to the premises and when. My impression is that both the Dedeks and the Moutidises exaggerated the amount of work that they had done and underestimated the amount the other had done, by way of repairs and renovations. I reach the same general conclusion in relation to their evidence as to who had acquired what chattels.

621 Mr Powell had "a rough idea" of what was left behind when Woodbury Way vacated the premises in May 1997. In his recollection it was "mainly the larger stuff". For instance, the equipment in the kitchen was left behind. He said that Woodbury Way left more than 10 but less than 100 blankets and mattresses, a considerable quantity of chairs, a fridge and a chest freezer. Mr Powell agreed that the cool room was Mr Dedek's property. He also said the oven was there when Woodbury Way took the business over and Woodbury Way bought and left a large electric hotplate for the kitchen.

622 The Kimis lease imposed an obligation to keep all "chattels" referred to in the schedule in good repair.[80] The schedule referred to the following "CHATTELS: All fixed floor coverings, light fittings, fans, cool room, heating units, hot water services, fire equipment and sprinkler system, window furnishing and furniture and fittings installed by the Lessor." That does not help in identifying specific furniture.

623 According to Mr Dedek, a further page headed "Additional list of chattel" also formed part of the Kimis lease ("the additional chattels list"). The additional chattels list does not resemble either the handwritten or the disputed inventories. Unfortunately, a copy of the Kimis lease with the additional chattels list was only tendered very late in the trial and the Moutidises were not shown it or asked about it. The version of the Kimis lease which had been tendered and relied upon by all parties up until that time had no such list. Furthermore, Mr Najjar's evidence was that the copy of the Kimis lease that he took to his solicitor did not have a list of chattels attached to it.

624 Mr Dedek said that the additional chattels list contained furniture and other items which he had bought from the Alfred Hospital and left on the premises when Kimis took over. This included 196 chairs which had been stamped "Alfred Hospital" or "hospital equipment" and underneath which a rectangular sticker had been placed. He said most of the curtains had a big stamp in the corner with "Alfred Hospital" on them. He could not remember if anything else had such a stamp on it. He did not say how much he paid for these items. Unfortunately, this allegation was not opened on by counsel for the Najjar defendants or put to any of the Moutidises. Nor did Sam Najjar identify equipment by reference to any such stamps.

625 Of course, Hidek had no interest in the Najjar proceeding, and therefore there was no obligation on its counsel to put the evidence about the Alfred Hospital chattels and the additional chattels list to the Moutidises. Even if counsel for the Najjar plaintiffs had not been aware that Mr Dedek would give this evidence, it would be unfair to allow the Najjar plaintiffs to rely on such potentially harmful evidence without having put it to the Moutidises for them to respond to. It would also be inconsistent with Mr Najjar's own evidence that there was no list of chattels attached to the Kimis lease.

626 The option agreement between Kimis and Hidek provided that in the event that the freehold of the premises was not bought and Kimis sold the business, Kimis would pay $20,000 to Hidek for the furniture on the premises owned by Hidek. There is no list of chattels included in the option agreement, so this does not assist in identifying specific chattels belonging to Hidek.

627 Mrs Dedek's evidence was only in general terms, namely that the Moutidises would not have had to go out and buy many items to run the business.

628 The Moutidises painted a very different picture of the situation when Kimis took over. They said that building repairs and renovations were complemented by a refurbishment of each bedroom. Pillows, blankets, bedspreads, curtains and, where necessary, mattresses were purchased for each room. New beds were bought for all except about 20 of the rooms. Louis Moutidis said that when Kimis took over, the premises contained an oven, a non-functional cool room, some dining room tables, 10 to 15 beds and approximately 20 chairs. He said Kimis bought the rest of the furniture. Mr Moutidis said that most of the chattels on the disputed inventory were owned by Kimis, although a small number of them may have belonged to Hidek.[81]

629 Sophie Moutidis gave evidence that they were able to keep 15 to 20 beds, 5 to 10 mattresses and about 40 wardrobes when Kimis moved in. Mattresses and wardrobes are not listed in the disputed inventory. She said that Kimis purchased about 40 chairs for the premises and two or three different style chairs and couches for the TV room. She could not remember whether televisions had to be purchased. Sophie Moutidis said that no chairs were bought for the dining room. In relation to the beds and bedding which had been left by Hidek, Sophie Moutidis said that half of it was not worth using and had to be disposed of. Kimis paid a lot of money to buy the industrial washing machine and dryer. She also said there were not enough cutlery, saucepans and plates when Kimis took over the premises, so they had bought them.

630 Some inconclusive evidence was also given as to what chattels were taken over by Western Lodge in December 1998. Ultimately it did not assist in resolving the question of what chattels were on the premises on 1 July 1998 or who owned them.

631 The biggest problem faced by the Najjar plaintiffs in establishing falsity of the representation is in identifying specific chattels and proving that they did not belong to Kimis. Most of the chattel descriptions are so general as to be unhelpful in this regard, for example, generic references to tables, chairs, beds and many kitchen items. It is common ground that the cool room did not belong to Kimis and therefore could not be sold to Star Lodge.[82] I also accept that some of the furniture on the disputed inventory belonged to Hidek, such as some of the dining room tables and chairs, but am unable to make findings as to specific items other than the cool room. Conversely, I accept that many of the items on the disputed inventory did indeed belong to Kimis, but am unable to conclude precisely which ones.

632 Accordingly, I find that the chattels representation was false in relation to the cool room and less than half of the dining room tables and chairs. The only evidence I have as to the value of those items which belonged to Hidek is that it is considerably less than $20,000; precisely how much less, I simply cannot say.

633 Before considering the question of reliance, it is helpful to summarise my findings as to which misrepresentations were made. I have found that the profitability representation was made, but falsity has not been established. The market representation was not made. The representation as to satisfactory operation was made, but was false (if at all) - depending on when it was made - to a minor extent. The chattels representation was made and was false in relation to some chattels.

634 For the reasons which follow, I do not accept that when Najjar SAS paid $100,000 on 3 July 1998 to acquire units in the Star Lodge trust, it did so in reliance on the two misrepresentations.

635 It is clear that Sam Najjar was very keen to become some sort of businessman. He had originally wanted to buy an interest in the Staffa House business, but that had fallen through. Sam Najjar was not working full time when he first met Sophie and Louis Moutidis at the premises; it appears he may have finished full time work in the previous year, when he had been interested in Staffa House. His only income in late 1997 and early 1998 was from casual work delivering pizzas. When the Moutidises offered him a chance to acquire an interest in the business, he jumped at it.

636 There were no formal negotiations between the parties. The deal to sell a half share in the business for $100,000 was struck around January 1998 and the price never changed thereafter. Najjar SAS and the Najjar trust were set up in January 1998, because Mr Najjar had decided to buy into the business by that time. Sam Najjar said he was happy to be going into business with the Moutidises, as he classed them as "very, very good friends".

637 The formal ownership structure was not considered until Mr Mitsios was consulted some months later. The corporate structure was a formality and played no role in the parties' decision-making.

638 Sam Najjar started attending the premises regularly by December 1997. By about April 1998, he was attending on a daily basis, working in the office. He was working long hours, between 4 and 7 days per week. There was a dispute as to whether or not Sam Najjar was paid for that work. The Moutidises said that he received $600 cash per week throughout that period. Sam Najjar denied that he was paid anything for that work. There is no documentary or other evidence to support either side. It is not necessary for me to resolve that dispute. Whether or not he was paid for the work, it is undoubtedly the case that Sam Najjar was working regularly at the premises from April onwards.

639 It is clear that Sam Najjar was anxious to get into the business and was pushing Louis Moutidis to settle before 1 July 1998. It seems that 1 July was chosen because it was the start of the new financial year.

640 Commercially inexperienced and uneducated as he was, there is no evidence that Mr Najjar asked or had any particular queries or concerns about the operations of the business, either before he made the decision to buy into it, or before Najjar SAS invested its money. Nor is there any evidence that his solicitor served any requisitions or sought any information from any of the Moutidis entities.

641 I have found that the "operating satisfactorily" representation was made, based on Mr Moutidis' admission that he had made it on several occasions between April and June 1998. However, Mr Najjar gave no evidence of in fact relying on any such representation.

642 Further, I have found that this representation was false, if at all, only in relation to the MFB notice of 26 May 1998. It has not been established that the representation was made on any particular occasion after 26 May. That notice had not been complied with by 1 July. Even had he been shown or told about the notice, I am not satisfied that it would in fact have concerned Mr Najjar or had any effect on his decision to go ahead with the deal.

643 In relation to the chattels representation, the Najjar plaintiffs have not established when the stock-take occurred or that it had the slightest impact on their decision- making. It may well be that it only occurred in the last few days of June, presumably after Mr Cohen asked Mr Najjar for a list to attach to the contract of sale. Nor is there any evidence that Sam Najjar was remotely concerned to ensure that the disputed inventory or indeed any list of chattels was attached to the contract of sale.

644 In response to a specific question from Mr Collinson at the end of his evidence in chief, Mr Najjar said that he probably would not have bought or gone into the business if he had known that most of the chattels on the disputed inventory list were owned by Hidek rather than by Kimis. The question was asked on a premise which has not been made out. I am not satisfied that "most" of the chattels were owned by Hidek; the cool room certainly was, as were less than half of the dining room chairs and tables. Falsity has not been established in relation to any other chattels. Nor have the Najjar plaintiffs established what value those few Hidek chattels had.[83]

645 Considering the evidence overall, I agree with Mr Hevey's characterisation of Mr Najjar, namely that he was paying $100,000 to be a business owner, "not to buy 20 chairs or a cool room".

646 For these reasons, I conclude that the Najjar plaintiffs did not rely in the relevant sense on either of the misrepresentations.

647 Given all of the above, it is not necessary for me to make any findings in relation to loss and damage flowing from any misrepresentation.

648 Had it been necessary to consider this question, the Najjar plaintiffs had a number of hurdles to overcome in proving and quantifying their damages. One such hurdle is the fact that, after Hidek terminated the Star Lodge lease, Sam Najjar and/or Najjar SAS took the benefit of the whole business and the right to occupy the premises; that is to say, he or they got the entire business for the price Najjar SAS had paid for one half of it. Then, by December 1998, Sam Najjar had decided to give the business to Manuel Jiminez "for nothing", because he no longer wanted the business and all the worry that went with it. That may have been relevant to questions of mitigation. Finally, there is the problem caused by the fact that since December 1998, Western Lodge has continued to pay $1,000 per month off Sam Najjar's mortgage.

649 The unexpected failure to call a witness may, in appropriate circumstances, lead to an inference that the uncalled material would not have assisted that party. This is referred to as the principle in Jones v Dunkel.[84]

650 The principle in Jones v Dunkel may apply to both parties, if a witness might be expected to have been called by both. In that case, the operation of the principle is not that the failure of one party excuses the failure of the other, but that the competing inferences that the uncalled evidence would not have assisted either side arise, and the trier of fact must consider the evidence which is before it in the light of those inferences.[85]

651 At various stages during the trial it was suggested that adverse inferences could be drawn in relation to the failure to call Wayne Cuthbertson, one of the staff employed at the premises, and Peter Cohen, the solicitor for Sam Najjar and Manuel Jiminez and their companies.

652 Wayne Cuthbertson was present at a number of important events, including meetings in late July and August with council officers and meetings between the Moutidises and Sam Najjar in early August; most critically, he was said to have been present when Mr Dedek served the re-entry notice and subsequently appointed Mr Najjar as his agent on 14 August. Mr Cuthbertson could have been expected to have given relevant and important evidence as to what was said and done and who was present on these occasions.

653 The Najjar defendants and Beamer each argued that Mr Cuthbertson ought to be perceived as being firmly in the other's "camp".

654 At the start of the trial, Mr Cuthbertson would certainly have been placed in the Beamer camp. On 9 January 2002, Beach J granted Beamer's ex parte application for mareva injunctions against various Jiminez defendants and the appointment of a receiver and manager to Western Lodge. In support of that application, Beamer had relied upon an affidavit of Wayne Cuthbertson.

655 Although the Cuthbertson affidavit was not before me, it was common ground that allegations in it were also responsible for those versions of the Beamer statement of claim in the Beamer proceeding which positively asserted that the default and re-entry notices had been fraudulently created on 1 September 1998. I was told that Mr Cuthbertson had also provided Beamer's lawyers with a witness statement to similar effect. In seeking leave to withdraw that positive assertion from the claim, Beamer's counsel said that Beamer would not be calling Mr Cuthbertson as a witness and could not make out the positive assertion without him.

656 Mr Cuthbertson's apparent allegiances took a sudden turn during the trial, when Mr Najjar unexpectedly produced a folder of hitherto undiscovered documents which became known as "the black folder". The black folder contained a number of important documents, including originals of the default, re-entry and police notices. Mr Najjar said that Mr Cuthbertson had given him the black folder during the course of the trial. It then transpired that Mr Najjar had met with Mr Cuthbertson on several occasions over the past weeks.

657 On the evidence before me, it would be hard to conclude that Mr Cuthbertson belonged more obviously in one camp than the other. He was in recent, voluntary contact with both Beamer and the Najjar defendants. Either side could have called him to give evidence, but chose not to. His character and credibility were maligned on several occasions from various corners of the bar table. I infer that counsel on both sides made the decision not to call him based on their assessment of how Mr Cuthbertson might perform as a witness and to what extent he might assist or harm their clients' case. I conclude that neither side thought he would have been a credible or reliable witness.

658 A Jones v Dunkel inference can only be drawn where the court can be certain that there was some evidence that could have been given and on what subject matter. I was not shown his affidavit or witness statement. Beyond knowing from what other witnesses have said that he was at a certain number of meetings and might have given evidence about what occurred at them, I do not know whether his evidence on any particular subject would have been more favourable or harmful to one side than the other.

659 Notwithstanding the heat which had been displayed from both sides of the bar table whenever Mr Cuthbertson's non-appearance was mentioned during the running of the trial, by the time we came to closing addresses Mr Collinson did not press a submission that I could draw an adverse inference against Beamer in relation to Mr Cuthbertson.

660 Beamer's counsel did argue in closing that I should draw such an inference against the Najjar defendants. When asked what specific evidence it was asserted that Mr Cuthbertson might have given, Mr Hevey said that Mr Cuthbertson ought to have explained the provenance of the black folder. When, how and from whom did Mr Cuthbertson acquire such critical documents and were there any other important documents in his possession? Whilst the provenance of the black folder is one of the many mysteries in this case, it is not sufficient to lead to any adverse inference that might impact on any relevant findings.

661 Peter Cohen was the solicitor for the Najjar defendants at all relevant periods in 1998. In my opinion, he might have been able to give evidence in relation to at least the following matters: the handwritten and disputed inventories, lodgement of the DHS transfer form, and any contact he had with Sam Najjar and Manuel Jiminez in relation to and around the time of the default and the re-entry notices. Legal professional privilege was claimed, and not challenged, in relation to a number of documents on Mr Cohen's firms' files, including three handwritten notes dated 28 or 29 July 1998.

662 Whilst Mr Collinson informed me from the bar table that Mr Cohen would not be giving evidence because he was at the Olympics, no evidence was led in this regard, in particular no evidence as to when he had left and for how long. Given that the trial ran over seven weeks, and had been listed some months in advance, in the absence of such evidence I am not prepared to find that Mr Cohen was unavailable to be called.

663 However, the principle in Jones v Dunkel does not apply where the witness not called is the party's solicitor, at least where the evidence which is in consequence not given is privileged and the privilege has not been waived. The court will not permit the destruction of the privilege by this back door.[86] In this case, the Najjar defendants did not waive any legal professional privilege. Beamer did not point to any specific, non-privileged evidence which it was asserted that Mr Cohen could have given.

664 In relation to the Moutidises' failure to call their solicitor, Peter Pryles, Mr Collinson correctly conceded that he could not ask for the Jones v Dunkel inference to be drawn in relation to that failure, given issues of privilege.

665 For these reasons, my findings are not affected by the failure to call Mr Cuthbertson or Mr Cohen.

666 In the Najjar proceeding, the Najjar plaintiffs' claim should be dismissed.

667 In the Beamer proceeding, I propose to order as follows:

(1) Najjar SAS pay the plaintiff the sum of $6,137.75 pursuant to the supplementary agreement.

668 I will hear from the parties as to the precise form of orders, including the appropriate scale or basis for any costs orders.

I certify that this and the 143 preceding pages are a true copy of the reasons for judgment of Hollingworth J of the Supreme Court of Victoria delivered on 1 July 2005.

______________________________

1. [1] In fact no evidence was led that the business had any goodwill independent of or not constituted by the lease and the certificate of registration.
2. [2] Beamer claim paragraphs 48-50.
3. [3] Beamer claim paragraphs 41-42.
4. [4] On the evidence currently before me, I am not satisfied that N54 was discovered by Mr Phillips or provided to Beamer's then solicitors, Pryles & Defteros in early 1999.
5. [5] HS Act s.3.
6. [6] The dispute related to what happened on the day that Woodbury Way finally vacated the premises. Mr Dedek accused the tenants of attempting to steal Hidek's property, smashing windows and damaging property as they left. Mrs Waugh denied any theft and accused Mr Dedek of swinging a chain around or near the head of Mr Powell, which Mr Dedek denied. The situation was clearly heated. Eventually the police were called and a "ceasefire" was negotiated.
7. [7] Although Mr Jiminez said on a number of occasions that he first met Mr Najjar in May 1998, eventually, when confronted with documentary proof, he reluctantly conceded that he had met him in January of that year and helped him set up a corporate structure.
8. [8] PLA s. 198(1).
9. [9] PLA s. 198(3).
10. [10] Mr Phillips' fax number at the time was 9846 4884. Ms Richards' fax number was 9608 8588. That explains two of the handwritten annotations at the top of N54.

[11] There was a dispute as to whether N54 was the document numbered 2 in an affidavit of documents prepared and sworn by Mr Jiminez on 11 March 1999. This dispute is really relevant only to costs.

1. [12] Mr Russell thought the visit was in June or July, and Mr Koutsantonis thought it was earlier in August.
2. [13] Demonstrated when he was asked to read certain documents in court.
3. [14] On the 14th, there was the added problem that it was dark, and there is no evidence that the front doors were illuminated externally such as might draw one's attention to the re-entry notice.
4. [15] In proceeding 7332 of 1998 ("the trustee proceeding").
5. [16] I am not in a position to determine who is responsible for all of the various delays in these proceedings. However, it is clear that Beamer has never sought expedition, and that serious defects in discovery by Moutidis entities has caused delays and one adjournment of the trial.
6. [17] In particular the e-mail from Dale Siebuhr to Andrew Fleming dated 2 September 1998 (ex B15).
7. [18] For example, it made no mention of Mr Najjar's $50,000 loan from his father, which should have been recorded as a liability.
8. [19] The term is used in DHS minutes dated 24 September.
9. [20] For example, an MFB report of 4 March 1999, a council building notice of 11 March 1999, a council building order of 2 June 1999, a council building infringement notice of 9 November 2001 and a council building notice of 14 July 2003

[21] Section 146(1) provides that:

" (1) A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice -

(a) specifying the particular breach complained of; and

(b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and

(c) in any case, requiring the lessee to make compensation in money for the breach-

and the lessee fails, within a reasonable time thereafter, or the time not being less than fourteen days fixed by the lease to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach. ..."

1. [22] Horsey Estate Limited v Steiger [1899] 2 QB 79 at 91 per Lord Russell LJ; Westbrook Holdings Pty Ltd v Roseramble Pty Ltd (1994) 13 WAR 273 at 280.
2. [23] Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404 at 413. See also Shepherd v Lomas [1963] WLR 962 at 970; Gair v Smith [1964] VicRp 107; [1964] VR 814 at 817; Jennings Industries Ltd v Commonwealth (1983) 69 FLR 189 at 209.
3. [24] Gair v Smith [1964] VicRp 107; [1964] VR 814 at 817 and Re Automotive and General Industries Ltd (Supreme Court of Victoria, Adam J, 1 May 1970, unreported) at 26.
4. [25] Dogan v Morton (1935) 35 SR (NSW) 142 at 149-150 per Davidson J; Westbrook Holdings Pty Ltd v Roseramble Pty Ltd (1994) 13 WAR 273 at 279-280.
5. [26] [1938] HCA 34; (1938) 60 CLR 336 at 361-362 per Dixon J.
6. [27] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449 at 450 per Mason CJ, Brennan, Deane and Gaudron JJ.
7. [28] Re Automotive and General Industries Ltd (Supreme Court of Victoria, unreported, Adam J, 1 May 1970) at 30.
8. [29] Hyman v Rose [1912] AC 623 at 631.
9. [30] Hyman v Rose [1912] AC 691 at 721-725 at 631 per Earl Loreburn LC (HL).
10. [31] Chan v Cresdon Pty Ltd [1989] HCA 63; (1989) 168 CLR 242 at 254-255.
11. [32] JD Heydon and PL Loughlan, Equity and Trusts (6th ed.) at 349.
12. [33] [1973] AC 691 at 721-725.
13. [34] [1983] HCA 11; (1983) 152 CLR 406 at 444.
14. [35] Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd (2000) 10 BPR 18, 085.
15. [36] Tannous v Cipolla Bros Holdings Pty Ltd (2002) NSW V Conv R 56-001, 58,245 at 58,249 per Barrett J.
16. [37] Rose v Spicer [1911] 2 KB 234 at 241-242 per Cozens-Hardy MR.
17. [38] Shiloh Spinners Ltd v Harding [1973] AC 691 at 725-726 per Lord Wilberforce (HL).
18. [39] Pioneer Gravels (Qld) Pty Ltd v T & T Mining Corporation Pty Ltd [1975] Qd R 151 at 161-162 per Hart J.
19. [40] Platt v Ong [1972] VicRp 18; [1972] VR 197 at 199 per Gillard J, referring to Lo Giudice v Biviano (No 2) [1962] VicRp 61; [1962] VR 420 at 427 per Adam J.
20. [41] Quan Hong Le v Victoria Investments and Property Pty Ltd BC9900404 (Supreme Court of Victoria, unreported, Beach J, 9 February 1999) at [15].
21. [42] Melacare Industries of Australia Pty Ltd v Daley Investments BC9507293 (Supreme Court of New South Wales, unreported, Hodgson J, 1995); Bezden Pty Ltd v A Castellano Nominees Pty Ltd BC200301017 (Supreme Court of Victoria, unreported, Balmford J, 17 March 2003) and Hiller v Goodfellow (1988) V Conv R 54-310.
22. [43] BC8600072 (Supreme Court of Victoria, unreported, Brooking J, 19 December 1986) at 10.
23. [44] [1962] VicRp 61; [1962] VR 420.
24. [45] At 424.
25. [46] Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562; Cicinave Pty Ltd v Jasco Pty Ltd (1989) 5 BPR 11, 139; Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635.
26. [47] Lo Giudice v Biviano (No 2) [1962] VicRp 61; [1962] VR 420; Platt v Ong [1972] VicRp 18; [1972] VR 197.
27. [48] WD Duncan, Commercial Leases in Australia (4th ed.) at 345.
28. [49] (1977) 2 BPR 9602.
29. [50] Stieper v Deviot Pty Ltd (1977) 2 BPR 9602 at 9607.
30. [51] See Dennis and Copley v Eddie [1952] VicLawRp 16; (1952) VLR 92 at 106 per Sholl J.
31. [52] See Howard v Fanshawe [1895] 2 Ch. 581 and discussion in Dennis and Copley v Eddie [1952] VicLawRp 16; (1952) VLR 92 at 106 per Sholl J.
32. [53] Lindsay Petroleum Co v Hurd [1874] LR 5 PC 221.
33. [54] See in particular, Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 433 per Dixon CJ and Fullagar J.
34. [55] Lindsay Petroleum Co v Hurd [1875] LR 5 PC 221 at 239-240.
35. [56] BC9502613 (Supreme Court of Victoria, unreported, per Beach J, 18 December 1995).
36. [57] Stanhope v Howorth (1886) 3 TLR 34.
37. [58] Guiffre v Geelong City Council (1992) V Conv R 54-438.
38. [59] The Beamer claim refers to s 4A of the Trustee Act 1958. No such section has been in existence at any relevant time.
39. [60] In late 1998, the relevant duties arose under s 232 of the Corporations Law, not ss 180 to 183 of the Corporations Act 2001 as pleaded by Beamer.
40. [61] I doubt whether George Moutidis, the other director of Star Lodge, had any better comprehension of director's duties than Sam Najjar.
41. [62] The particulars of loss are drawn in the same way as they would have been drawn if the business and lease had been taken over by an unconnected third party as a consequence of a breach of duty.
42. [63] Paragraphs 9 to 15 plead background matters relating to the contract of sale, the Kimis DHS transfer, the Kimis and Star Lodge leases, the default and re-entry notices and their alleged invalidity. Paragraph 17 simply pleads that Beamer has suffered loss and damage by reason of Star Lodge's breaches.
43. [64] Paragraph 15(b) of the Beamer claim.
44. [65] The pleading at the start of the trial was the seventh amended statement of claim.

[66] Even in closing addresses, I commented that I had been expressing problems with Beamer's pleading "from day one" and the pleading problems may be "fatal" to its claim. To be fair to Beamer's current counsel and solicitors, it must be said that the main focus of all parties was on the conspiracy claim. Also, the pleading they inherited was such a cobbled-together "cut-and-paste" job that nothing short of a complete re-write - with the possible consequence of yet another adjournment of the trial - could have addressed the pleading defects.

1. [67] On at least 15 occasions.
2. [68] George Moutidis' only reference to Pryles & Defteros was to say that they acted for the Moutidises after 2 September and the Moutidises took all their advice from Peter Pryles.
3. [69] Beamer claim paragraph 20.
4. [70] Beamer claim paragraph 23.
5. [71] Beamer claim paragraph 25.
6. [72] Beamer claim paragraph 26.
7. [73] Beamer claim paragraph 46.
8. [74] Beamer claim paragraphs 23, 46.
9. [75] Beamer claim paragraphs 43, 46.
10. [76] The Beamer proceeding was not commenced until 15 December 1998.
11. [77] Who exercised his right to privilege from self-incrimination during his evidence about Western Lodge's tax returns.
12. [78] In closing address, counsel for the Najjar plaintiffs sought to rely on several matters which had not been pleaded or opened as particulars of falsity of this representation, such as financial performance. Given the way in which the case was conducted and out of fairness to the Moutidis defendants, I have not had regard to such matters.
13. [79] See for example his evidence in relation to the Star Lodge resolutions for the ANZ Bank dated 6 August 1998.
14. [80] Some of the items in the schedule are clearly fixtures, not chattels, but nothing turns on their misdescription for present purposes.
15. [81] For example, he conceded that Hidek might have owned 20, not 55, dining chairs and 2 or 3, not 6, dining tables.
16. [82] The cool room was probably a fixture not a chattel, but it was treated as a chattel by the parties for the purpose of the representation.
17. [83] Save that it is something considerably less than $20,000.
18. [84] [1959] HCA 8; (1958) 101 CLR 298.
19. [85] Brandi v Migot (1976) 12 ALR 551 at 560.
20. [86] Wentworth v Lloyd (1864) 33 LJ (Eq) NS 688 (HL).