Plaintiff v First Defendant

1 In this proceeding, the plaintiff, Play Australia Pty Ltd ('Play Australia'), brings a claim for damages against the first and second defendants, arising out of an investment made by it in the third defendant in July 2010. The first and second defendants, Mr John Papadimitriou and Mr Ayman Abdou ('defendants') were alleged to have engaged in misleading or deceptive conduct by making certain representations to Mr Andrew Moussi, the sole director of the plaintiff, to induce him to make an investment of $250,000 in the third defendant which in turn would invest in a multiunit apartment development in Frankston ('development project'). The development project never proceeded, the third defendant went into liquidation, and the plaintiff lost its investment in its entirety.

2 For the reasons which follow, the plaintiff has failed to establish that the defendants, or either of them, are liable for misleading or deceptive conduct, and the proceeding shall be dismissed.

3 Mr Andrew Moussi is the sole director and shareholder of the plaintiff. He is an experienced IT professional, and, through the plaintiff, has provided software testing and project management services to the ANZ Bank for a number of years. At the time of the trial he was 40 years old.

4 Mr Moussi's best friend is Dr Ambrosius (Bruce) Kambouris. Dr Kambouris is, among many other things, an industrial chemist and inventor. Mr Moussi and Dr Kambouris have been friends for approximately 20 years, and have embarked upon a number of business ventures together, including an olive farm, a wine label, and a liquor store. Dr Kambouris' inventions include, among other things, 'Botanical Water', a by-product of the fruit and vegetable processing industry, and 'KeepaFresh', a form of food packaging made from vegetable waste.

5 It was through the process of seeking to commercialise the inventions referred to above that Dr Kambouris, and subsequently Mr Moussi, met the defendants in early 2010. The defendants, who, among other things, claim to be experienced in raising capital for start-up ventures, offered to assist Dr Kambouris to raise capital for the commercialisation of his inventions in exchange for shareholdings in companies established for that purpose. The main focus of their activities was the commercialisation of Botanical Water. For a number of months in 2010 Dr Kambouris worked closely with the defendants on the Botanical Water project for their perceived mutual benefit. However, in around September 2010, Dr Kambouris parted company with the defendants in acrimonious circumstances, and the disputes between them resulted in hard fought litigation in this Court.[1] These disputes, and the commercial dealings between the parties leading up to these disputes, are only tangentially relevant to the issues in the current proceeding, save that they provide some background and context for the dispute which is the subject matter of this proceeding, and provided fuel for the cross examination of the parties on credit issues.

6 While the frequency and duration of his visits to Melbourne is in dispute (Dr Kambouris lives in Mildura), it appears that Dr Kambouris visited Melbourne quite frequently during 2010, sometimes for days at a time, particularly after he ceased his employment in Mildura in May 2010, and that he almost always stayed with Mr Moussi in his apartment in Southbank. It was through his friendship with Dr Kambouris, and his involvement in assisting Dr Kambouris to commercialise his inventions, that Mr Moussi met the defendants in February 2010. At first, Mr Moussi met the defendants in the company of Dr Kambouris, but Mr Moussi also had, during the course of 2010, spoken individually with Mr Papadimitriou and Mr Abdou about their other business interests, and in particular, their interests in property development.

7 Mr Papadimitriou and Mr Abdou are, among other things, the principals of Search Property Group Pty Ltd ('Search'). The website for Search[2] describes its business as follows:

Search Property Group have [sic] been at the forefront of Melbourne's property market for a few years and are currently on the rise.

The business has forged a reputation in the community built on professionalism and attention to detail.

Every development, sub-division and finance is held to the strictest standard of reliability and quality to deliver the best product possible.

We work with the best professionals within the industry to provide a range of services all conducted in house to provide the best and fastest service for our clients.

At Search Property Group we always ensure projects are not only economically viable, but also environmentally sustainable and community supportive.

Our expertise covers everything from residential, retail and commercial property development to property investment and asset management and even development and construction management.

We also contain all professionals in-house to save time and money and don't [sic] need to go external for any services.

At Search Property Group our partners are a key part of our organisation, containing in-house:

• Builders
• Solicitors
• Accountants
• Architects
• Property Consultants

This allows us to combine all strengths across all of our partners to share resources, challenge boundaries, and bring our vision to reality.

8 The third defendant, 328NHF Pty Ltd ('328NHF'), was incorporated by Mr Abdou in July 2010 as a special purpose vehicle for the purpose of purchasing and developing a substantial property at 382 Nepean Highway, Frankston ('Frankston property'). The purchase was never completed, and 328NHF went into liquidation in 2013.

9 Turning to the subject matter of the proceeding itself, it appears that by 2010 Search and its principals were actively seeking opportunities for medium to larger scale property developments. They had embarked on a 33 apartment development at 138 Frankston-Flinders Road, Frankston South ('138FF development'), and were actively pursuing opportunities to undertake redevelopments of various properties owned by branches of the Returned Services League ('RSL'). In or around March 2010, they became aware of the Frankston property, which was on the market and potentially ripe for redevelopment for residential apartments (the site was occupied by a retirement village).

10 While the exact chronology of events and the contents of some relevant conversations are in dispute, the following is a largely uncontroversial narrative of the relevant events.

11 Sometime in July 2010, Mr Abdou entered into a contract of sale with O'Connor Assets Pty Ltd ('vendor') to purchase the Frankston property. The contract of sale for the Frankston property ('contract of sale') was dated 1 July 2010. The terms of the contract of sale provided for the purchaser to be Mr Abdou or his nominee, and provided for a process by which any nomination to a substitute purchaser was to be effected. The purchase price was $3.3 million, with $165,000 payable on signing, a further $165,000 payable on 1 July 2011, with the balance of the purchase price payable on 1 July 2012.

12 Prior to this time, in early June 2010, Mr Moussi had discussions with Mr Papadimitriou and Mr Abdou about participating in the development project. What was said, and what was agreed during these discussions, is at the heart of the dispute between the parties. However, sometime between 5 June and 11 June 2010, Mr Moussi decided that the plaintiff would advance the sum of $250,000 towards the development project. This sum ('advance') was to be raised by way of a loan from the Commonwealth Bank secured by an investment property in Brunswick owned by Mr Moussi. Mr Moussi's application for finance ('loan application') was made through AllStates Financial Services Pty Ltd ('All-States'), in which members of Mr Papadimitriou's immediate family had a financial interest. Mr Papadimitriou and Mr Brett Barr, a principal of All-States, completed all of the necessary paperwork for Mr Moussi to sign the loan application on or around 11 June 2010.

13 On 1 July 2010, 328NHF was incorporated by Mr Abdou. A certificate was issued for 25 shares to be held by Three Point Design Pty Ltd ('Three Point Design'), with the remaining 75 shares being held by A J Phoenix Pty Ltd ('A J Phoenix'), a company representing the Papadimitriou and Abdou interests. Three Point Design was a special purpose vehicle established by the principals of Parker Design Pty Ltd ('Parker Design'), an architectural and design firm which was to complete the architectural and planning documentation for the development project for submission to the Frankston City Council ('Council') for town planning approval, and other architectural and design works. It seems that it was intended that Three Point Design would receive equity in the development project in lieu of fees being charged by Parker Design. Mr Nicola Formichelli, who was then employed by Parker Design, was appointed as a director of 328NHF. However, at a point in time which remains unclear, but may have been as early as late July 2010, Mr Formichelli abruptly left the employ of Parker Design, but, with the assistance of another designer, Mr Charlie Di Pietta, continued to work on developing the necessary documentation for the purposes of obtaining town planning approval for the development project.

14 On the evening of 14 July 2010, a meeting took place between Mr Moussi, Mr Abdou, Mr Papadimitriou, and Dr Kambouris at Mr Moussi's Southbank apartment. What was said during that meeting, and what documentation changed hands is a matter of dispute between the parties, but what is not in dispute was that on that evening, Mr Moussi provided Mr Abdou with a cheque for $250,000 drawn upon the account of the plaintiff, which was deposited into 328NHF's bank account. On 21 July 2010, the sum of $165,000 was paid by Mr Abdou to the vendor, being the first tranche of the deposit.

15 In his evidence, Mr Abdou identified minutes of a meeting of the directors of 328NHF dated 15 July 2010 ('15 July minute').[3] The 15 July minute states that both Mr Abdou and Mr Formichelli attended the meeting at an office at Chelsea from which Search and All-States operate ('Chelsea office'). The 15 July minute, which is signed by both directors, states as follows:

Ayman Abdou advised that on behalf of the company on 14 July, 2010 he met with Andrew Moussi, in his capacity as the director of Play Australia Pty. Ltd. ("Play"), and agreed to the following:

(a) Play is to pay $250,000.00 to the company to be applied as to the amount of $15.00 as consideration for the transfer of 15 shares in the company from A J Phoenix Pty. Ltd. and as to the amount of $244,985.00 as an interest free loan to the company repayable upon the development and sale recently purchased by the company at 382 Nepean Highway, Frankston. ("the land")

(b) The company will apply the loan monies towards the purchase of the land and the companies operating expenses.

(c) A J Phoenix Pty Ltd and 3 Point Design Pty Ltd are responsible for designing the development on the land, obtaining all necessary development approvals, letting construction contracts, doing all other necessary things to effect the development and sale of the land including arranging finance for same.

16 However, ASIC was not notified of the transfer of shares from A J Phoenix to Play Australia until February 2013, some months after the issue of this proceeding.

17 After that time there appeared to be limited communication between the parties regarding the development project, although on 13 September 2010 Mr Moussi sent Mr Papadimitriou a brief email asking for the share certificate for the plaintiff's shares in 328NHF.[4] However, as noted above, by September 2010, there was a falling out between Dr Kambouris and Mr Moussi on the one hand, and Mr Abdou and Mr Papadimitriou on the other hand regarding the commercialisation of Botanical Water. There was no direct evidence as to the extent of Mr Moussi's direct involvement in these issues and disputes, although, to the extent I can rely upon the judgment of Robson J in Re Botanical Water, it appears Mr Moussi was actively engaged in the dispute.

18 On 23 September 2010, Mr Moussi sent Mr Papadimitriou an email ('23 September email')[5] in the following terms:

John, as I have not received any Share Certificates, planning documents, architecture drawings, council approvals and feasibility study etc.

I was given financial advice by yourself as consultant for ALL States Financial Consultants Pty Ltd advising me that you can refinance my home to raise the $250,000 for a property development project in which you are a part of.

You showed me the property with another person (Warren). You also advised me that you have contracts with RSL to develop all their properties and partnering with a major builder.

You also advised that you have successfully completed other projects with huge returns to investors.

I paid the $250,000 on the 14/07/2010 and still have not received my shares or other documents.

I have also done a titles search on the property concerned and it has not been transferred to 328NHF Pty Ltd.

I invested the money with the understanding that the property would be purchased and I would own 15%+. It was communicated to Commonwealth Bank by Brett Bar that the loan was for property.

I feel that what was offered has changed considerably.

I have put my trust in All States Financial Consultants Pty Ltd to give me the correct financial advice and guidance.

You have also offered Matt Harle to give me legal advice and set up a Family Trust with the understanding that he is a lawyer. I have the current understanding that he is not registered, is that correct? I would have never sought his legal advice if he was not a registered lawyer.

I request that the $250,000 payment be returned immediately not later than Friday 24th of September 2010. I have not been given what was promised and feel misled.

I have attached the company extract and extract from land title.

19 Later that day, Mr Papadimitriou responded as follows:[6]

Dear Andrew,

I refer to your email of 22 September, 2010 and am most disappointed that you have now chosen to falsely represent what has transpired to date.

Firstly neither myself or Allstates Financial Consultants Pty Ltd at any time gave you financial advice. I simply responded to your request to seek my assistance in raising monies to enable you to make a property investment. As a consultant of Allstates, a licenced loanbroker, I assisted in satisfying your request by arranging a first mortgage loan. Neither myself or Allstates hold Financial Services Licences which would enable us to give the financial advice which you allege and are both mindful of the licence requirements as prescribed in the Corporations Act. The allegation is maliciously false and defamatory.

Secondly on the evening of 14 July, 2010 Ayman Abdou and you negotiated for you to participate in the development of land at 382 Nepean Highway, Frankston by way of loan to 328NHS Pty Ltd, the purchaser of the land, and the purchase of 15% of the shares in 328NHS Pty Ltd from another shareholder, A J Phoenix Pty. The terms of the agreement were recorded in the minutes of the Directors meeting of 328NHS Pty Ltd a copy of which is attached. Ambrosios Kambouris and I were also present.

Thirdly you were at all times aware that the contract of sale of the land was for a price of $3,300,000.00 payable by an initial deposit of $165,000.00, a further payment of $165,000.00 on 1 July, 2011 and the residue on 1 July, 2012. Your complaint that 328NHS Pty Ltd is not registered as owner of the land is unfounded. I estimate that the other shareholders of 328NHS Pty Ltd will be obliged to fund approximately $1,000,000.00 in architects and other consultants fees and the disbursements prior to commencement of construction on the land. A preliminary set of plans will be available in approximately one week.

Fourthly on 15 July, 2010 328NHS Pty Ltd recorded the transfer of 15 ordinary shares from A J Phoenix Pty Ltd to Play Australia Pty Ltd pursuant to the above minute. I attach copies of the share registry entry and share certificate No. 3 as recorded in the statutory register of 328NHS Pty Ltd. And as provided by the directors of same. I have requested that the directors of 328NHS Pty Ltd forward share certificate No. 3 to Play Australia Pty Ltd.

Fifthly your claim that you paid $250,000.00 to 328NHS Pty Ltd on 14 July, 2010 is untrue. Your cheque was handed to Ayman Abdou by you on 19 July, 2010 and paid into the bank account of 328NHS Pty Ltd on 20 July, 2010.

Sixthly your allegations that I offered Matt Harle to give you legal advice is likewise maliciously false and defamatory of both myself and Matt Harle who, I understand, is now taking legal advice concerning a damage action against you. I and several witnesses can state positively you were well aware that Matt Harle retired as a practicing lawyer over 6 years ago and has not since purported to provide legal services or advice. As you are aware Matt Harle is also qualified as an accountant and has a wealth of commercial experience and knowledge. You are also aware that, earlier this year, when your associate Ambrosios Kambouris was accused by his former employer Australian Vintage Ltd of misappropriating its intellectual property Matt Harle used his experience to collate all relevant material and arrange for Ambrosios Kambouris to be represented by both a suitably qualified practising solicitor and a suitable qualified practicing barrister. How do you reconcile this fact with your false allegation.

Seventhly your allegation that you were misled is also maliciously false and defamatory.

Eighthly I note your request that the amount of $250,000.00 be repaid to you. I have mentioned this to the directors of 328NHS Pty Ltd who believe that there are many others who would be willing [to] take up the investment opportunity given to you however this cannot occur within your nominated time limit and will take several weeks. Please advise the directors if this is what you seek. Naturally such a process would involve transfer of your shares and releases.

20 Finally, on 4 October 2010, Mr Moussi responded as follows:[7]

John, as per your last point on the response, I would like to get my money back.

You have stated that there are others who would be interested in taking my placed.

Can you please advise of what period of time I can expect a refund.

21 There appears to have been no further communication between Mr Moussi and the defendants regarding the development project until 22 September 2011, when the solicitors for Mr Moussi (who are also the solicitors on the record for Play Australia in this proceeding) wrote to the defendants and 328NHF in the following terms:[8]

In July 2010 Moussi paid $250,000 ("the Contribution") to 328NHF Pty Ltd ("328NHF") in reliance on representations you made to him (not limited to the following):

1. The Contribution was to enable 328NHF to complete settlement on the acquisition of a property located at 382 Nepean Highway, Frankston ("the Property").
2. 328NHF would conduct a development on the property so purchased.
3. The Property had 40 existing leased dwellings generating income that would support the value of the Property pending the development.
4. Moussi was informed to expect a development profit equating to a tenfold return on the Contribution.
5. You were both experienced property developers that had conducted many successful property developments on behalf of investors and that you jointly owned a property development company that held a contract with RSL for the development of 200 RSL properties.
6. The Property and the development thereof was your most profitable project at the time, and the only reason you were seeking an investor to assist to complete acquisition was because you were stretched by the large capital demands associated with your contractual obligations in developing 200 RSL properties.

In an e-mail he sent to John Papadimitriou on 22 September 2010, Moussi communicated his feeling of having been misled in relation to the above and other matters. John Papadimitriou sent a reply e-mail to Moussi on 23 September 2010 which attached a letter. Moussi takes issue with various points raised in that letter. Further, we do not purport to address exhaustively here all of the assertions raised by John Papadimitriou in his letter. We will do so in due course.

In John Papadimitriou's letter he asserts that Moussi was "aware that the contract of sale of the land was for a price of $3,300,000.00 payable by an initial deposit of $165,000.00, a further payment of $165,000.00 on 1 July, 2011 and the residue on 1 July, 2012."

Moussi categorically denies this assertion. Such information was never communicated to Moussi until John Papadimitriou's letter, and at all times Moussi acted in reliance on your representations that the Contribution was consideration for Moussi acquiring a 15% interest in the proprietor of the Property, and that completion of the purchase of the Property using available funds contributed by you and other investors was imminent.

Further, Moussi took particular additional comfort from your representation the Property was generating rental income that would support the value of the Property pending the development.

Despite paying the Contribution, Moussi has become aware and is greatly concerned that 328NHF has not acquired the Property. We attach a Title Search for the Property and note 328NHF is neither listed as the proprietor nor listed a caveator of any interest in the Property. Moussi is also concerned that he has not receive from the director of 328NHF original share certificates evidencing ownership in 328NHF and that ASIC has not been notified of any share issue to Moussi.

Moussi has also observed the Property has been publicly advertised by 328NHF to on-sell the Property with the attached development approved by Council. Such action would breach your obligations and the obligations of 328NHF to Moussi, considering the Contribution was induced from Moussi on the basis of 328NHF acquiring the Property outright and conducting a development with a view to earning a development profit, in relation to which you have represented Moussi should expect to earn tenfold on the Contribution.

Your conduct and that of 328NHF, is grossly oppressive upon Moussi, whose funds you have apparently used as payment of a deposit for the attempted purchase of the Property on a long dated settlement while you seek out a purchaser to on-sell. In the circumstances, this would afford Moussi with strong and damning grounds under the just and equitable jurisdiction of the Court to support a range of orders in favour of Moussi applying to the affairs of 328NHF and its assets.

To redress the above situation, Moussi demands repayment of his $250,000 by Friday 7 October 2011. If this is not received in cleared funds by that date, we hold instructions to commence proceedings against you and 328NHF for recovery of this amount and/or equitable orders for dealing with whatever interest is held by 328NHF in the Property.

22 It appears that no response was ever provided to this letter ('September 2011 letter'), and this proceeding was issued on 1 May 2012, approximately two months prior to the date of the settlement of the sale of the Frankston property specified in the contract of sale ('settlement date').

23 Returning to the chronology of events, it seems that the development project was plagued with difficulties, in particular, difficulties in obtaining Council approval for a development of the scale and density originally contemplated by the defendants, and including, it appears, inadequate funding.

24 These difficulties commenced at an early stage of the development project. As earlier indicated, it was intended that Three Point Design, an entity representing the interests of Parker Design, would carry out all of the necessary design and town planning documentation in exchange for a 25% shareholding in 328NHF. However, at a time which is not entirely clear, but probably in July or August 2010, Mr Formichelli, who was the defendants' main point of contact at Parker Design, suddenly left his employment at Parker Design. While Three Point Design remained a shareholder at 328NHF for some time (until July 2011), the connection between Parker Design and the development project was effectively severed. Because of his changed circumstances, Mr Formichelli brought in an associate to assist him with the design and town planning work, and both required payment in cash rather than by means of an equity participation in the development project. This work was carried out in the latter months of 2010.

25 Another investor, Mr Gregory Waddell, came on board in October 2010, for the sum of $150,000. He and an associate lent $75,000 each to 328NHF as an interest free loan, in exchange for a combined shareholding in 328NHF amounting to ten per cent. This transaction was documented by way of a formal agreement between Mr Waddell and 328NHF,[9] unlike the transaction between the plaintiff and 328NHF.

26 Originally it was intended that the development project would involve the construction of 86 apartments, and an application for town planning approval for a development of that scale was submitted to the Council in January 2011. However, this application was rejected on the basis that it was an overdevelopment of the site, exceeded the three storey height limit in the area, and had inadequate setbacks.

27 While the chain of events is a little unclear, it appears that the Council's rejection of the town planning application for the development project marked the end of the association between the defendants and Mr Formichelli. Discussions took place between the defendants and other potential investors, including a Dr Farag, and later a Mr Aziz, and other professionals were engaged, apparently by Dr Farag, to submit a fresh town planning application to the Council. An application was made in or about May 2012 for the construction of a 32 unit development. Payment of the second tranche of the deposit was made in or about July 2011.

28 Sometime in 2011, the plaintiff, through its solicitor, lodged a caveat over the Frankston property, which was withdrawn in or around March 2012. This proceeding was issued on 1 May 2012.

29 During this time the defendants were also apparently occupied with trying to secure finance for the settlement of the purchase of the Frankston property and the completion of the development project. They were not able to do so before the settlement date, or the later settlement date agreed between Mr Abdou and the vendor. Ultimately, the vendor lost patience, the contract of sale was rescinded, and the development project was at an end. The accounts of 328NHF show that at the time of liquidation, 328NHF had the following liabilities:

(c) $75,000 owed to each of Mr Waddell and G L White Pty Ltd;

30 The plaintiff issued the writ and statement of claim on 1 May 2012, claiming that the defendants (and 328NHF) had engaged in misleading and deceptive conduct on the part of the defendants and sought, among other things, damages pursuant to s 159 of the Fair Trading Act 1999 (Vic).[10]

31 In summary, the plaintiff alleges that the defendants induced Mr Moussi to raise funds using the equity in his only substantial asset to invest in the development project by making a number of extravagant and misleading claims about their financial standing and commercial experience, and the security and profitability of the development project. In particular, the plaintiff alleges that the defendants misled Mr Moussi into believing that they were successful business people, had engaged and were engaged in a number of lucrative property developments, and that 328NHF had an enforceable contract to purchase the Frankston property. Furthermore, the defendants represented to Mr Moussi that an investment in the development project would be risk free, and would generate substantial financial returns for the plaintiff. Mr Moussi relied upon these representations, all of which were untrue, and as a result, lost the entirety of his investment when the purchase of the Frankston property and the development project failed to proceed.

32 It is helpful, for the purpose of evaluating the evidence, to assign the individual representations to each of two broad categories. The first class of representation includes those that go to the capabilities and financial standing of the defendants, while the second class includes those representations relating to the property development itself.

33 The representations said to have been made by the defendants to the effect that they were 'persons of substance' include the following:

(a) the defendants were successful business persons who had access to millions of dollars of funds for property development;

(b) the defendants operated their developments through All-States and Search;

(c) the defendants (or companies associated with them) had 200-odd contracts on foot to develop RSL clubs, including but not limited to the Hawthorn and Glen Waverley RSLs;

(d) for every $150,000 that Moussi or his nominee invested with the defendants they would generate $900,000 return in two years; and

(e) Mr Abdou was a major owner of 'Telechoice' and possessed substantial personal wealth.

34 The representations were said to have been made by the defendants to Mr Moussi or in Mr Moussi's presence at a meeting at the Chelsea office on 5 June 2010, at a meeting later that morning in a nearby café, at earlier meetings in May 2010 in a carwash and at a café in South Melbourne, and by statements made on Search's website.

35 These representations were said to have been misleading or deceptive, or likely to mislead or deceive, on the basis that:

(a) the defendants were not successful business persons with access to millions of dollars of funds for property development;

(b) Mr Papadimitriou was an undischarged bankrupt, having been entered on the National Personal Insolvency Index on 1 December 2007 and removed on 2 December 2010, and was accordingly prohibited from being a director of the companies he purported to control;

(c) the defendants (or companies associated with them) did not have 200odd contracts on foot to develop RSL clubs;

(d) the defendants (or companies associated with them) were not successful property developers; and

(e) Mr Abdou is not an owner of Telechoice and does not possess substantial personal wealth.

36 The second class of representations concerned those which relate to the development project itself. These include:

(a) an investment with the defendants (or companies associated with them) was no risk because they sold everything off the plan to investors;

(b) a company owned and controlled by the defendants had a contract to purchase the Frankston property; and

(c) an investment with the defendants would be used to purchase the Frankston property such that Mr Moussi or his nominee would own part.

37 The above representations were said to have been made on various times during the morning of 5 June 2010, at the Chelsea office, at a meeting at a nearby café, and during a visit to the Frankston property.

38 Later representations said to have been made concerning the development project include:

(a) the deposit with respect to the purchase of the Frankston property had been paid by Mr Abdou;

(b) for a $250,000 investment Mr Moussi or his nominee would own 25% alternatively 15% of the Frankston property and/or the investment vehicle (later being 328NHF) that investment vehicle having and retaining the benefit of having entered into a contract to purchase the Frankston property;

(c) there were other investors 'going in' for 10% and the defendants themselves were investing more than 50% of the money needed to purchase the Frankston property;

(d) Mr Moussi or his nominee could use All-States to raise the $250,000;

(e) Mr Moussi or his nominee could use their 'solicitor', Mr Matthew Harle, to set up an appropriate structure for the investment and obtain advice in relation to the investment;

(f) Mr Moussi or his nominee would be making a 25% alternatively 15% return on a $15 million profit in relation to the investment;

(g) Mr Abdou would provide Mr Moussi with copies of the contract of sale in relation to the Frankston property, the architectural drawings, the projected financials of the property development and the like within a few days of the 'investment' of $250,000 on 14 July 2010.

(a) in the case of (a) above, in a telephone call between Mr Papadimitriou and Mr Moussi a few days after the 5 June meeting;

(b) the representations at (b) to (f) were said to be made during a meeting between Mr Moussi and the defendants during a car trip a few days after the 5 June meeting;

(c) the representation at (b) above was also made in a share transfer form executed by Mr Moussi at his Southbank apartment on 14 July 2010; and

(d) the representation at (g) was said to have been made by Mr Abdou at the Mr Moussi's apartment on 14 July 2010.

40 The plaintiff alleges that the representations above were misleading or deceptive or likely to mislead or deceive on the basis that:

(a) to the knowledge of the defendants, Mr Harle did not possess a practising certificate;

(b) for its $250,000 investment the plaintiff was not given 25% or 15% ownership of the Frankston property or 328NHF, that company not having an asset being a contract to purchase the Frankston property;

(c) the Frankston property was not and is not owned by 328NHF but is and was at all material times owned by the vendor;

(d) the plaintiff was not allocated 25% alternatively 15% of the shares in 328NHF;

(e) the investment contained substantial risk rather than no risk;

(f) the investment returns promised could not and will not ever eventuate;

(g) the defendants (or companies associated with them) were not investing more than 50% of the monies needed to purchase the Frankston property; and

(h) Mr Abdou did not provide Mr Moussi with copies of the contract of sale in relation to the Frankston property, the architectural drawings, and the projected financials of the property development within a few days of the advance or at all.

41 The plaintiff contended that in reliance upon the representations:

(a) Mr Moussi on behalf of the plaintiff raised $250,000 through AllStates;

(b) Mr Moussi retained Mr Harle as the plaintiff's solicitor in relation to his investment, and, as a result of his advice, invested the $250,000 through the plaintiff, being a trustee of a discretionary trust subsequently established by Mr Harle; and

(c) On 14 July 2010, the plaintiff invested $250,000 with the defendants through 328NHF.

42 Finally, the plaintiff claims that by reason of the defendants' misleading or deceptive conduct, it has suffered loss and damage. Had the representations not been made, the plaintiff would not have made the advance, and the plaintiff claims $250,000 plus interest pursuant to statute from 14 July 2010.

43 On 7 May 2014, the sixth day of the trial, the plaintiff made an application to amend its statement of claim to include the following allegations (the amendments to the alleged representations are underlined):

(a) in June and July 2010 the defendants (or either of them) represented that for a $250,000 investment Mr Moussi or his nominee would own 25% alternatively 15% of the Frankston property and/or the investment vehicle (later being 328NHF), that investment vehicle having and retaining the benefit of having entered into a contract to purchase the Frankston property and paid the deposit;

(b) the representation above was said to be implied by reason that in May and June 2010 the defendants (or either of them) represented to Mr Moussi that a company controlled by them had a contract to purchase the Frankston property and that an investment with the defendants would be used to purchase the Frankston property such that Mr Moussi or his nominee would own part of the Frankston property;

(c) the representation was misleading because 328NHF did not have an asset being a contract to purchase the Frankston property, the rights under that contract having been novated, nominated to Beach Front Frankston Pty Ltd ('Beach Front') or otherwise transferred to Beach Front after these proceedings were commenced and on a date after 20 June 2012; and

(d) the novation, nomination or transfer is to be inferred from the fact that the contract of sale was originally entered into between the Vendor and Mr Abdou on or about 1 July 2010; on or about 15 July 2010 328NHF was nominated as the purchaser of the Frankston property; and on 3 July 2012 the vendor's solicitors served a rescission notice under the contract of sale on Beach Front.

44 The application to amend was made during the course of cross-examination of Mr Abdou, and was allowed. The application was made and granted prior to Mr Chakir, the vendor's solicitor, giving evidence. At the close of the trial, counsel for the plaintiff indicated that he would not press the amendment referred to in paragraph 43(c) above, on the basis that the evidence given by Mr Chakir did not support this allegation, as Beach Front was never formally nominated as the purchaser of the Frankston property.

45 The defendants' defences are quite sparse, to the extent of being unenlightening. However, in response to a request for further and better particulars of paragraphs 5 and 6 of their defences, which referred to 'various discussions' between them and Mr Moussi, a more fulsome response was provided to the plaintiff's allegations by the defendants (who were at that time self-represented). As these particulars are largely consistent with the manner in which the defendants put their case at trial, they are reproduced in full, as follows:[11]

(a) Papadimitriou and the Second Defendant ("Abdou") first met Moussi in late February 2010 together with his partner and claimed business manager Kambouris. The meeting was at 55 Collins Street, Melbourne and was about a packaging invention called "KeepaFresh" claimed to have been invented by Kambouris and a waste water treatment invention subsequently called "Botanical Water" claimed to have been invented by Moussi and in particular discussed the setting up business structures to exploit the inventions which structures were to be owned by entities associated with Kambouris, Moussi, Abdou and Papadimitriou's family. The advice previously given to Kambouris by Papadimitrou and Abdou that Papadimitriou was an undischarged bankrupt and could not be involved in the management of a corporation and could not hold equity in the proposed business structures.

(b) From late February to April, 2010 Papadimitrou and Abdou had almost daily communications, various discussions, with Kambouris representing his and Moussi's interests and less frequent direct communications with Moussi. The communications were mostly by telephone but included two visits by Papadimitrou and Abdou to Mildura where Kambouris was based and a visit to a Patent Attorney in Adelaide with Kambouris and meetings with Kambouris and some times Moussi when Kambouris was in Melbourne at 416 Nepean Highway, Chelsea and various restaurants and coffee lounges. During this period five companies were incorporated in which entities associated with Abdou, Papadimitrou's family, Kambouris and Moussi (including the Plaintiff), became shareholders and the invention rights were transferred. Abdou was an officer of each of the five companies. Papadimitriou was not. All of the various discussions related to the prosecution of the inventions.

(c) From the beginning of April until late April, 2010 the various discussions continued on an almost daily basis and were mainly by telephone and related to the prosecution of the inventions. In mid April Kambouris resigned from his Mildura employer and thereafter spent most of his time living with Moussi in Moussi's apartment at Unit 1909, 80 Clarendon Street, Southbank and whilst Moussi was at his work at the ANZ Bank would spend most of his days with Abdou and Papadimitriou. The daily routine generally involved Abdou and Papadimitriou collecting Kambouris in Abdou's car from Moussi's apartment in Southbank and returning him later in the day. On most days Moussi also met with Abdou, Papadimitrou and Kambouris and the principal discussion point was prosecution of the inventions and, in particular, the ongoing preparation of an Information Memoranda to raise moneys from the public for the Botanical Water invention. During this time, Moussi, Kambouris, Abdou and Papadimitriou on 16 April, 2010 visited Freehills where Moussi signed various patent transfers, applications and Statutory Declarations in relation to the Botanical Water invention. Most of the meetings involving Moussi were either at Moussi's apartment, various nearby coffee lounges and restaurants and 416 Nepean Highway, Chelsea. Abdou and Papadimitriou were also involved in assessing and syndicating various property development proposals and, consequently, Kambouris accompanied them on site inspections and meetings with agents, vendors, joint venturers and investors. In late April, 2010 Kambouris asked Abdou and Papadimitriou if he and Moussi could become involved in one of the projects.

(d) In May, 2010 the vast majority of the various discussions related to the prosecution of the inventions and, particularly, the preparation of the Information Memorandum. In the premises at 416 Nepean Highway, Chelsea, Kambouris involved himself in some of the feasibility work on potential property development projects including the possible development of a property at 382 Nepean Highway, Frankston which had been introduced to Abdou and Papadimitriou by the Estate Agent, Ray White (Carrum Downs) Pty Ltd ("the 382 project"). Abdou and Papadimitrou informed Kambouris that they intended to develop the 382 project in conjunction with a firm of architects called Parker Design and that an in principal agreement had been reached with Parker Design that it would, as its contribution to a twenty-five per cent (25%) equity in the 382 project, provide its services and all other necessary consultants' services to obtain town planning permits for the highest and best development of the land as a high density residential precinct and, in addition, would provide the entity which would purchase the land with an interest free loan equivalent to five per cent (5%) of the purchase price. This process continued through May and into June, 2010 and Kambouris further involved himself in the feasibility process, including inspection of draft sketch plans and development cost analysis and, again, expressed interest in investing in the 382 project if the opportunity arose. Abdou and Papadimitriou wrote on a whiteboard cost estimates showing a development profit of up to $9,000,000 upon a completion of the 382 project in Kambouris' presence. Abdou and Papadimitriou told Kambouris that they were committed to other investors who were each prepared to lend moneys to the development entity and each take a five per cent (5%) equity. In late June, 2010, Abdou and Papadimitriou had negotiated the purchase of the land for the 382 project at a price of $3,300,000.00 with a deposit of ten per cent (10%) of which half, or $165,000.00 was payable on signing the contract and the balance one year later in July, 2011 and that a company was to be formed with A J Phoenix Pty. Ltd. ("AJP") to hold 75% of the 100 shares to be issued and that the remaining 25% of the shares would be held by 3 Point Design Pty Ltd the nominee for Parker Design. Abdou and Papadimitrou again stated that if the opportunity arose Kambouris and Moussi could become investors in the 382 project and discussed with Kambouris and Moussi that subject to approval of the other shareholders AJP was prepared to transfer 15 of its 75 shares to Moussi and Kambouris or their nominee on the basis that Moussi and Kambouris would lend $250,000 interest free to the 382 project until completion of same.

(e) The various discussions between Abdou, Papadimitriou, Kambouris and Moussi continued for most of the days of July 2010 and were conducted by telephone and face to face at Moussi's apartment, various nearby coffee lounges and restaurants and 416 Nepean Highway, Chelsea and included all aspects of prosecution of the inventions and the 382 project including the following:

• The incorporation of the Third Defendant ("the Company") on 1 July, 2010 with 100 issued shares of which 75 were held by AJP and 25 held by 3 Point Design Pty. Ltd. With Abdou and Nicola Formichelli as directors
• The receipt of a Contract of Sale of Land for the 382 project land showing Abdou and or nominee as purchaser
• The dispute between the partners of Parker Design resulting in the retirement of Formichelli and the decision of 3 Point Design Pty Ltd not to proceed with its role in the 382 project
• The agreement of 3 Point Design Pty Ltd to transfer its 25 shares in the Company to AJP effective from 11 July, 2011
• The offer to Kambouris and Moussi to lend $250,000 to the Company with 15 shares in the Company to be transferred from AJP
• The decision of Kambouris and Moussi to accept the 382 project offer and invest in the name of the Plaintiff
• The nomination of the Company as purchaser of the 382 project land by Abdou
• The resolutions of the Company to register the transfers of shares from 3 Point Design Pty Ltd to AJP and from AJP to the Plaintiff
• The provision on 14 July, 2010 of a cheque from the Plaintiff to the Company for $250,000
• The payment on 17 July, 2010 of a cheque to the vendor of the 382 project land for $165,000
• The ongoing consultation about preparation of town planning plans and related expert reports
• The Plaintiff was aware that the deposit had been paid because Abdou and Papadimitriou told Moussi and Kambouris

46 Mr Abdou filed an amended defence on 12 September 2013. Relevantly, the amended defence:

(a) included an allegation that Mr Moussi obtained the following documentation from the Chelsea office in his presence: financial projections for the development project in or about April to June 2010; architectural drawings for the development project in or about May 2010; and a copy of the contract of sale in or about August 2010; and

(b) included a claim that by reason of the matters pleaded in the statement of claim and the amended defence, the defendants are concurrent wrongdoers by reason of the operation of s 24AH of the Wrongs Act 1958 (Vic) ('Wrongs Act').

47 The defendants' position with respect to the 'persons of substance' representations is that, save for the representation that the defendants operated their developments through All-States and Search, which is in substance correct, the representations were simply not made. In any event, Mr Moussi knew, or must have known, by reason of his own observations of the operations of the Chelsea office, and his visit to Mr Abdou's home, and his close association with Dr Kambouris that the defendants, while they were experienced in business, finance, and property development, were not in possession of substantial personal wealth, did not have access to millions of dollars for property developments, and that the defendants did not have contracts on foot to develop 200 plus RSL properties, but were merely 'pitching' for the work.

48 Further, the defendants asserted that they told Mr Moussi and/or Dr Kambouris that Mr Abdou's brothers owned Telechoice, and that Mr Papadimitriou had told Dr Kambouris at an early stage of their association that he was an undischarged bankrupt, which caused Dr Kambouris no apparent concern. As far as the defendants were concerned, Mr Papadimitriou's bankruptcy was no secret. They denied telling Mr Moussi that for every $150,000 invested with the defendants a return of $900,000 would be generated within two years.

49 As for the representations alleged to have been made regarding the development project, the defendants' position at trial was that:

(a) they denied telling Mr Moussi that any investment with them was 'no-risk', rather, they told him they sought to minimise risk by selling a certain proportion of the development project off the plan before approaching the bank for finance;

(b) they told Mr Moussi they 'had the contract' for the Frankston property, in that they had in their possession an unsigned contract of sale;

(c) it was never suggested that Mr Moussi would own part of the Frankston property, it was always understood by all parties that Mr Moussi or his nominee would own shares in the company that was established to purchase the Frankston property and undertake the development project, being 328NHF, and the plaintiff was allocated shares in 328NHF;

(d) 328NHF was nominated as the purchaser of the Frankston property, and it was always intended, until after the issue of this proceeding, that 328NHF would complete the purchase of the Frankston property;

(e) the defendants never told Mr Moussi that they were funding fifty per cent of the funds needed to purchase the Frankston property from their own resources: rather, they told Mr Moussi that shares would be transferred to other investors as they came on board (as did occur) and the remainder would be raised from a bank;

(f) Mr Moussi did in fact raise the $250,000 required for the advance through AllStates;

(g) the defendants never put Mr Harle forward as a solicitor to provide advice and to set up an appropriate structure for the investment, but identified Mr Harle as a 'retired solicitor', and they were not aware of any dealings between Mr Moussi and Mr Harle;

(h) they never told Mr Moussi that the plaintiff would make a 15 per cent or a 25 per cent return on a $15 million profit: the arrangement was that the plaintiff would be repaid the advance, and would receive a 15 per cent return on an estimated profit of $7 to $10 million;

(i) Mr Moussi was provided with copies of or access to all of the information requested by him, including financial feasibility analyses, share transfer forms, and architectural drawings prior to the plaintiff making the advance; and

(j) Mr Moussi knew the advance was needed to pay the deposit.

50 In summary, the defendants' position was that, rather than being induced by the defendants into making the advance, Dr Kambouris approached the defendants on Mr Moussi's behalf to inquire whether Mr Moussi might invest in the development project, and that Mr Moussi was, being a commercially astute business person, fully informed about the structure and financials of the development project.

51 Finally, in relation to the proposed nomination of Beach Front as the purchaser of the Frankston property (which never ultimately occurred as the sale did not proceed), this was necessary to appease the major investor in the development project, who was 'spooked' by the issue of the proceeding, and had the purchase of the Frankston property proceeded, the shareholdings in Beach Front would have reflected the interests of the parties in 328NHF.

52 The issues for determination in the proceeding are as follows:

(a) what was the precise nature of the asset acquired by Mr Moussi upon advancing the sum of $250,000 to the company? Was it an equity investment of $250,000 in the company or the Frankston property? Alternatively, was it consideration for 15 shares in the company, as well as a loan of just short of $250,000 for the company? In any event, does the characterisation of the transaction have any real bearing upon the outcome of this proceeding?

(b) were any or all of the representations pleaded in paragraphs 5 and 6 of the statement of claim made by Mr Papadimitriou and/or Mr Abdou?

(c) if so, did the making of those representations amount to misleading or deceptive conduct within the meaning of s 9 of the Fair Trading Act?

(d) did Mr Moussi rely upon any or all of such representations when causing the plaintiff to advance $250,000 to 328NHF?

(e) if so, was there a causal connection between any representations made by the defendants and Mr Moussi's decision to make the advance? More specifically, was Mr Moussi influenced by any misleading or deceptive conduct on the part of the defendants or either of them, or was his decision to make the advance made as a result of his own perceptions of the potential benefit of making the advance, or as a result of information and/or encouragement provided to him by Dr Kambouris, or both?

53 Section 9(1) of the Fair Trading Act 1999 (Vic) provides as follows:

A person must not, in trade and commerce, engage in a conduct that is misleading or deceptive or is likely to mislead or deceive.

54 As to what amounts to misleading or deceptive conduct, or conduct which is likely to mislead or deceive, counsel for both parties agreed that the judgment of Macaulay J in Vouzas v Bleake House Pty Ltd,[12] provides a useful and accurate summary of the relevant authorities regarding what amounts to misleading or deceptive conduct. His Honour said:

First, the conduct must induce or be capable of inducing error. Secondly, whether it does induce or is capable of inducing error is to be assessed objectively by the Court in light of all relevant surrounding circumstances. Thirdly, to undertake that task objectively requires the Court to evaluate what a reasonable person in the position of the representee would have understood the conduct to have meant.[13]

55 Other principles relevant to the determination of whether a person is liable for misleading and deceptive conduct can be summarised as follows:

(a) silence may amount to misleading or deceptive conduct where the circumstances give rise to an obligation to disclose relevant facts. This obligation is not confined to cases where there is a special relationship (for example, a fiduciary relationship).[14] The existence of the obligation to disclose relevant facts is not negated simply by reason of the fact that enquiries could have been made which would have disclosed the true position;[15]

(b) where a party seeks relief in respect of representations made to identified persons, including him or herself, as opposed to a class of persons, such as consumers, identifying the character of the conduct and establishing the causal link between the conduct and the plaintiff's loss requires analysing the particular conduct of the particular defendant in relation to the particular plaintiff:

...bearing in mind what matters of fact each know about the other as a result of the nature of their dealings and the conversations between them, or which each of them may be taken to have known.[16]

(c) in cases of representations as to future events or conduct where issues regarding the state of mind of the maker of a representation are involved, a finding of misleading or deceptive conduct can only be made where the maker of the representation did not believe what was stated or made the representation with reckless indifference as to their accuracy;[17]

(d) in relation to the question of whether a party relied upon a false or misleading representation, including whether that party was induced to enter into a particular transaction, in Gould v Vagellas,[18] Wilson J restated the applicable principles as follows:

1. Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case.
2. If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.
3. The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation.
4. The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract.[19]

(e) the statements of Wilson[20] and Brennan JJ[21] in Gould v Vagellas to the effect that, notwithstanding the practical onus upon a defendant to adduce evidence in support of any contention that the plaintiff had not relied upon a false or misleading representation, the ultimate onus of proving reliance and/or inducement rests upon the plaintiff have been reaffirmed by the High Court in Sidhu v Van Dyke;[22]

(f) the representation need not be the sole inducement. In Henjo,[23] Lockhart J stated as follows:

[R]ecovery under s 52 is founded by the applicant's actual reliance upon the misleading or deceptive conduct of the respondent, although that conduct was not the only factor in the applicant's decision to enter a particular agreement, and although the applicant did not seek to verify the representations or did so inadequately and so failed to discover their falsity.

(g) while the characterisation of conduct as either misleading or deceptive is logically anterior to whether a person has suffered loss and damage because of it, there may be some practical overlap in the resolution of these questions.[24] Determination of the causation of loss or damage might require account to be taken of subjective factors relating to a particular person's reaction to conduct found to be misleading or deceptive or likely to mislead or deceive. A misstatement of fact may be misleading or deceptive in the sense that it would have a tendency to lead anyone into error. However, if it is actually disbelieved by the person to whom it is made, the representation or conduct concerned would not ordinarily be causative of any loss or damage flowing from the conduct of the person to whom the representation was made;[25]

(h) further, where it is alleged that a defendant made multiple misrepresentations, it is necessary for a plaintiff to go beyond a statement that it was induced by the representations to enter into a particular transaction. In particular, principles of causation require the plaintiff to precisely identify what aspect of the representations was influential upon its decision, to enable the Court to determine whether the aspect of the defendants' conduct that is said to cause loss is the same aspect that is said to be misleading or deceptive;[26] and

(i) concepts of contributory negligence or apportionment of damage have no part to play in assessing the liability to compensate a victim of misleading or deceptive conduct. In Henville v Walker,[27] Gleeson CJ stated:

It will commonly be the case that a person who is induced by a misleading or deceptive representation to undertake a course of action will have acted carelessly, or will have been otherwise at fault, in responding to the inducement. The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under s 82 unless the conduct of the victim is such as to destroy the causal connection between the contravention and loss or damage. The respondents knew the purpose for which their representations were being relied upon by the appellants. The Full Court accepted that the making of the representations amounted to engaging in misleading or deceptive conduct in trade or commerce. There was no warrant for a conclusion that the negligence of the appellants in relation to the feasibility study was the sole cause of the decision to undertake the project.[28]

56 Considering these principles in the context of the current proceeding, it is clear that the onus is upon the plaintiff to show that the defendants made statements and/or engaged in conduct which was capable of inducing error in Mr Moussi, and did in fact lead him into error. In that light, one must have regard to Mr Moussi's commercial experience and capabilities, as well as the actual knowledge he had of the defendants, their financial position and their experience and capabilities. It may well be that any failure by Mr Papadimitriou to disclose that he was a bankrupt might amount to misleading or deceptive conduct, if the circumstances are such that an obligation was imposed upon the defendants to disclose that matter to Mr Moussi. Furthermore, if the defendants have engaged in misleading or deceptive conduct, the fact that Mr Moussi may have failed to take care of his own interests by conducting some form of due diligence is no bar to relief.

57 However, the onus is upon the plaintiff to establish that it relied upon the misleading or deceptive conduct of the defendants in making the advance. Even if the plaintiff is able to demonstrate that the defendants engaged in conduct which is capable of inducing error and was calculated to induce him to make the advance, the inference that the plaintiff was induced by the conduct may be rebutted by showing that Mr Moussi possessed actual knowledge of the true facts or did not rely upon them. Of relevance here is the defendants' contention that Mr Moussi knew, either directly or through his association with Dr Kambouris, that the defendants were not wealthy individuals, and further, that the manner in which the development project would be structured and funded was fully explained to Mr Moussi. However, if it is found that the defendants have engaged in misleading or deceptive conduct of any kind, the defendants will be liable if the plaintiff establishes that conduct played a material role in inducing Mr Moussi to make the advance, even if other matters also influenced Mr Moussi's decision.

58 Finally, to the extent that the defendants are found to have made representations concerning future matters, such as the likely profitability of the development project, such statements can only be found to be misleading or deceptive if it can be shown that the defendants did not believe what was stated, or were recklessly indifferent as to their accuracy.

59 At trial, the plaintiff called Mr Moussi, Dr Kambouris, and Mr Formichelli to give evidence on its behalf. Owing to developments during the course of the trial, Mr Chakir from Maddens Lawyers, the solicitors for the vendor, was subpoenaed by the plaintiff to attend Court to give evidence and to produce his file. Both Mr Papadimitriou and Mr Abdou gave evidence on behalf of the defendants.

60 Each of the witnesses gave their evidence orally, and each of the main witnesses (Mr Moussi, Dr Kambouris, Mr Papadimitriou and Mr Abdou) were subject to extensive crossexamination. Unusually for a dispute concerning a substantial commercial transaction, there were limited contemporaneous documents available to shed light on the transaction and the contentions of the parties. As such, the oral testimony of the parties was critical, and much of the crossexamination of the witnesses focussed upon issues of credit.

61 Mr Moussi was the primary witness for the plaintiff. He works as an IT manager providing consultancy services to the ANZ Bank on large scale projects, including managing teams of people to test new software. During the relevant period, he was working out of ANZ's office at 55 Collins Street ('ANZ building'). He gave evidence that he was introduced to the defendants in February 2010 by Dr Kambouris, with whom he had been close friends for about 20 years. In February 2010 there was a series of meetings between him and Dr Kambouris and the defendants regarding the Botanical Water and KeepaFresh inventions. He gave evidence that one morning in February 2010, Mr Abdou collected him from the ANZ building to drive him (along with Mr Papadimitriou, Dr Kambouris, and a Warren Slattery) to the Chelsea office. On the way to the meeting, he overheard Mr Abdou talking to Warren Slattery about the property developments the defendants were involved in. Mr Papadimitriou told Mr Moussi that Mr Abdou was the owner of Telechoice. Mr Moussi was impressed because Telechoice was a large telecommunications company. Mr Moussi described the Chelsea office as having a formal reception area, branding for AllStates, and a professional looking boardroom. During the meeting itself the defendants described what expertise they could bring to assist Dr Kambouris and Mr Moussi with the inventions, in particular, raising funding for start-ups and property developments. Mr Papadimitriou described himself as previously working in the banking industry, and being very experienced in finance.

62 At some stage, Mr Moussi looked at the All-States website, which he reviewed quite thoroughly after he offered to revamp it. The website referred specifically to property development and commercial investments, not just home loan broking and finance broking. Mr Moussi also identified the Search website, which promotes Search's expertise in property developments, and refers to Search having inhouse professionals, including inhouse architects and inhouse lawyers. Mr Abdou showed him the first version of the website, he could not recall when, but it was before September 2010. He stated:

But in regards to what Search Property Group did and the details of it, that also got covered between March and May, or in the period where I invested my money, where they have gone into a lot of detail in regards to what Search Property Group did.[29]

63 Mr Moussi gave evidence that in May 2010 he embarked upon what he described as 'a property trip' to the USA. For $7,000 he embarked upon a tour organised by an Australian company which had introduced an investment scheme in the US. He had a keen interest in investing in the USA market as there were cheap properties with 'high cash returns and capital gains' available for purchase.

64 The property trip took just over a week to complete, and he returned to Melbourne at the very end of May or the very beginning of June 2010. Just after he returned he called Mr Papadimitriou and told him he had just returned from the USA, and wanted to have another meeting to discuss the progress of the capital raising for Botanical Water. Mr Papadimitriou suggested that Mr Moussi visit the Chelsea office on the morning of Saturday, 5 June 2010.

65 During the meeting at the Chelsea office on 5 June 2010 ('5 June meeting') Mr Papadimitriou told him that the defendants had won the contracts to develop all of the properties owned by the RSL. Mr Papadimitriou took Mr Moussi through architectural drawings of the first RSL property they were going to develop, being a property in Glen Waverley, an architectural drawing of the Hawthorn Club, and aerial photographs of a number of the RSL properties.

66 Mr Moussi said that while Mr Abdou was in the Chelsea office at the time, it was Mr Papadimitriou who showed him through the aerial photographs and architectural drawings for the RSL properties. Mr Moussi gave evidence that Mr Papadimitriou told him that Search had won the contract to develop all of the RSL properties, because the RSL was cash strapped, and it would be financially rewarding for both Search and the RSL. Mr Papadimitriou told him that when Search developed all of the RSL properties, Search would make a profit of $400 million.

67 Mr Moussi gave evidence that Mr Papadimitriou and Mr Abdou 'constantly' talked about the RSL properties in the two month period in which he got to know them. Mr Papadimitriou would talk a lot about his background in finance, he had been the youngest bank manager for Citibank. The defendants told him they would receive a lot of referrals from people with failing property developments where the defendants would put together a team and finance to assist them. Mr Moussi stated:

And I was impressed. I have to be honest with Your Honour, I was impressed. I didn't know much about property development and it was impressive. The architecture drawings looked impressive. Everything to me looked impressive. To me I was really excited to meet people who were - I thought were like really business savvy, had all this experience and, you know, I was really impressed. I have to be honest. [30]

68 Returning to the 5 June meeting, Mr Moussi gave evidence that Mr Papadimitriou then suggested that they go to the coffee shop just around the corner from the Chelsea office run by Mr Papadimitriou's wife and daughters. Mr Abdou was there, as was Mr Formichelli, Search's architect and business partner. He spent most of the time at the coffee shop talking to Mr Abdou, who said words to the effect that:

Andrew, we, you know we buy properties, we, you know we get them, we get plans designed, get the plans approved by the Council. We sell everything off the plan and with the equity we have in the properties, plus the 10% deposit and the actual contracts for sale, we'll go to the bank and you know within two years the entire property is developed and we make money.[31]

69 Mr Moussi told Mr Abdou about his trip to the USA, and that what had struck him about investing in the USA was that it was not a high risk because he would not be required to invest hundreds of thousands of dollars because property in the USA was so cheap. Mr Abdou's response was as follows:

Why would you want to invest in the USA? It sounds great, obviously from what you're saying it sounds great. Why would you want to invest in the USA? It's on the other side of the world, if something was to go wrong, what would you do? He goes, 'If you invest in Australia', he goes 'what I can do for you is because we're all getting together with this water invention', he goes 'I can get you into a property. You give me $150,000. In two years I'll turn that to $900,000'. And he goes, 'It's local, it's here, it's with us. You know us. We do this for a living'. And it made sense. To me it made sense. These are the two options that I had and it made sense to go with an option in Australia.[32]

70 A young man called 'Warren' was also at the coffee shop, and John Papadimitriou wanted to show Warren what he had previously shown Mr Moussi about the RSL properties. They returned to the Chelsea office, then Mr Papadimitriou had a discussion with Warren about which properties would be developed first. Then, Mr Papadimitriou said that they had just come across this property in Frankston, and suggested they all go and have a look. So Mr Moussi, Warren and someone else, who Mr Moussi was told had a building background, travelled in Mr Papadimitriou's four wheel drive vehicle to the Frankston property. Mr Moussi gave the following evidence about what occurred during this journey:

John was talking about, you know, they had an architect as a business partner so there's no architecture fees in regards to developing property. He went to school with Grollo Senior's son and they had a close relationship. He was talking about a quote that he had received from another building company for $10 million and Grollo brought it down to $6 million because of their power around building and purchasing. So they had that relationship and that was - so John was talking about how we can get these properties done. They've got all the logistics in place to get these done very efficiently and cost effective and very, very lucrative.[33]

71 Mr Moussi was effusive in his description of the Frankston property. With a creek and a secluded beach at the rear, he said he thought the property was 'absolutely beautiful', and 'really beautiful'.

72 Mr Moussi gave the following evidence regarding his conversation with Mr Papadimitriou at the Frankston property:

Does Mr Papadimitriou say anything in relation to the property?---He mentioned that they had, they had an opportunity to buy the property and within a week's time maximum, they had to deposit - they had to give the owner the deposit for the property. So they said, 'We need to rai - - - ". So there was an opportunity. Due to their high investment nature or due to the big responsibility of the RSL, they said they can't obviously do 200 RSL properties and take all these other opportunities at the same time, so they were seeking other people to come on board as partners for this particular project. And within a week they needed to raise the money for the deposit and they wanted $35,000 each.

Who is the $35,000 each from?---He mentioned it to myself, to Warren and a third party, but I wasn't certain who else. They said there were others as well. I wasn't certain who else that would have been.

And what were you to get for your $35,000?---Ten per cent. He said, '10 per cent and no other money would be required', and that was qualified by - the architectural drawings would be done by their partner. Again by 10 per cent, selling everything off, everything off the plan, receiving the 10 per cent deposits and then going to the bank and getting a loan to cover the rest, rest of the bills.[34]

73 Nothing further of note happened at the 5 June meeting. Mr Moussi gave evidence that a couple of days later, he received a phone call from Mr Papadimitriou during which Mr Papadimitriou told him that Mr Abdou had paid the deposit on the Frankston property and that there was no rush, no urgency to do anything that week.

74 Mr Moussi gave evidence that shortly after that time, Mr Papadimitriou telephoned him and said that he and Mr Abdou were on the way to the city and could meet with him. Mr Papadimitriou telephoned again and said they could not find a car park, so Mr Moussi went downstairs and was collected from outside the ANZ building by Mr Abdou, who was driving a 7 series BMW. They drove around for about 20 minutes, with Mr Abdou doing most of the talking. Mr Moussi gave evidence that Mr Abdou said:

Ayman said to me that because of - you know, 'Andrew, we like you', you know, they - they liked to use the terms, you know, 'You're now one of us. You know, we're getting involved in business together, you're now one of us. You know, because you're one of us, we want to give you opportunity.[35]

Who said what?---Yes, so we're in the back of the car and Ayman - as I mentioned before he would mention - because of our other business relationship they got to like me, they wanted to offer me 15 per cent of this property development, because it was a very high, lucrative property development, they won't towel me up. They saw it as a good opportunity for me to earn revenues where I could get out of my consulting work at ANZ and seek, you now, any other aspirations, you know. They were very - they were very particular about saying to me - specifying to me that I wasn't to tell any of the other investors - not that I knew the other investors, because they all had opportunities for 10 per cent, but I was having 15 per cent. Ayman then went on to say that they required $250,000. I responded saying, 'I don't have $250,000', because initially they said 35. Shall I continue?

Yes, please?---Then John Papadimitriou said, 'That's not a problem.' He asked me a couple of questions about my unit in Brunswick. I said, 'It's, you know, a two-bedroom unit.' I had $70,000odd left to pay off the property. He said, Allstate Financial, I'll get it re - refinanced and we'll get the money from the property, from my Brunswick property.

All right. What was your reaction to this, what did you say?---Look, initially, I was a little bit - you know, obviously, I was a little bit shocked when someone says, you know, from 35 to 250,000, but there was a lot of assurity from them that this is no risk. and the one thing - even when I - you know, the whole time I've spoken to Ayman from that café meeting, Ayman specifies no risk, we're investing in property. You know, how can you go wrong when investing in property? There is zero risk. That was something that was really, really emphasised. So to me, Your Honour, just putting it in perspective, is it wasn't an easy decision for me to make personally because it was my only property. You know, I had it for seven or eight years, I'd paid off a lot of it, I'd renovated it myself, but I was investing - I was told that I was investing with a group of other people, including themselves, and they were putting up around 50 per cent of the money themselves, they gave me that assurity, and we were putting in the money to buy a property. And I liked that, buying a property, that's what I want to do. Property investment's good.[36]

76 Mr Moussi gave evidence that Mr Papadimitriou made reference to the defendants putting in fifty per cent of the funds required for the property development at the 5 June meeting, but that this statement was repeated during the car trip referred to above ('car trip').

77 Some days after the car trip, Mr Papadimitriou and Mr Abdou visited Mr Moussi at the hairdressers, and Mr Papadimitriou gave him the loan application form to sign.[37] Mr Moussi gave evidence that he signed the loan application form, but that the details had been completed by someone else.

78 Mr Moussi gave evidence about the events leading up to and including the meeting of 14 July 2010 ('14 July meeting'), when he gave Mr Abdou a cheque drawn upon the plaintiff's bank account and made out to 328NHF (on Mr Abdou's instructions). The relevant extract from the transcript follows:

Mr Magowan: Now I want you to tell Her Honour the circumstances in which you came to write out that cheque?---On the 14th of July, just prior to the meeting Your Honour, again my associate Ambrose Kambouris, spent the day with John Papadimitriou and Ayman Abdou. I was expecting them to come over that night, Ayman Abdou and John Papadimitriou to get a cheque for the $250,000. Prior to them coming over I passed a message through to Brett Barr asking that if I can get all the - so when they do come over if I can get all the contracts and all the paperwork, they can come across with it. Prior to them coming over Bruce - Ambrose is Bruce - Bruce is his English name. He had given me a call, informed me that they'd expressed concern over my request to receive the contracts and all the paperwork stating that, 'I didn't trust them. Andrew doesn't trust us'.

I might just stop you there. When you say, all the contracts and all the documents or all the paperwork, what are you referring to there?---Everything they promised me what the deal was. They said the whole - all the information that made up this project, they were going to give it to me. So I would know who was investing, the architecture drawings, the financials, the projections. Everything that I needed to know that I'd been told I would be given when they actually come and see me. this is what I was previously promised and this is what I asked. Brett Barr as well. So obviously when I give them a cheque, I have this in hand as well. When I had this phone call it was more that they had passed on to Ambrose that they were distressed. He was on the phone. I didn't actually speak to them directly on the phone. And I said to him, 'It's not a matter of me saying they're dishonest or I don't trust them. it's just the way you do business'. so they're going to just cause a bit of upset and anxiety.

So what happened next?---On 14 July they came up to the apartment.

What time?---It would've been late - it would've been about eight, 8.30 at night. They had been - they spent the whole day, they had obviously been out to dinner, they come back. I had finished work for the day, Your Honour, so it was actually quite late when they came over. When they came up to the apartment I sat on the dining room table with Ayman Abdou, John Papadimitriou and Bruce were sitting on the couch. They were having their own conversation as John was complaining of pain. Bruce being a qualified medial practitioner. He was just looking at his arm and whatever from a treatment point of view. So they weren't fully engaged in the conversation that I was having with Ayman Abdou. Ayman then proceeded to explain to me that the way we're going to do this venture is everything is going to be formed under a company. Everyone gets shares as part of the company and the company will be 328 Nepean Highway as NHF. As I stated before every company is named after the property. He then informed me that all the paperwork, everything that I needed, he will give it to me in the next two or three days. So he confirmed with me that I would receive all the paperwork. And he didn't have them on him.

Again what did you understand the paperwork to be?---I understood it to be everything that made up this project. So all the investments, the money raised, the costs, the projections, the architecture drawings. This is what he was saying to me. So everything that would make up the investment I would actually receive. So what exactly am I putting my money in to. One thing I should really emphasise, they never, ever stated it was a loan - never.

Is there anything else said at this meeting?---At the meeting Ayman also gave me a transfer of shares document to sign. The transfer of shares document, Your Honour, is not the one that I see in the actual books. It was - it stated 250,000 dollars worth of shares out of a million shares. I was a little bit confused about the numbers but I didn't really want to question. Because of that incident over the phone about the trust I didn't really want to shake it up to much in regards to - so I - - -

So you signed a document?---So I signed that document. When they left I don't know what happened with my copy. I've been searching and searching and searching for my copy.

So how many versions did you sign?---I signed two versions - two copies.[38]

79 Mr Moussi then gave evidence about his dealings with Mr Matthew Harle. Mr Moussi met Mr Harle in August 2010 upon the recommendation of the defendants after Mr Moussi mentioned to Mr Papadimitriou that he needed assistance to set up a family trust. He understood that Mr Harle was a lawyer, and much of the time at the meeting was consumed by Mr Harle's long and detailed description of his history and experience as a lawyer. However, in September 2010, he and someone else (presumably Dr Kambouris) conducted a Google search and discovered that Mr Harle was no longer a practising solicitor and the circumstances in which he ceased to be a practising solicitor.

80 Mr Moussi was then taken to the email correspondence between him and Mr Papadimitriou in September and October 2010 (reproduced at paragraphs 15 and 16 above), as shown by the following extract from the transcript:

Why is it that you're writing to Mr Papadimitriou?---My understanding that John Papadimitriou was running Allstate Financial and he was managing Search Property Group. He was - and he was to be an owner and part shareholder of the investment property. He was the lead contact I had for this.

Presumably you weren't aware at the time that he was bankrupt?---I had no idea.

Can I take you to 483. I will ask a further question there. How do you know he was bankrupt? What effect would that have had on you?---I would not have invested. I mean, I knew these guys from what they told me to be successful business people, wealthy successful business people. John had a very strong background in finance and banking. One thing, Your Honour, I'd like to say what really shocked me the most was at the last court hearing, end of last year, when he was referred to by his barrister as a truck driver. So I'm sorry, I was not told that his profession was a truck driver and I'm sure you have it on record, and I was not told he was bankrupt. I would not refinance my only asset to give it to a truck driver who's bankrupt. I invested because these guys were successful. To get 200 RSL properties - why would RSL give 200 of their properties? They would have done the due diligence on these guys as well. I Googled them, I couldn't find anything. I've been to their offices. I've had a look at their work. I did everything I can and I had to put faith in what they said.[39]

81 Mr Moussi gave evidence that despite his request, the plaintiff did not receive a refund of the advance. He gave evidence that he asked for a refund because:

I hadn't received any of the paperwork that was promised, it was just over two months after I gave him the money, I didn't care about what they promised me in regards to return on investment, I - I wanted my money back. I wasn't comfortable with - with the investment. It wasn't what I was given, promised. And coming back to me and saying that it's a loan and this is not what I agreed upon, so I wanted my money back.[40]

82 Mr Moussi was asked by his counsel what occurred with Mr Formichelli. Mr Moussi stated that when he conducted a company search of 328NHF he noticed that Three Point Design was a shareholder in 328NHF and Mr Formichelli was a director. He said that when he went to Three Point Design's office (presumably the offices of Parker Design) he was told that Mr Formichelli no longer worked there, but was given his telephone number. When Mr Moussi telephoned him, Mr Formichelli had no idea who he was. Mr Moussi explained who he was, and they later had a meeting to discuss Mr Moussi's side of the story.

83 Much of the cross-examination of Mr Moussi went to matters of credit, such as his nomination as the inventor of Botanical Water, and the accuracy of the information in the loan application. Ultimately, Mr Moussi conceded that he and Dr Kambouris did not want Dr Kambouris' former employer to know that he was branching out on his own.[41]

84 Mr Moussi consistently maintained that Dr Kambouris did not regularly spend time with him in Melbourne or discuss any of the defendants' property developments with him until the June-August period in the case of the former, or the July-September period in the case of the latter, and that he had no discussions with anyone about the Frankston property until the 5 June meeting.

85 Mr Moussi did not consider that Mr Abdou's modest home was inconsistent with his belief that Mr Abdou was a very successful and wealthy business person. He stated:

... I was in their offices, I saw plans, I saw things right in front of me that was tangible, right, they had a business, I saw the properties, they told me they had the RSL contracts. To me that was massive.[42]

86 When it was put to him that the defendants did not have the RSL contracts, Mr Moussi replied:

Why would - if they're just doing a feasibility study why would they have an actual architectural drawing for one of the properties? [43]

...

I put it to you, you and Dr Kambouris knew full well they were simply engaged in discussions with the RSL and didn't have any contracts, would you agree with that?---My understanding was the contracts - they told me they got the contracts. My understanding was they got the contracts. When I was at the meeting, Your Honour, I saw the first drawing for the first RSL site, that's what I saw. I am sure someone can ask Nick Formichelli, it's something I saw the first drawing for the first site they were going to do. What does that say? That means they have got the contract. Why would you do a site for the RSL and not have a contract, but I don't run their business. It's not my business to quiz people on. I work, I'm busy.[44]

87 Mr Moussi maintained that the propositions that he could receive a 600 per cent return on an investment in two years, and that there was no risk in investing in property, were reasonable. He was not aware of how many apartments the defendants planned to construct on the Frankston property, but that Mr Abdou told him that they could make a $10 to $15 million return on the investment, and that he would get his investment back and 15 per cent of the profits.

88 Mr Moussi was extensively cross-examined about the plaintiff's allegation that the defendants represented that any investment by the plaintiff would be 'no risk', as follows:

When you gave evidence before you considered there was no risk in buying a block of land because if the development didn't go ahead you could always sell the land, do you remember saying that?---I do remember saying that, yes.

You weren't told that by Mr Abdou or Mr Papadimitriou, were you?---No.

That was your own thinking on the matter wasn't it?---Yes, I did my own assumptions, yes. So, yes, I did myself think, we've got to buy property. I was told we're going to buy property and if the worst thing come to worst, they couldn't get the plans, if they couldn't move forward - and mind you, Your Honour, they just had another property development site, 182 Nepean Highway which Dr Kambouris bought an apartment from.[45]

...

What did you think this company was, 328NHF, what was it?---It was a company set up to buy the property, acquire the land, develop the land, sell units off the land and then make a profit and sell at the end.

Or make a loss, whatever the outcome is?---I was told that was not feasible, that's not possible. How would it make a loss? That's what I would like to know. I don't know, how would it make a loss?

Is it your case no property development could ever make a loss?---I don't know, my understanding was, and it could be my massive ignorance and you can put that on record, is that when you sell everything off the plan all the money is there and you build the property. Everything was to be sold off the plan up front. We weren't building something in the hope we were going to sell something and were going to sell everything off the plan up front, or they were, not me. I wasn't part of the management of the company. They were going to sell everything off the plan up front. The 10 per cent deposits would go towards expenses, that's what I was told. That's why there was no risk. we are putting money into the land, sell everything off the plan, everything is sold, we go to the bank and we get the money to do all the building and everything else and that's it. Andrew, where's the risk, there is no risk.

It's your case, is it, when you went into this you believed it was absolutely a guaranteed investment?---That makes sense to me. it makes sense, it was guaranteed, that makes sense to me and it still makes sense to me. I still think it's a good idea to get a property, get a planned development and sell things off the plan. I absolutely - just to qualify, I think it's a great idea. All you would hear on the news is how people do that and kill it. Absolutely that's what I believed.[46]

...

I put it to you, Mr Moussi, that no property developer can guarantee to you that you will make a profit from any development of this nature and that you knew that?---I did not know that, Your Honour, and Your Honour, that's terrible. If that's the fact, that is terrible, to tell me that I'm the only person putting my money up front and it's massive risk and it's a loan is ridiculous. Yes, property developers should not, now that I know what I know, they should not but I was told that and believed it. Your Honour it's not about what I'm saying, look at the company websites, look at what they advertise.[47]

89 Mr Moussi was also cross-examined about his views about the merits of investing in property, as follows:

Mr Moussi, did you read the newspapers or watch the TV news?---At that time I was would watch the news and it was crazy the property boom, it was crazy how many people were buying land, subdividing it, putting building on it and making a fortune. It didn't talk about the failures. Still today in the news they are talking about house prices booming this year. The house pricing growth has been crazy. Yes, I watched it.

So you formed the view that the property was a great investment?---I still say the property itself in the location it was a great investment. That's not the regret. Is it the property and its location why it failed, I don't know.[48]

...

For your investment of $250,000 you were going to get $2.25 million?---That sounds like an amazing return, from a professional investment company it sounds like an amazing return, a very lucrative opportunity, absolutely.

It's too good to be true, isn't it?---What's too good to be true? How many people have made millions from real estate investment, ridiculous money. People going from one to 50 homes. These stories are just common and when you hear on the news you hear a lot of stories around successful investment, buying properties off the plan, redeveloping it, selling everything off the plan. It was crazy. The 2000s was a huge period for that, people were getting small pieces of land and subdividing it into three or four units and making massive amounts of money, the first unit would cover the costs and the other ones would be profit. So yes, it sounded very feasible to me. it didn't sound like a too good to be true situation.[49]

...

I put it to you, you did not believe you were going to make $2.25 million out of this project or anything like that?---I believed the property would have made 10 to $15 million, 10 would have been the worst, and 15 would have been the best. That's what I honestly believed, I honestly believed that. why wouldn't I believe that? Is there any evidence to say you couldn't make that much money in a property development of that size, I don't know.

You based that in part on the fact you thought property was doing extremely well and it was a great investment, is that right?---Property is doing great now property has been insane the last 10 or 15 years.[50]

90 Mr Moussi was also cross-examined about the plaintiff's allegation that the defendants had represented to him that they were putting in fifty per cent of the funds required for the acquisition of the Frankston property, and how he understood the development project would be funded. Mr Moussi gave evidence that despite the Frankston property being valued at approximately $3 million, based upon his extrapolations from the investment he made, he believed the defendants would be putting in $700,000 to $800,000, rather than $1.5 million or $1.65 million, and that the remaining cost of the acquisition of the Frankston property and the development project would be funded by the deposits from apartments sold off the plan and from bank finance. However, his evidence in this regard differed from his response to a question as to why he thought, given that the defendants were wealthy individuals who could raise millions of dollars, why they did not use their own money to fund the development project, which was as follows:

They were getting other people to put money in and they would get a percentage for the effort of them getting other people to raise money. Sweet deal for them they were getting a percentage for not putting any money in.

You didn't think it was a bit odd they wouldn't put their own money in, given you've given evidence as to how wealthy they were?---They were providing a service, companies who raise money, what venture capitalists get or what these investment companies get in return, I'm not an expert in that.[51]

91 Mr Moussi adamantly maintained that the defendants told him that Mr Abdou had paid the deposit on the Frankston property. He did not know what the terms of the contract of sale were, or the size of the deposit, but assumed that it was well in excess of the $35,000 contribution referred to at the 5 June meeting:

It didn't make any difference to you whether the deposit was paid for [or] not provided they entered into the contract to purchase the property. ... I didn't see the contract to purchase the property at that time, Your Honour, I don't know what the terms were.

I put it to you, it didn't make any difference to you as an investor when they paid the deposit, provided they entered into a contract to purchase the property?---They told me they had entered into a contract to purchase the property and pay the deposit. I'm not sure what that question really means.

HER HONOUR: Sorry, Mr Moussi, that's not the question Mr Jones was asking?---If they had the property, yes, they entered into a contract to get the property was very important. My money was going into that property if that's what you mean.

MR JONES: I put it to you it didn't make any difference to you whether or not they paid the deposit. What you were interested in was they were going to buy the property which would then be developed. That's what you were interested in, wasn't it?---It was very much of interest to me, Your Honour, that they paid the deposit because at the end of the day how do I even know the property existed. How do I know that that property would have been given to someone else? They had told me there was no rush - John Papadimitriou, specifically, Ayman had paid the deposit which had locked down the property. That's what I knew. They had locked it down with a deposit. That deposit was essential otherwise there is no property, what was I putting my money towards?

HER HONOUR: So that was important to you because you wanted to be certain that the contract was in existence?---John Papadimitriou said if we don't put the deposit in that week, the week of 5 June, they will lose the property, so they paid a deposit so to me they had secured the property. I was putting money into a property they had secured. That was my understanding with that.[52]

92 Mr Moussi was also cross-examined in some detail about his interests in various companies and his commercial experience. He gave evidence about his role at the ANZ Bank as a senior test manager, which involved sometimes teams of up to 30 or 40 people on various projects.

93 It was put to Mr Moussi that Mr Abdou had never told him that he was an owner of Telechoice. Mr Moussi disagreed, and stated that this happened when they had a long coffee session one morning in April or May 2010 when Mr Abdou told him all about himself. Mr Abdou told him how he got Telechoice up and running. Mr Abdou told him that he was going to put $30 to $40 million of his own money into the commercialisation of the KeepaFresh packaging invention, Mr Abdou told him about all of the businesses he was involved with, and that the defendants were going to make $400 million profit from the development of the RSL properties. Mr Moussi stated:

At the start of this case last year Ayman made a statement in court that he had no money, he was not a wealthy man, this is 12 months ago. I had no idea about that, I thought he was a wealthy individual. No one is going to say, I'm going to put $30 to $40 million towards a packaging invention and not have money, that's substantial wealth, that's massive wealth.

HER HONOUR: Mr Moussi, in your statement of claim you make reference to the defendants having - presenting themselves as having substantial material wealth. What I understand from your evidence is that you're saying they didn't actually use those words, Mr Abdou didn't sit in the car and say 'I've got substantial material worth' but are you saying that he told you various things which made you draw the conclusion that he had substantial material wealth?---Correct. [53]

94 Other topics upon which Mr Moussi was cross-examined included:

(a) whether he signed a statutory declaration to the effect that he was the inventor of Botanical Water and his understanding of the meaning of the term 'inventor';

(b) the reason the plaintiff made alternative claims in its statement of claim (that is, for 15 per cent or 25 per cent of the Frankston property or 328NHF), and whether he could explain why he was told he would get 10 per cent of the property for a $35,000 investment on 5 June 2010, and then accepted a proposal whereby he could get a 15 per cent share for a $250,000 investment only days later;

(c) where he lived at various times, and the accuracy of the information he supplied to AllStates for the purpose of completing the loan application;

(d) the meaning and accuracy of statements made by him and/or his solicitor in correspondence in September 2010 and July 2011; and

(e) whether by the time he wrote the 23 September email there had been a falling out between he and Dr Kambouris on the one hand and the defendants on the other hand regarding Botanical Water.

95 Dr Kambouris was also called to give evidence on behalf of the plaintiff. He gave evidence regarding his wide ranging qualifications in chemistry, metallurgy, and the health sciences. He gave evidence about his friendship and business ventures with Mr Moussi, and how he came to be introduced to the defendants.

96 Dr Kambouris gave evidence that at his first meeting with the defendants, which was probably in early February 2010, Mr Abdou represented himself as being 'the owner of Telechoice, being very very wealthy, and also he's a very, very big builder', and that Mr Papadimitriou introduced himself as someone who had been the youngest state manager for Citibank and now had his own money lending business.

97 Dr Kambouris gave evidence that the defendants were 'big builders', and that he had gone to the Chelsea office and there was a board there with eight huge properties they were developing. He gave evidence that they were going to build many things. He said that Mr Papadimitriou told him:

Bruce, you know, we are going to redevelop most of the RSLs, we have got the contract, we are going to start with two in particular.[54]

98 Dr Kambouris went to two meetings between the defendants and RSL officials between March and June 2010, one in Glen Waverley and one in Hawthorn, because the defendants would take him everywhere with them when he was in Melbourne. He gave evidence that between February 2010 and July 2010 he visited Melbourne every two to three weeks, for two days at a time, mostly on the weekends.

99 Dr Kambouris gave evidence about the involvement of Mr Harle in drawing up legal and commercial documents on his behalf in relation to the commercialisation of Botanical Water, and in assisting him and providing instructions to a barrister, Mr Mark Goldblatt, in relation to Dr Kambouris' dispute with his former employer over intellectual property issues.

100 Dr Kambouris' evidence regarding the 14 July meeting is reproduced in the following extract from the transcript:

Your Honour, on 13 July, the reason why I was down that particular time and during working days was I had to go see Mr Goldblatt, which I saw him on 13 July which was the final time I saw him, so then I stayed over and I went with the businessmen for business concerning Botanical Water and on the day of the 14th, finally when they brought me home because I was always with them, I didn't have to do anything, they just took me everywhere, we went and had dinner which is on Bay Street, I invited Ayman and John upstairs into Andrew's apartment so I can do some treatment on their back, Your Honour, because he was having a very stiff neck and complaining about it. So we brought them up - I brought them up and I did do a treatment on Ayman while John was sitting on the couch. Andrew was looking with me as we were treating Ayman. What I saw on that particular date - - -

Her Honour: That's the 13th?---No, on the 14th, Your Honour, at Andrew Moussi's apartment and this is fairly late at night. So what we saw, I saw Andrew Moussi pass a cheque over to Ayman Abdou and Ayman saying to the effect, 'I'll get you the paperwork in a few days', you know. That's what I saw - - -

Could you hear what was being discussed?---Yes, I was there. There was nothing to discuss about, we were just talking. I was treating Ayman Abdou, that's what I was doing, that's what we were all doing, I was treating Ayman Abdou. When he got up, Andrew gave him the cheque and, 'Thanks, I will send you the stuff in a couple of days.'

Was there any discussion of a loan?---No discussion of a loan, no. Your Honour, I have been to that - remember I went everywhere with these people, they took me to RSL but I also went to this property as well and this property that we are talking about, they took me once and they took me around to the beach and whatever and John Pappas said, 'This is the property that Andrew Moussi's invested in' and look, John does like to exaggerate, I knew that but he said, 'Andrew's going to make millions out of this here', I said, 'It's a fantastic site.' So that's what I know about the situation. You know, my job was Botanical Water and I have really didn't even know to the extent that these people were doing business in building except that, you know - Andrew doesn't talk much, he's that sort of bloke. He may - but he doesn't really talk a lot, he's an IT bloke so we don't talk too much about things.

When you say you don't talk too much, you were having conversations with Mr Abdou and Mr Papadimitriou, and I only want to talk about the conversations you are having about property investment, property generally, not water, right? In relation to that how much of that are you conveying to Mr Moussi?---By the time I went home, not much at all. I would just tell him what concerns me, the water, what we did, blah, blah, blah, how we are progressing with that, not a real lot, no.[55]

101 Dr Kambouris also gave evidence that Mr Papadimitriou offered to sell him an apartment in the 138FF project on a no deposit, cost price basis, but that the development, and therefore the purchase, did not proceed.

102 Under cross-examination, Dr Kambouris conceded that he knowingly made false statements to a patent attorney at Freehills that Mr Moussi was the inventor of Botanical Water, but he had made those statements because he was 'scared to death' of Mr Harle (who he believed to be a retired judge), and the defendants, and he just did what they told him to do.

103 Dr Kambouris gave evidence that after he left his employment in May 2010, he would come to Melbourne every second week or so and stay two or three days a week, until about August.

104 Dr Kambouris was adamant that he had not discussed Mr Moussi making an investment in the development project until after the advance was made, and that he found out about it when Mr Papadimitriou took him to show him the Frankston property and told him 'Andrew's going to make ten times what he put in there'. He was not aware prior to 14 July that Mr Moussi was asking the defendant for paperwork about the development project, but recalled him doing so afterward.

105 Finally, in relation to the issue of what Dr Kambouris knew about the defendants' property development activities, he gave the following evidence:

They will say you were often asking questions and looking at documents relating to the property development, would you agree with that?---I would, yes. I mean, what else was there to do sometimes? 'Oh, what about this property', just general talk.

That's true, there wasn't very much else to do, was there, because they were waiting for this other business to start?---That's probably - but they are very secretive people, if they got a phone call they would take it, quiet. They never disclosed things to me to that extent, like details.

You formed your own view about what they were doing from looking, they had plans on the walls and things like that?---I did form my own view, there's no doubt but then I waited with the introduction and then I saw all this stuff and then I see RSLs and I see big architectural firms and multistorey buildings, I said, this is amazing, well done.

And you often asked them questions about feasibilities and things like that and projects, would you agree with that?---I don't know what you mean by that, really.

In terms of certain projects they would say they had figures on the white boards as to feasibility studies, would you agree with that?---You mean what they were probably going to earn out of them?

Yes?---Yes. They didn't have it on the board. This Frankston one that I was buying, they were going to make seven million. I also remember them saying about 383, they are going to make anything from $12 to $15 million out of this project and I also remember them working closely with David Caroll who presold everything so the risk was zero in this project because that agent there, they said to me, they would not start until they had 70 per cent of the units sold and this is what - - -

If they didn't get 70 per cent, they wouldn't even be able to start, is that what you are saying?---That's how they said there's no risk at all if we do that, I gathered from them basically.

The risk is of course if you don't get the 70 per cent, you don't start at all?I don't know how they do their business. Their preferred option is to start with 70 per cent.

And they told you that?---They told me that. that's not a big - it's a clever approach but you know, and the same with 138, you know, they presold quite a lot of them. I don't know what happened there.

They had in fact pre-sold all of those in the one that you bought into, did they not? The one you bought into, they had presold a lot of apartments?---Yes.

You knew that?---Yes, the agent came with his secretary to their Chelsea office with a whole heap of contracts.[56]

106 Other topics upon which Dr Kambouris was cross-examined included:

(a) his attendance at meetings with the defendants concerning the RSL properties, and what the defendants had told him about the RSL properties;

(b) the people who worked at the Chelsea office, and the appearance, layout and state of repair of the Chelsea office;

(c) whether Mr Papadimitriou had told him about being bankrupt, and what other things the defendants had told him about their commercial background and experience.

107 Mr Formichelli was subpoenaed by the plaintiff to give evidence. He gave evidence that he had been an architect and draftsman for over 30 years. He was a director of Three Point Design until it was deregistered in December 2011. He first met the defendants approximately four years ago when he was working for Parker Design. He was introduced to the defendants through an associate in the context of seeking expressions of interest for a joint venture to redevelop a property in Ringwood, although nothing came of that. Later, there were some discussions about the potential for developing some RSL properties, because Mr Formichelli had many contacts within the RSL, and Parker Design had developed a number of RSL properties over the years.

108 Mr Formichelli gave evidence that Parker Design had prepared some conceptual drawings for the site owned by the Waverley RSL in Glen Waverley, being a proposal for an eight to nine storey mixed use development. He provided copies of the drawings and plans to the defendants, and he arranged for the defendants to make a presentation to the Waverley RSL about their capabilities. He could not recall what was specifically said, but that he defendants introduced themselves as property developers. It was an introductory meeting.

109 Mr Formichelli gave evidence that he had also done some conceptual works for the Hawthorn Club, which was not an RSL club, but a private sporting club. There were some further meetings, but it just 'dropped by the wayside'. At one stage he and the defendants made a presentation to the Victorian Branch of the RSL at its Collins Street headquarters. There was discussion about moving to a more formal arrangement, such as entering into a heads of agreement, but prior to that the RSL officials wanted more information about any potential joint venturers, including who the directors were, what assets they had, their personal financial circumstances, and what projects they had done. That information was never forthcoming from the defendants, the RSL got tired of waiting, and have now proceeded with other parties.

110 Mr Formichelli first heard about the Frankston property from the defendants when Parker Design was doing the design work for the 138FF project. The defendants told him about the Frankston property, that they had a long settlement on it, and they had no-one to do the town planning documentation for the development project. There were discussions, and it was agreed that the Parker Design interests would be represented by Three Point Design, that Parker Design would produce all of the necessary architectural and town planning documentation, and in exchange Three Point Design would take a 20 or 25 per cent share of the profit generated by the development project.

111 Mr Formichelli was taken to the ASIC extract for 328NHF, which showed that he was appointed as a director of 328NHF on 1 July 2010, and ceased to be a director on 11 July 2011. He was not aware that he was removed as a director of 328NHF or that Three Point Design was removed as a shareholder of 328NHF in July 2011.

112 Mr Formichelli gave evidence that he met Mr Moussi only once, in a café in Chelsea, and had never heard of the plaintiff. He was taken to the 15 July minute. He did not recall such a meeting, or being aware of the subject matter of the 15 July minute, but he identified the signature on the 15 July minute as his. When asked why he signed the document when he did not recall having a meeting, he said there were a number of occasions where documents were put in front of him by Mr Harle, who worked in the Chelsea office, for signature, and he 'just trusted what they were doing'. He never entered into any discussion with the defendants about the other parties involved in the development project, and did not know anything about the financing of the development project. He did not know about Gregory Waddell or any agreement between him and 328NHF in October 2010. He did not control the bank account of 328NHF.

113 Mr Formichelli gave evidence that after he left Parker Design and joined forces with Mr Di Pietta to do the documentation for the development project, the arrangement between him and the defendants changed. Because of his and Mr Di Pietta's personal circumstances, they needed to be paid up front, and they and the defendants agreed to the payment of a fee as well as a reduced share of profits. A certain amount of the agreed fee was paid, but the remainder, approximately $45,000, was not.

114 Mr Formichelli gave evidence that the application for town planning approval for the development project was refused by the Council. After that time, he attended a meeting with the defendants at an office in Wells Road in Chelsea, but after that time (around July or August 2011) he had no further communication with the defendants, or any knowledge of what occurred with the development project.

115 Under crossexamination by counsel for the defendants, Mr Formichelli gave evidence that he had experience in becoming involved in joint ventures for property developers. He met the defendants through a business associate who told him the defendants were property developers, and they discussed a possible joint venture that did not proceed.

116 Mr Formichelli gave further evidence about his involvement with the RSL. He knew the CEO of ANZAC House. The RSL's strategy was to reduce the number of RSL clubs from about 72 to about 40, and to rationalise, sell off, or redevelop surplus properties. Mr Formichelli created a database of the RSL properties, and followed up those where he thought there might be development opportunities.

117 Mr Formichelli introduced the defendants to his contacts at the RSL, and arranged a number of meetings between them and RSL officials, including the officials investigating the possible redevelopment of the Glen Waverley RSL. He gave evidence that he met Dr Kambouris around that time, and that Dr Kambouris attended two or three meetings attended by him and the defendants. The purpose of these meetings was to develop the relationship between the Glen Waverley RSL, ANZAC House, and the defendants, as the RSL would not proceed unless they felt comfortable with the individuals involved. They (being himself and the defendants) were presenting concept plans and discussing the process of making town planning applications. He agreed that it would be obvious to anyone at the meetings, including the meetings attended by Dr Kambouris at Glen Waverley and Hawthorn, that the defendants were 'pitching' for the work rather than having been already engaged to undertake the developments.

118 Mr Formichelli gave evidence that some years after these events (about 12 months prior to the trial) Dr Kambouris contacted him about this proceeding, representing Mr Moussi, and asking if they could meet. They met in a café in South Melbourne, and Dr Kambouris told him about Mr Moussi's involvement in the development project, about which Mr Formichelli knew nothing.

119 Mr Formichelli also confirmed his earlier evidence about the change in the arrangements for his remuneration for his work on the development project after he left Parker Design. He believed the profit share component was reduced to 10 or 15 per cent, or that he was to get an apartment in the Frankston property, but nothing was ever documented between him and the defendants.

120 Mr Formichelli gave evidence that he and Mr Di Pietta produced the necessary documents for the town planning application for the development project, including the conceptual and architectural drawings for a four level apartment complex with over 80 apartments. He also recalled that all of the relevant consultants' reports were prepared for submission to the Council. The application was refused. He believed that set-backs were an issue, but he did not recall that it was refused on the basis that it was an overdevelopment of the site.

121 After the refusal of the town planning application, he met the defendants and others (including Dr Farag) to discuss the development project. Mr Formichelli's evidence was a little unclear upon this point, but it appears that he believed there could be ongoing negotiations with the Council regarding the scale and design of the development project. However, his involvement with the development project ceased, and he was not involved in the subsequent development application for 32 apartments.

122 Mr Formichelli gave evidence that based upon the proposal for the development project he had prepared, he saw no reason why the development project would not have been profitable. He also agreed that, given what had transpired, he was not surprised that he was no longer a director of 328NHF, and Three Point Design was no longer a shareholder of 328NHF, he just did not know about their removal.

123 Finally, he agreed that when he was working with the defendants, he occasionally visited the Chelsea office, and that Dr Kambouris was occasionally there, during the week, and he would be in the room in which they held their discussions.

124 Mr Erol Chakir, a solicitor employed by Maddens Lawyers in Warrnambool, was subpoenaed by the plaintiff, and attended Court with his file in relation to the sale of the Frankston property. He was the solicitor who had care and conduct of the sale of the Frankston property on behalf of the vendor.

125 Mr Chakir gave evidence that the purchaser of the Frankston property was Mr Abdou and/or nominee. Prior to discussing this proceeding with the solicitors for the plaintiff, he had never heard of 328NHF, and there was no reference to that company on his file. Indeed, the only reference to any nomination was in an email from Mr Steve Brkic of Enterprise Law, the solicitors for Mr Abdou, dated 18 July 2012, which stated as follows:

I am instructed that my client agrees to the terms of your correspondence in regards to the withdrawal of the Rescission Notice. Please note that my client will be nominating Beach Front Frankston Pty Ltd as the purchaser and we will forward the nomination documents upon receiving the unconditional loan approval from the Bank of Queensland. We note that if the director will be required to execute a Deed of Guarantee, please forward a copy of the correct form of Guarantee as soon as possible.[57]

126 Mr Chakir gave evidence that he was instructed to issue a rescission note in respect of the contract of sale on 2 July 2011, when Mr Abdou failed to pay the second tranche of the deposit. The rescission notice was addressed to both Mr Abdou and Enterprise Law.

127 The contract of sale was supposed to settle on or about 2 July 2012, but it became clear that was not going to happen. He was instructed to issue another rescission notice on 3 July 2012, a copy of which was also sent to Beach Front Frankston Pty Ltd. After some 'toing and froing', the rescission notice was withdrawn on the basis that settlement was to occur later that month. That did not happen, and a further rescission notice was issued on 23 July 2012.

128 Counsel for the defendants drew Mr Chakir's attention to clause 5 of the General Conditions of the Contract of Sale, which provides that:

The named purchaser may at least 14 days before the settlement date nominate a substitute or additional purchaser, but the named purchaser remains personally liable for the due performance of all of the purchaser's obligations under the contract.

129 Mr Chakir confirmed that Mr Abdou was under no obligation to nominate a substitute purchaser until 14 days prior to settlement, and it was not expected that the settlement would take place on 2 July 2012, as Mr Abdou was yet to obtain bank finance. He confirmed that he received no formal nomination form nominating Beach Front as a purchaser. He believed that the settlement did not take place because the purchaser had insufficient funds to complete the purchase.

130 Mr Chakir was asked about a caveat which was lodged over the title of the Frankston property. He could not recall who the caveator was, but that it was lodged by Armytage Lawyers (the solicitors for the plaintiff in this proceeding). He had discussions with Mr Armytage at the time to ascertain the grounds of the caveat, and he was told that the caveat was lodged because there was a loan of some funds to Mr Abdou. The caveat was ultimately withdrawn, and did not impede settlement in any way.

131 The first witness to give evidence on behalf of the defendants was Mr Papadimitriou. Mr Papadimitriou gave evidence about his background in the finance and property development industry, including property developments he has carried out with his father. He studied accounting, and he has completed the necessary courses to work in the finance industry. He has been employed by Household Finance Corporation, AVCO, ANZ, and held a senior position with Chase AMP for three years. He left that position in the early 1990s after having a heart attack, and became a self-employed mortgage broker. When he was employed by Chase AMP he met a lot of property developers, as a significant part of his role was organising finance for property developments. This was also a substantial part of his work as a finance broker.

132 Mr Papadimitriou gave evidence that he went bankrupt in 2007, and came out of bankruptcy in or about December 2010. During the period of his bankruptcy he was helping his wife, who was running a coffee shop with their daughters, and was assisting anyone who wanted assistance (presumably with commercial matters). He first met Dr Kambouris in 2010, when Dr Kambouris was introduced to him and Mr Abdou by his daughter's father-in-law, who told him that he had met Dr Kambouris, who lived in Mildura, and that Dr Kambouris wanted to speak to him about an invention. He first met Dr Kambouris in a café in Oakleigh, and Dr Kambouris mainly spoke about the storage system KeepaFresh. Dr Kambouris wanted the defendants to find him an investor to bring KeepaFresh to fruition. Dr Kambouris also made a presentation about KeepaFresh to a group of people in Geelong.

133 Mr Papadimitriou gave evidence that he told Dr Kambouris that the only way to raise funds which would enable Dr Kambouris to retain a significant proportion of the entity which owned the intellectual property for KeepaFresh would be to go to the public to raise funds.

134 During the course of their early meetings Dr Kambouris told him that he had a friend that had a 'water project' whereby the excess water extracted from grapes and vegetables could be bottled and sold rather than thrown away. Given the water shortages Victoria was experiencing at the time, and given that during a visit to a food processing plant in Mildura he witnessed tons of water being poured away, he thought it sounded like a good idea. Mr Abdou was with him at the time and they thought that the Botanical Water project had more merit than the KeepaFresh invention.

135 Mr Papadimitriou gave evidence that he had told Dr Kambouris at their very first meeting that he was bankrupt, saying words to the effect:

And what did you say to him? -"Basically I can't work, but I'm working through Ayman, I'm assisting Ayman. Ayman's the person that - because Ayman did have a lot of funds, and still has funds - not as many as before - he's assisting Ayman in these property developments, because I'm still bankrupt till 2010." It was through the Taxation Office.

And what Dr Kambouris say about that?---He was just interested in raising money.[58]

136 As for Mr Abdou's background, Mr Papadimitriou said Mr Abdou told Dr Kambouris in his presence that he was 'in telecommunications', and that his brothers owned Telechoice.

137 Mr Papadimitriou was questioned about his involvement in Search. He gave evidence that his wife and Mr Abdou are shareholders, and through his wife he helps them out. He stated:

... My wife and - Ayman Abdou and my wife are shareholders in that, and through my wife I help them - I help them out. When I - the three years that I went bankrupt I actually had two heart attacks in between there, so I didn't really work in those years, I was helping put deals together for Ayman, for my wife, for Dr Farag, that's basically all I did.[59]

138 He gave evidence that the first property development Search was involved with was 138FF development, which Mr Abdou acquired. This development commenced in 2010, and has now been completed, with 14 to 15 apartments remaining unsold. Also at the start of 2010 he was developing a site in Carrum with four townhouses ('Johnson Avenue project'), one in which he now lives, having sold the remainder.

139 Mr Papadimitriou was asked about his involvement in the Botanical Water project. Mr Papadimitriou spoke to a Mr John Marinopoulos of the Strategic Intelligence Group, and asked him about the best way to raise money to commercialise the invention. Upon his advice, he organised for Dr Kambouris to meet with Freehills to take the necessary steps to secure the intellectual property associated with the invention.

140 Mr Papadimitriou gave evidence that he and Mr Abdou were told by Dr Kambouris that Mr Moussi was the inventor of Botanical Water. He overheard a telephone conversation between Dr Kambouris and Mr Abdou where Dr Kambouris was upset about having to leave his former employer by reason of a dispute over the ownership of Botanical Water, and discussed with Mr Abdou whether Mr Abdou should provide some financial assistance to Dr Kambouris.

141 Mr Papadimitriou told how after Dr Kambouris became unemployed, Mr Abdou suggested that, instead of sitting at home, Dr Kambouris should come and help them with his inventions. For some six to seven months, Dr Kambouris would attend the Chelsea office three to four days a week while the defendants were compiling the Information Memorandum. This continued until the parties fell out. During most of the time that Dr Kambouris was at the Chelsea office Dr Kambouris was sitting and listening to what he and Mr Abdou were doing, including working on the 138 FF project and the Johnson Avenue project. He was staying with Mr Moussi during that time, and Mr Abdou would often collect Dr Kambouris from Mr Moussi's apartment.

142 According to Mr Papadimitriou, Dr Kambouris accompanied the defendants to meetings with the RSL and the Hawthorn Club on three or four occasions. As such, he believed that Dr Kambouris must have known that Search did not have the RSL contracts, because he would have heard the defendants pitching for the work. He denied telling Mr Moussi that the defendants had the contracts to develop 200 RSL properties.

143 Mr Papadimitriou described the Chelsea office as a modest office, being formerly a real estate agent's office. During the time that Dr Kambouris was regularly visiting the Chelsea office, he and Mr Abdou were there for most of the time, and Matthew Harle and Brett Barr would come in sometimes. Mr Formichelli would visit occasionally when the defendants started work on the development project. He and Mr Abdou worked together in a small room with two desks.

144 Mr Papadimitriou gave evidence that initially Dr Kambouris showed no interest in the defendants' property developments, but did after he attended the defendants' meetings with RSL officials and the defendants showed him the Frankston property and the 138FF development.

145 Mr Papadimitriou was quite vague about when Dr Kambouris introduced him to Mr Moussi, but he said that it was after they had had several meetings with Dr Kambouris and others, in the context of the discussions about Botanical Water.

146 Mr Papadimitriou explained that he and Mr Abdou first met Mr Formichelli when Parker Design was doing the architectural and design work for the 138 FF project. When Mr Abdou was considering whether he should acquire the Frankston property, Mr Abdou suggested that Parker Design become an investor in the development project, because it would save about $500,000 in fees. He was present when Mr Abdou negotiated with Mr Formichelli about Parker Design's participation in the development project.

147 Mr Papadimitriou gave evidence that while Dr Kambouris was attending the Chelsea office he was always asking questions about the defendants' business activities, he did not express an interest in becoming involved personally in Search's property development activities until Mr Abdou acquired (or was about to acquire) the Frankston property.

148 Mr Papadimitriou's evidence about the defendants' original discussion with Dr Kambouris and/or Mr Moussi regarding the Frankston property was also somewhat vague, but it was to the effect that the initial approach came from Dr Kambouris, on the basis that he had a friend that wanted to invest in the development project. However, Mr Abdou already had another investor, but when the arrangement with Parker Design fell apart, he believed that Mr Abdou told either Dr Kambouris or Mr Moussi that an opportunity was available to invest in the development project.

149 Mr Papadimitriou was vague about the dates and venues where he and Mr Abdou met with Mr Moussi to discuss the development project, but he maintained that they had a number of meetings and telephone calls, with there being two meetings at Mr Moussi's apartment, one of which was to pick up the cheque, and others possibly at the Chelsea office, his wife's coffee shop, and at the ANZ Bank building where they visited Mr Moussi when they went to meet with Freehills regarding the Botanical Water project.

150 In response to a question regarding the discussions he was having with Mr Moussi about the development project, Mr Papadimitriou gave the following evidence:

Well, he wanted to know what the property was about. We explained to him we were doing 138. At the beginning we had no plans or permits but we had some preliminaries. Mr Formichelli had discussed with us what he could get on there. And we did a feasibility on the preliminaries that we had because we know what it costs to build per metre, so we worked out how many metres and basically we know the expenses and we know what the prices were because we spoke to a real estate agent in the area. He had a shop in Frankston which is pretty much half a kilometre away from where the building was and he told us what we could get for it, so we - basically conservative prices for what we would get, what the expenses, and we worked out what the profit was.

What did you discuss with Mr Moussi at the first meeting you had with him? -Basically all what we discussed was what the project was about.

What did you tell him it as about?---We wanted to develop 87 or 86 apartments, and that was basically it.

Did you have a meeting where you took Mr Moussi to see this block of land? -Yes, Mr Moussi asked to see it and we went and saw it.

And who went there?---It was myself, Mr Kambouris, Mr Moussi and Mr Abdou. Pretty much Mr Abdou went everywhere with me because he drove. I didn't drive.

Was there any discussion about how much initially in the first discussion, how much Mr Moussi wanted to invest? -No, that discussion came to us through Mr Kambouris. Mr Kambouris said to us that Mr Moussi would like to invest $250,000.[60]

151 Mr Moussi's allegations regarding the statements said to have been made to him by the defendants regarding their personal financial circumstances were put to Mr Papadimitriou, who denied that the defendants had told Mr Moussi that they were successful business people with access to millions of dollars of funds for property developments. Mr Papadimitriou stated:

It's not true. Successful, yes. We were - we still are. We are still developing building. Not as much as we would like but we are still doing it. We're still building.

Did you say that to Mr Moussi that - - - ?---No, he made - that assumption he made himself by seeing us - by seeing the developments that we were doing. It's something that he put together his own. Never did I say that.[61]

152 Mr Papadimitriou said that Dr Kambouris could see what the defendants were doing, they had nothing to hide. Mr Moussi also attended the Chelsea office a couple of times, and could have seen what was 'on the board'. He denied telling Mr Moussi that he told him that the defendants had contracts to develop 200 odd RSL Clubs, or that for every $150,000 that he invested with them, Mr Moussi would generate a return of $900,000 in two years. In response to a question about whether he told Mr Moussi that an investment with the defendants was 'no risk', he responded as follows:

No, what we did say was we minimise the risks by preselling what we're going to borrow from the bank. Minimise all risk. There is always a risk. But we minimised all risk by preselling the apartments so whatever the debts is - because the bank would not advance you the funds unless you've got enough sales, you've got to half one and a half - well then, you had to have one and a half times the sales, the money that you borrowed from the bank before they would lend you the money. So that's exactly what we did. There's always risks but we minimise the risks. That's what was said.[62]

153 In response to the allegations made by the plaintiff in the statement of claim and by the witnesses called on behalf of the plaintiff, Mr Papadimitriou gave the following evidence:

(a) he agreed he had told Mr Moussi in May or June 2010 a company controlled by the defendants had a contract to purchase the Frankston property;

(b) he had never discussed with Mr Moussi whether or not the deposit had been paid;

(c) he had not told Mr Moussi that he would own a share of the property, but that he would own 15% share of the company that owned the property;

(d) he never told Mr Moussi that Mr Abdou was an owner of Telechoice and possessed substantial personal wealth: rather, he has always heard Mr Abdou saying that his brothers own Telechoice, which is true. All he knew about Mr Abdou was that he had worked in the telecommunications industry;

(e) he never told Mr Moussi that he went to school with the Grollos, and he has never met Mr Grollo;

(f) he agreed that he did tell Mr Moussi that other investors were 'going in' for ten per cent;

(g) he did not tell Mr Moussi that he and Mr Abdou were going to contribute fifty per cent of the funds needed to purchase the Frankston property;

(h) what he did tell Mr Moussi was that the defendants would follow the same procedure as with the 138FF project: that is, once planning approval was obtained for the development project, the value of the Frankston property would increase, and the additional equity in the property would be used to obtain finance from a bank;

(i) he agreed that he told Mr Moussi that All-States could raise $250,000 for him after Mr Moussi asked if the defendants could organise funds for him;

(j) he denied that he or Mr Abdou could use their solicitor, Mr Harle, to set up an appropriate structure for the investment. He believed Mr Moussi downloaded the trust document for his family trust from the internet, and he never saw Mr Moussi speaking with Mr Harle in his presence;

(k) when asked whether Mr Moussi was told that Mr Abdou would provide him with a copy of the contract of sale, architectural drawings, and predicted financials of the development of the property within a few days of Mr Moussi making the advance, Mr Papadimitriou responded:

That was done. Mr Kambouris was in our office and he always - because the photocopier was downstairs and he was helping himself to everything.[63]

(l) the defendants told Mr Moussi that for his investment of $250,000 he would get 15 per cent of the profits of 328NHF, and he was pretty sure that at the time Mr Moussi made the advance the estimated profits were somewhere between seven and ten million dollars. Mr Papadimitriou said:

he knew exactly because he was in the office looking at the paperwork and Mr Kambouris asked us every possible question about how it works and everything. We explained everything to him, so they knew all the ins and outs, how they worked, and we were explaining it to him and he knew how - what it was... [64]

(m) in response to a question about whether he told Mr Moussi that there would be 'no risk' involved in the development project, Mr Papadimitriou replied as follows:

No, there was always a risk. What I said is, we minimise the risk. We minimise the risk by getting pre-sales, so basically if all goes bad, by minimising the risk, once we get the permits we could actually sell them and you still make a profit on there. We minimise the risk. At no stage did I tell - because there's always a risk. Something could happen while you're building it, lightening, flood, something could happen. There is always a risk when you're building. What I did say to him is we minimise the risks. That's what we tried to do, minimise the risk.[65]

154 Mr Papadimitriou denied that he had a meeting with Mr Moussi while driving in a car, and said that he remembered meeting Mr Moussi in the split level coffee shop at the ANZ building. When asked to describe his recollection of the meeting on 14 July 2010 at Mr Moussi's apartment, Mr Papadimitriou gave the following evidence:

We attended his property, upstairs, and basically we explained to him - basically all the questions he was asking we answered to him, and when he was happy he offered us the - but he offered a cheque because I wasn't well at the time and they were both - one was a masseur and one was acupuncturist and they wanted to give me an acupuncture and a masseur (sic) and Mr Moussi gave me a massage and Mr Kambouris an acupuncture, and that's after we answered all his questions, "Are you happy?". We gave him a copy of all the documentation he was after and we gave him for the second time his share certificate because he wouldn't hand over anything without the share certificate because the first time we gave him the share certificate it was an ASIC transfer which we download off the internet. He said, "It's not the right one". I work for the bank so we got a transfer certificate that you use for real estate and I explained to him, "This is not the right one", but that's the one he wanted signed, so we gave it him that one as well, and he took it into his room because it was only a one bedroom apartment and he took it into his room and he put it somewhere in his room. I don't know where.

You say he asked you a number of questions. What did he ask you?Basically how we're going to start it, what's going to be involved with the property. The same questions Mr Kambouris was asking us every day that he was there, and the risks, and I said there's - there is always a risk but we minimise the risks by taking all these measures and, you know, precautions in advance.[66]

155 Mr Papadimitriou was asked whether there was only discussion about a loan in his presence, and responded as follows:

Yes, it was a loan to the company. It was something to do with tax which they discussed before and it was easier to do it - I wasn't - I'm not exactly sure what exactly it was, but it was something to do with tax and they discussed it.[67]

156 Mr Papadimitriou gave evidence that the loan agreement between Gregory Waddell and 328NHF was made on 29 October 2010, by reason of Mr Waddell and an associate investing $150,000 in the development project, in exchange for ten per cent of the shares in 328NHF. The defendants approached Mr Waddell because they needed more funds because of the problems they were having with Mr Formichelli (presumably his and Mr Di Pietta's requirement that their fees be paid upfront).

157 Mr Papadimitriou was taken to the email sent by Mr Moussi to him on 23 September 2010, and the various allegations made by Mr Moussi in that email. In response, Mr Papadimitriou gave the following evidence:

(a) he agreed with Mr Moussi's statement that the Frankston property had not been transferred to 328NHF, but said that Mr Moussi was well aware from 'day one' that there was a two year settlement during which time the defendants would obtain the necessary permits to develop the Frankston property; and

(b) he rejected the allegation that Mr Moussi had not received his shares or other documents.

158 Mr Papadimitriou gave evidence about what transpired with the development project. He said that the defendants had originally engaged Parker Design to do the 'preliminaries', that is, to do the plans and obtain the necessary permits for the development project. However, not long afterwards, Mr Formichelli left Parker Design, and told Mr Abdou that he wanted to do the work himself, originally on the same terms, but later, because of his financial position, Mr Abdou agreed to pay him, and 328NHF paid Mr Formichelli over $100,000. They did not make the final payment to Mr Formichelli because he had misrepresented what had occurred with the Council to the defendants. Mr Papadimitriou identified the plans and other documents prepared by Mr Formichelli for the development project, which was submitted to the Council on 25 January 2011.

159 Mr Papadimitriou gave evidence that, despite being assured by Mr Formichelli that the proposal for the 86 apartments in a four storey building on the Frankston property would be approved by the Council, that development could not be approved because of a town planning overlay which effectively limited developments on the Frankston property to three storeys. He said that Mr Formichelli must not have spoken to the Council prior to the application being lodged, or done any of the necessary research.

160 Following the rejection by the Council of the development application, Dr Farag, an associate of the defendants who was intended to be the main financial backer for the development project, arranged for an architect to meet with the Council and formulate a new development proposal for the Frankston property. Eventually, a proposal for a development containing 32 apartments was lodged with the Council, which Mr Papadimitriou said was met with in principle approval by the Council, although no town planning approval was formally issued. However, the development project did not proceed, because prior to the settlement date, someone lodged a caveat on the title to the Frankston property, so 328NHF could not borrow on it.

161 Mr Papadimitriou was taken by his counsel to a document which was headed '382-384 Nepean Highway, Frankston: Cashflow Analysis', with a date reference 'Amended: 10 October 2010',[68] which he said was a profit and loss projection prepared by the defendants for submission to banks for the purposes of raising finance. This spread sheet was based upon a development of 86 apartments and one shop, and showed a projected net profit for the development project of $12,755,975. Mr Papadimitriou said he believed that there would have been later versions of this document, as the number of apartments reduced.

162 Mr Papadimitriou's evidence about how he calculated the sum of seven to ten million dollar profit he told Mr Moussi the development project would generate was somewhat confusing, in that he seemed to be basing that calculation on the development project constituted by 32 apartments, which of course was not in contemplation at the time Mr Moussi made the advance.

163 Finally, Mr Papadimitriou gave evidence that the 138FF project has been completed. The building is finished, they have sold enough properties to repay the bank, and they are just waiting for the titles to come through so that they can settle on the properties.

164 Under cross-examination, Mr Papadimitriou gave further evidence about his experience in finance and property developments, and maintained that he was experienced in property development, having been responsible for evaluating and approving finance for property development, but also in undertaking property developments.

165 Mr Papadimitriou confirmed he told Dr Kambouris that he was bankrupt at the first meeting he had with him in a café in Oakleigh in early 2010, and that he spent time helping out others who needed his assistance, including projects where his wife had a financial interest.

166 Mr Papadimitriou confirmed that when he met Mr Moussi in June 2010 that he told him the defendants had a contract to purchase the Frankston property, but he did not tell him he had a signed contract, because Mr Abdou was still in negotiations with the vendor and the real estate agent, and the contract was unsigned. He also agreed that he told Mr Moussi that they had another investor coming in, notwithstanding the fact that Mr Waddell did not invest in the development project until October 2010. He agreed that the deposit paid in July 2010 was funded in its entirely from the advance.

167 Mr Papadimitriou gave evidence that the purchase of the Frankston property did not proceed because of the caveat lodged by the plaintiff, because it 'startled' the investor (presumably Dr Farag).

168 Mr Papadimitriou rejected the assertion that the statements made on the Search website were untrue, and the suggestion that Search had never carried out a successful property development. He again denied telling Mr Moussi that the defendants had the contracts to develop 200odd RSL properties, or that he showed Mr Moussi aerial shots of approximately 15 to 20 RSL sites. He stated that Dr Kambouris went to the RSL with the defendants on a number occasions, and he knew that the defendants were pitching to win the contracts to re-develop the RSL sites.

169 Mr Papadimitriou denied telling Mr Moussi that for every $150,000 Mr Moussi invested with the defendants, he would get a return of $900,000 in two years, but he did tell Mr Moussi that he would get a large return, and he would get 15 per cent of the profits on the development project. He did not dispute telling Mr Moussi that he hoped the development project would make a profit of $10 million, although that kept changing according to what Mr Formichelli said could be achieved on the site. He gave evidence that the defendants would have done a cash flow analysis, and that he would have been able to estimate building costs, because they had spoken to builders, and the builder was going to be Dr Farag. It was Dr Farag's building company that did the drawings and other documentation to get approval for the revised proposal for the development project.

170 Mr Papadimitriou recalled having a meeting with Mr Moussi at the Chelsea office, his wife's coffee shop, and going to inspect the Frankston property. He believed Dr Kambouris was also there. He also recalled having a further meeting a few days later, but that it was in a coffee shop in the ANZ building, not in Mr Abdou's car. He could not recall whether he or Mr Abdou told Mr Moussi that Mr Abdou had paid the deposit on the Frankston property.

171 Mr Papadimitriou denied telling Mr Moussi that the defendants were putting in fifty per cent of the funds to purchase the Frankston property, and said that the defendants explained to Mr Moussi how the transaction was structured.

172 Mr Papadimitriou did not accept Mr Formichelli's evidence that the defendants' dealings with the RSL ceased because the defendants failed to provide them with the information they required, and that the defendants provided the RSL with all of the information requested by them.

173 Other topics upon which Mr Papadimitriou was cross-examined included:

(a) whether he understood that his status as a bankrupt meant that he was prohibited from managing a company, and whether he effectively runs the companies in which his wife has an interest;

(b) whether any documentation about the development project had been provided to Mr Moussi;

(c) the expenses incurred by 328NHF during the course of the development project, and the destination of funds transferred from the 328NHF bank account;

(d) the payments made by 328NHF to Mr Formichelli and Mr Di Pietta, and the reason why certain amounts remained unpaid; and

(e) the reason why 328NHF could not complete the purchase of the Frankston property.

174 On reexamination, Mr Papadimitriou gave further evidence about the following matters:

(a) the payments made by 328NHF to Mr Formichelli and Mr Di Pietta, and when Mr Formichelli and Mr Di Pietta commenced work on the development project; and

(b) his employment and experience in the financial services industry.

175 Mr Papadimitriou was taken to a number of invoices, and a payments journal of 328NHF,[69] and gave evidence that 328NHF paid Mr Formichelli and Mr Di Pietta over $90,000. From reviewing the payments journal, which showed a payment to Mr Di Pietta in September 2010 and a payment to a civil engineer in August 2010, he was able to conclude that Mr Formichelli must have left Parker Design before August 2010.

176 The defendants also called Mr Ayman Abdou, a director of Search and 328NHF, and the original purchaser of the Frankston property. Mr Abdou gave evidence that he is currently in the garage door sales business and the property development business. His business and professional background is variously as an accountant, then in telecommunications, property development, and the garage door business. At one stage, he and his brothers owned the largest Optus dealership in Victoria, before he left that business and his brothers went on to found Telechoice.

177 Mr Abdou first became involved, with his brother, in property developments in the early 1990s, often with other members of the Coptic Orthodox church community, through which he knows Dr Farag. The largest property development with which he has been involved is a 40 unit development on the corner of Springvale and Westall Roads, along with a 13 unit development in Mordialloc, and a six storey apartment block in Port Melbourne.

178 Mr Abdou was asked about his dealings with Dr Kambouris and Mr Moussi. Mr Abdou told the Court that he first became aware of Dr Kambouris in or about January 2010 when Mr Papadimitriou told him that he had met a scientist or chemist who had a great idea about packaging. He attended a meeting in Geelong where Dr Kambouris made a presentation to a group of four or five potential investors about his packaging invention. He discussed investing in the packaging invention with Mr Papadimitriou, but they only had funds for the 138FF project, but agreed to keep talking with Dr Kambouris. Dr Kambouris and Mr Papadimitriou became very good friends, and spoke on the telephone each day.

179 Mr Abdou gave evidence that he and Mr Papadimitriou decided that investing in the packaging invention would be too expensive, but became interested when Dr Kambouris told them about Botanical Water. He said that Dr Kambouris told them that Mr Moussi was the inventor, but that he knew all about it. Dr Kambouris proposed that they work together in partnership to commercialise Botanical Water, and over the next few months the defendants worked to secure the intellectual property and draw up the Information Memorandum.

180 Mr Abdou gave evidence that he believed Dr Kambouris left his employer in April 2010, in the context of a dispute between them about intellectual property, following which Dr Kambouris called him in a panic about his financial situation. Mr Abdou bought him a new mobile phone and a new laptop, agreed to pay him $6,000 per month, and told him to 'come in and start working'. He said that in MayJune 2010 Dr Kambouris spent at least three to four days a week at the Chelsea office, working on a new invention, but also attending meetings to raise funds for the commercialisation of Botanical Water. Later his visits dropped off to one or two days a week. Dr Kambouris always stayed with Mr Moussi when he was in Melbourne, and eighty per cent of the time Mr Abdou collected him from Mr Moussi's apartment and brought him to the Chelsea office. They all became good friends, and would regularly have dinner together at the end of the day.

181 During the majority of the time that Dr Kambouris was at the Chelsea office the defendants were working on the 138FF and Johnson Avenue projects, with Mr Papadimitriou and Dr Kambouris working with other professionals on the Botanical Water project. Occasionally, Brett Barr and Matthew Harle would come into the Chelsea office.

182 Mr Abdou gave evidence about his dealings with Parker Design and Mr Formichelli. The defendants met the principals of Parker Design in or around January or February 2010 when they engaged them to carry out the architectural design works for the 138FF project, with Mr Formichelli doing most of the work. In around March 2010 they were introduced to the Frankston property by a local real estate agent. However, as the defendants did not have the funds to purchase the Frankston property and find the expenditure required to obtain all of the necessary approvals, they approached the principals of Parker Design, who agreed to do all of the architectural drawings, design work, all of the council approvals and permits and consultants, and invest about $200,000 in cash, in exchange for which they would obtain a 25% share in 328NHF.

183 The thrust of their agreement was documented in a letter from Search to Mr Formichelli dated 6 April 2010,[70] signed by Mr Abdou, which stated as follows:

We refer to our recent discussions and confirm our intent to work with you to our mutual benefit on future development projects which you introduce to us.

As part of this arrangement we confirm that on each of the projects we will employ Parker Design Services Pty Ltd to prepare all plans and specifications for town planning, construction and interior design purposes and will follow Parker Design's recommendations in respect of the employment of related consultants such as engineers, building inspectors, traffic, heritage and other consultants. In addition we confirm that we will secure an equity and/or profit share for Parker Design in each such project. As you are aware the equity share will vary with each project depending upon the structure of same.

184 Mr Abdou was asked about what Dr Kambouris knew about what the defendants were doing with their property developments. Mr Abdou said that Dr Kambouris was often bored while he was at the Chelsea office, and he would look at and comment upon the plans for the Johnson Avenue and 138FF projects. The defendants offered Dr Kambouris an apartment in the 138FF project on the basis that payment of the deposit could be deferred until Dr Kambouris started making a financial return on the Botanical Water project.

185 Mr Abdou gave evidence that the defendants took Dr Kambouris to a few meetings at the RSL clubs at Glen Waverley and Hawthorn because they felt bad about leaving him at the Chelsea office by himself, and they were not going to leave him in the car while they attended meetings.

186 Mr Abdou gave the following evidence about the defendants' dealings with the RSL:

What was the purpose of those meetings?---They were just introductory. We had a meeting from the guy from ANZAC House, he came and spoke to us. Our whole thing is that if we could put the deal together, and then we could find the funders to fund the money. So what we were just trying to get the deal together. What they wanted to work out exactly what the RSL wanted, want the developer would want, and if it was enough money for both people to be happy, then the project would go ahead. The only reason the project didn't go with Waverley is that the RSL wanted too much and there was no profits for the people investing their money, and we just couldn't come to an agreement that everybody was happy, there was enough money for both.

It has been said in evidence that there were various documents relating to the RSL that were in your office. Do you recall that?---There was three pictures. There was one picture that Formichelli gave of the proposed building that he wanted when he was working at Parkers at the time, that he designed that's going to on top of that Waverley area. That was one picture. 3D poster, A3. And there was three aerial views of Hawthorn club, Beaumaris and Sunshine. And they were the only three that these clubs at that time were interested in doing something, and Formichelli brought it in to show, if we could find any investors that would like to put money into developing it.[71]

187 Mr Abdou gave evidence that he first met Mr Moussi in South Melbourne in late February/early March, after he and Mr Papadimitriou returned from visiting Dr Kambouris in Mildura. That was when they agreed to get together and form a company to commercialise Botanical Water.

188 When asked about when the defendants first had discussions with Mr Moussi about the development project, Mr Abdou gave the following evidence:

The chat probably first came up because Andrew was always interested in what we were doing and how we were doing it. He also thought it was a bit fascinating. We had I think - I think it was Mother's Day and I think May, Mother's Day I had Andrew and Dr Bruce and his wife and his kids at my place in Carrum Downs for Mother's Day dinner, lunch, so I picked up Andrew from his place in Docklands I think at the time, and then we went and picked up Bruce and his wife. We put them in a hotel in Prahran Quest where they stayed in, and they followed us in their car back to my place because they didn't know how to get there, and we had dinner and I think I might have mentioned something. We were talking about the water and names and stuff like that during that night, and I had John as well and his wife and his daughter there at my place. We had - the biggest thing is that, you know, we - everything thought that we were going to be millionaires out of - you know, everyone's going to make $2m out of the water and they were very excited about that, but we had a little bit, maybe a five minute chat about 328 at that time and said that, you know, we're thinking we might be able to do that because Parkers is coming in. They're going to be paying the deposit and they're going to be doing all the - the initial deposit was going to come from Parkers and they were going to do the - all the Council and plans and permits. They were handling that. So that's our first time that we ever said anything about it, but we didn't ask Andrew to come in because we didn't need Andrew to come in. We didn't need anyone then.[72]

189 Mr Abdou described his house in Carrum Downs as a 'normal' house, single level, probably worth about $400,000, with three bedrooms and a study.

190 Mr Abdou gave the following evidence regarding how the proposal that Mr Moussi invest in the development project came about.

It was first discussed through Bruce. Bruce was very interested in doing something together with the properties. He wanted to invest somehow and he said, 'Look, I just don't have the money right now', and he says, 'but Andrew could come up with the money', and Andrew's had - his - Andrew's uncles own major hotel chains like The Waltzing Matilda and something at Doncaster and they do a bit of property development as well, and Andrew used to work with them, so Andrew knows all that side about property developments, and he said, 'Well, Andrew knows all that. Andrew's very good. He'll look at the project and if it's good maybe, you know, he' - and Andrew and Bruce, you know, they're very close. They're like, you know, they're partners, brothers for 20 years, whatever it was, so they - they've always been - if Bruce wanted to do something Andrew would help and if Andrew wanted to do something Bruce would help and they had that relationship together. So he said - I said, 'Yeah, no worries, we'll talk to Andrew and if he wants to come in', and that's when - the trouble happened with Formichelli at work, Parkers. Ashley rang him up when I was with him, said something really bad to Formichelli, like, you know, 'We don't want you back. We want to cast you away'. Formichelli - - - [73]

...

During that time, because of the agreement - disagreement that Formichelli had with his bosses and they for some reason didn't want him there any more, the deal with Three Point Design went south and they didn't want to be involved any more. So it was during that time when the cheque was done, you'll see that that's the time that we found out Three Point Design didn't want anything to do with it any more, so I said, 'Well', they were going to pay the deposit and do the plans and permits, and I said to Andrew, 'Well, if you want to invest in that property, I need the money to put the deposit down', and Andrew said, 'Well, I still have to raise the money. I've got an apartment in', whatever it is, 'I need to raise it', so he started working on raising the money and I'd ring him up every three or four days, 'Have you got it yet?', and then he said, 'Yeah, the money's in the bank. Come down and pick up a cheque', so that's the whole reason why I went down to pick up a cheque. Instead of him coming to us, I went to him. So I got the cheque and put it in the bank the next day straight away, put a special clearance on it and paid the deposit as soon as I could.[74]

191 Mr Abdou gave the following evidence about his discussions with Mr Moussi leading up to the making of the advance:

Well, he's - Andrew's been into the office a couple of times after work, when he's finished work to pick up his car or - I think, no, maybe once or twice Andrew's come and he's come on a Saturday, and we sat down and - on the computer when we did the visibility of the property, of 382, check how much apartments we are getting on it that we think we should be able to get, what the current sales of it is, how much its construction and costings and bank interest and everything else and came up - there was always around the $10m mark profit that was showing at the time when we first did it initially, so we said, because him and Bruce are doing it, him and Bruce were close to us, I said - they were putting in $500,000 for 25 per cent, 'If you put in 250', which is all he could afford because we wanted 500, but all he could afford was 250 and he said he could have 15 per cent, because I said to him, 'it doesn't work out', you know, 'at 500, 25 per cent that you get 15 per cent, but we're friends and, you know, we'll all make money together. This one's a good one', and that was it.

Did you tell him how much profit was expected on this project?---I said to him his profit would be 15 per cent of the total, so once we sell - once we sell the apartments and pay all the bills, whatever profit is left in the company it's 15 per cent is his profit. Didn't have an exact figure because we said that everything changes, but there was never an exact figure given, but, you know, we worked it out and he's not, you know, Andrew's pretty intelligent. He knew what it was. You know, he's very smart, so he knows.

You have heard evidence that there was a meeting in cafés. Do you recall that?---Yes, we've had constant meetings in cafés.

One in particular is a meeting in a café with you and Mr Moussi where you discussed the investment in this project. Do you call that?---Yes, I remember there was one in a café and there was one at Nando's and we've had a few, but yes, I remember that one in the café.

Can you recall what, if anything, was said at the café meeting?---Conversations are always the same. It's that once we do - once we do the property we have to - once we settle on a property we're going to have to - before we settle we have to have at least 50, 60, 70 per cent of the properties sold by the agent so we could get a construction loan and we always said that our best way of getting a construction loan is to try to have as many townhouses sold or apartments at this time sold.[75]

192 Mr Abdou had no recollection of having a meeting in a car, saying that the defendants usually met with Mr Moussi at a café in the ANZ building. When questioned about the meeting on 14 July 2010, Mr Abdou gave the following evidence:

What was the purpose of that meeting?---That was when I rang him in the afternoon and asked him has he got the money in the account and he said, 'Yes, come down and pick up the cheque', and I came down to pick up the cheque and he said, 'but I've got a - the one - the transfer that you gave me is no good and I've got a transfer from the ANZ that's a proper one. When you come you sign that one', and I said, 'No worries. It's the same thing to me'.

When you say the transfer you gave him, when did you give him a transfer?I gave him a transfer about a week or two before that. I gave him a transfer because he's already done his paperwork for the loan and everything and, you know, we trust each other. it was no big deal, so I said to him, 'Here's the transfer. You can lodge it whenever you want', and he had feasibilities because we did it together and we worked it out when he was in the office. He seen a copy of - we had a copy of the contract, but not signed, in the office and Andrew seen that. There was nothing really hidden because, you know, it's not like we were purchasing something from overseas. We were purchasing something, you know, two minutes down the road. They saw feasibilities. They did the feasibility with us in the office. Bruce used to do - sit down and work out the feasibility for it with me in the office, and the office is two desks, you know, and it's only a four by four room so it's not that much.[76]

193 Mr Abdou said that a number of matters were discussed at the meeting on 14 July 2010, but that the predominant subject was the Botanical Water capital raising and Information Memorandum. Mr Abdou identified a share transfer form[77] as the form he provided to Mr Moussi before 14 July 2010, and said that at the meeting at Mr Moussi's apartment on 14 July 2010 he signed an ANZ transfer of shares document provide by Mr Moussi. He believed Mr Moussi kept two share transfer documents. Mr Abdou also identified a document headed '328NHF Pty Ltd (ACN 144 975 986) Register of Members'[78] which showed the transfer of 15 shares to the plaintiff, which Mr Abdou says he created the next day after he returned to the Chelsea office.

194 Mr Abdou gave evidence that the reason why the advance was allocated in the way that it was ($15 for the purchase of the shares, and $249,985 by way of an interest free loan) was for tax reasons, so that Mr Moussi would not have to pay tax on the repayment of the loan. There was some discussion about Mr Moussi keeping some apartments in lieu of his profit share.

195 Mr Abdou identified the minutes of the meeting of directors held on 15 July 2010,[79] and said he did meet with Mr Formichelli on that day and explain the transaction to him, although Mr Formichelli was not terribly concerned with matters of capital raising.

196 Mr Abdou gave evidence that after receipt of the advance, he arranged a special clearance from the bank and paid the first tranche of the deposit to the vendor's real estate agent. He told the real estate agent that the purchaser under the contract of sale should be himself 'and/or nominee', and about a week or two later he nominated 328NHF as the nominee. After the contract of sale was signed the defendants started working through the requirements for Council approval, including what consultants were needed. They needed to do a soil test almost straight away. This was being arranged through Mr Formichelli, and later also Charlie Di Pietta. Mr Formichelli coordinated the provision of consultant's reports for the development project, approximately eight or nine in total.

197 Mr Abdou gave evidence about the Council's refusal of the original proposal for 86 apartments, the difficulties the defendants encountered with Mr Formichelli, and the defendants' subsequent dealings with Dr Farag and the Council regarding a scaled back proposal for the development project. The revised application for town planning approval was before the Council when the writ in this proceeding was issued and the plaintiff lodged a caveat against the title of the Frankston property, which 'stopped everything'. When asked what happened regarding the purchase of the Frankston property, Mr Abdou gave the following evidence:

All the people that were going to come to the bank with us - we couldn't get the town planning, so we couldn't get the uprise in the - in the land value, and then the people that were going to come in and help us with the investment, they backed out as well. So we defaulted on 1 July, we got an extension through Chris, I had a few meetings with the owner and he gave us a couple of months more, but I couldn't - - - [80]

198 Counsel for the defendants put various allegations made by the plaintiff to Mr Abdou. Mr Abdou's responses, in summary, were as follows:

(a) he denied telling Mr Moussi in May or June 2010 that he and Mr Papadimitriou were successful business persons who had access to millions of dollars for property development;

(b) he denied telling Mr Moussi that the defendants operated their developments through All-States and Search;

(c) he denied telling Mr Moussi that the defendants had 200odd contracts on foot to develop RSL clubs, including Hawthorn and Glen Waverley. He does not believe that he discussed the RSL projects directly with Mr Moussi, but that Mr Moussi may have been present when he and Mr Papadimitriou discussed the RSL projects;

(d) he denied telling Mr Moussi that for every $150,000 he invested with the defendants, he would receive $900,000 in two years, on the basis that a project always takes longer than two years to complete. It normally takes twelve to fifteen months to get town planning approval, then another three to four months to get building permits and a construction loan; so two years would go by before construction could start, then another year and a half to build;

(e) he denied telling Mr Moussi that an investment with the defendants was no risk, saying

No one ever says there is no risk in anything. I mean, we always say that the bank requires us and the quantity surveyor requires us before we go to the bank that we have to sell about [x] per cent ... selling 50, 60, 70 per cent of your stock before you go for a construction loan.[81]

(f) in response to Mr Moussi's allegation that the defendants told him they had a contract to purchase the Frankston property, Mr Abdou stated that:

Well, we had the ability to buy it and we needed his investment to get - to put the deposit down so that was - that's from day one. I mean, there was no secret in that, and that's the whole reason when Parkers left why we needed him'.[82]

(g) he denied telling Mr Moussi that Mr Moussi would own the Frankston property, but that he was told that he would own 15 per cent of the shares in the company that owns the Frankston property;

(h) he denied telling Mr Moussi that he was an owner of Telechoice. He said that it would have been 'weird' if he had said that, given that Mr Moussi had been to his home, and an owner of Telechoice would not live in a three bedroom house in Carrum Downs;

(i) he denied telling Mr Moussi that the deposit had been paid prior to Mr Moussi making the advance, because he needed the advance to put the deposit down;

(j) he denied telling Mr Moussi that there were investors going in for ten per cent, but he would have told him that there were investors going in for the balance of the shares, because that's what they do: if Dr Farag had come in he would have taken 50 per cent of the shares in 328NHF;

(k) he denied telling Mr Moussi that the defendants were investing fifty per cent of the funds needed to purchase the property, on the basis that if he had fifty per cent he would not have needed the funds from the plaintiff, but instead would have put the deposit down and obtained all the Council permits himself;

(l) he denied telling Mr Moussi that he could raise $250,000 through All-States he assumed that Mr Moussi would go through ANZ;

(m) he denied telling Mr Moussi that he could use their solicitor, Mr Harle to set up an appropriate structure for the investment and to obtain advice, saying that if he was going to recommend a solicitor he would recommend his solicitor from Enterprise Law;

(n) he denied telling Mr Moussi that he would make 15 per cent or 25 per cent return on a profit of $15 million; and

(o) in response to Mr Moussi's allegation that Mr Abdou told him at the 14 July 2010 meeting that Mr Abdou would provide Mr Moussi with copies of the contract of sale, the architectural drawings, the predicted financials within a few days of making the advance, Mr Abdou stated:

Yes, and he got all that before - a week or two before he even got - when he first put - did his loan application. he came in to the office that night after work with Bruce. I'm not sure if he - he had a copy of the contract that I was going to sign because I had an unsigned copy, but he had all the plans and feasibilities and - I mean, Andrew looked at all that before he puts any money in anyway. I mean, Andrew's not, you know, he's intelligent, so it's not that he - Andrew would never give you $5 before he knows what he's giving it to you for.[83]

199 Mr Abdou gave evidence that he was aware that Mr Moussi was going into partnership in a restaurant business on Albert Park Lake. Mr Moussi showed Mr Abdou his website which showed that he organised parties for entertainers and 'people on television'.

200 Mr Abdou gave evidence that he had another investor interested in the development project, Mr Aziz, after Dr Farag withdrew from the development project, with whom he formed Beach Front.

201 Finally, Mr Abdou was asked whether he was ever present when Mr Papadimitriou discussed his financial status with Mr Moussi. Mr Abdou replied as follows:

I was there twice when he spoke with Dr Kambouris about being bankrupt because he asked him as well that you know, we'll put the shares into your name for the water and stuff, so, you know, Bruce knew about it, about him being bankrupt.

When you say twice. What occasions was it?---Both times - one we were having dinner with Dr Bruce at his place and we were talking about the shareholdings and stuff like that.

HER HONOUR: Sorry, Mr Abdou when you talk about 'his place'?Dr Kambouris' place in Mildura.

All right?---During dinner, And another time would have been probably in our office when we were all sitting down together having a chat when we were doing the IM, as well, especially. That would have come up quite a few times. But you know, also John from Strategic Intelligence Group, John - can't think of this name now, surname, he also knew. It wasn't hidden from anyone. I don't think it was - everyone knew about it.[84]

202 Mr Abdou was briefly recalled and examined by his counsel, with leave, after the plaintiff successfully applied to make an amendment to its statement of claim, and Mr Chakir was called by the plaintiff. Mr Abdou gave the following evidence:

(a) in July 2010, it was always intended that 328NHF be the owner of the Frankston property, and all of the deposit cheques and architect's and other consultant's fees, were paid by 328NHF;

(b) on 15 July 2010 he signed a nomination form[85] nominating 328NHF as the purchaser of the Frankston property, and he believed that form was mailed directly to the vendor (that is, not to its solicitors);

(c) when asked why he did not nominate 328NHF just prior to the settlement date, Mr Abdou gave the following evidence:

Because we never had funding. We had a problem - we were going ahead with 328 and put Dr Farag as director of the company and we were going to get funding. Then we had the problem with the caveat and then we had a writ. Once we had a writ Dr Farag said, 'You got no chance, any company with any sort of legal procedure against it is not going to get finance'. So we got into panic mode and we thought how are we going to - we can't get finance now. Then we got our first rescission in July, we were just rushing around trying to get someone to help with it. It was back to Mr Rashad Aziz and he said, 'Look I could help you try to get out of this. The only way you could do is set up another company that doesn't have anything on it, I put my name as director'. I try to get the funding and he was going to take 60 per cent of that to do this. And we started going through the Bank of Queensland trying to get funding. And that is how we went from 328 to Beach Front. We were just trying to settle and not lose money for all the investors that put in[86].

203 Mr Abdou was asked about what impact the issue of this proceeding had upon his efforts to raise finance for the purchase of the Frankston property, and responded as follows:

Well it impacted as soon as that writ came out in May on 328 I had to tell Dr Farag because he was director. And he said to me, 'Well that stuffed it up. I don't want any headaches. Find someone else'. I said, 'Okay', so that took a while before I found Mr Rashad Aziz. And it took a few meetings to convince him to help and that's - we got on to Beach Front, I think, in June.[87]

204 Mr Abdou gave evidence that he sought finance through the Bank of Queensland, and obtained an approval for finance subject to valuation. The valuers took a long time, and the vendor did not want to wait any longer, and at the end of July 2012 issued the final rescission notice.

205 Mr Abdou was asked what would have happened to the shareholding of the plaintiff had Beach Front been nominated as the purchaser of the Frankston property, and responded as follows:

Beach Front was - it got it funding and all the shareholders from 328 would have got their same shareholding in Beach Front. So there was Greg Waddell, Play Australia and A J Phoenix. They would have moved on to Beach Front and then it would have got its funding and that was part of the agreement that we had anyway, that shareholding goes on to Beach Front.[88]

206 When asked when he formed the view that he would not be able to nominate 328NHF as the purchaser of the Frankston property, Mr Abdou replied as follows:

As soon as I got the writ and I spoke to Dr Farag and he said to me that - and we had a person from ANZ that he was there in his office when we were talking. And he said, 'You got no chance when you have a writ against the company to get finance. It just kills the company.'[89]

207 Mr Abdou was cross-examined in two stages, with Mr Chakir being interposed during the course of Mr Abdou's crossexamination.

208 Mr Abdou was questioned at some length about the role of Beach Front. Mr Abdou gave evidence that Beach Front was a vehicle for the investor, Mr Aziz, who was coming in to 'settle on the property'. He was to take 50 per cent of the shareholdings in Beach Front, and the share holdings in 328NHF would go across to Beach Front. However, Beach Front was never actually nominated as the purchaser, and he believed that the reason why the rescission notice issued by the vendor's solicitors was addressed to Beach Front was because his solicitors would have told the vendor's solicitors that it would be Beach Front that would be settling on the property.

209 Mr Abdou was questioned about his role in Telechoice, and taken to his profile in the Information Memorandum. He gave evidence that he did not found Telechoice, but that at one stage he managed it. When asked whether the profile in the Information Memorandum was plainly misleading, he replied 'Not totally.' When asked whether the description of himself was consistent with a representation he had made to Dr Kambouris and Mr Moussi, he replied as follows:

How can you say that when they - that's untrue. They came to my place. They visited me. They saw my kids. They saw where I lived. They saw what car I drive. They saw the office. You've got to be an idiot to think that I'm a millionaire when I've got like a - when you're driving a twenty thousand dollar car, you've got to say something that's modest.[90]

210 Mr Abdou was questioned about the intended role of Parker Design in the development project, and his evidence that Parker Design was going to contribute $200,000 to the purchase of the Frankston property. Mr Abdou gave evidence that the proposal was that Parker Design would contribute $200,000 in cash, and $300,000 'in kind', through the preparation of plans and other town planning and construction documents, commissioning consultants, and obtaining permits.

211 Mr Abdou was asked whether he understood that upon signing of the contract of sale, he was liable to pay the deposit and to perform the contract. Mr Abdou said he had an arrangement with the vendor's real estate agent that the contract was held by the agent until he paid the deposit, but in any event he never had any intention not to pay the deposit.

212 Mr Abdou confirmed that 328NHF was not incorporated until 1 July 2010, and therefore his earlier evidence that he gave Mr Moussi the share transfer forms shortly after Mr Moussi made the loan application could have been incorrect. Mr Abdou, unprompted, went further and said:

I always would have said Andrew's always received everything that he asked for, he had access to the office, Bruce had access to the office, we were always there together. It's - we were four friends, like four brothers, we were always together all the time, so everyone had access to everyone.[91]

213 Mr Abdou was asked about whether he could put a timeframe upon when Parker Design withdrew from the development project. Mr Abdou said he believed it was about mid to late July, based upon certain arrangements he had in place regarding Mr Formichelli's motor vehicle.

214 Mr Abdou was questioned about the dealings between the defendants and the RSL. Mr Abdou said that Mr Formichelli and an RSL official had brought conceptual drawings for the Waverley site and aerial pictures for three other sites to a meeting at the Chelsea office. While he accepted that he and Mr Papadimitriou would have to be vetted by the RSL, they were to be the project managers, not the investors. The defendants had given the RSL everything they requested.

215 Mr Abdou agreed that it is likely that he or Mr Papadimitriou would have told Dr Kambouris or Mr Moussi that other investors were going in for ten per cent, because that is the way the defendants operated: keeping shares then selling them off to investors to keep the project going. He was taken to the loan agreement between 328NHF and Gregory Waddell and said that is something he could have stored on his computer. When it was pointed out that there was no equivalent document for the transaction between 328 NFH and the plaintiff, he replied:

Your client was different. Your client was good friends. We weren't - we weren't people that didn't know each other.[92]

216 Mr Abdou was questioned in some detail about the accuracy of the ASIC records for 328NHF, and the fact that a number of transactions in relation to the shares of the company were either not recorded, such as the transfer of shares to Mr Waddell and his associate, or were recorded well after the event, such as the transfer of shares to the plaintiff. Mr Abdou's evidence on this matter was rather vague and confusing, but he did seem to be suggesting at some stage that the ASIC records were only updated at the time when annual accounts were prepared.

217 The second stage of Mr Abdou's crossexamination took place after the plaintiff amended its statement of claim, after Mr Chakir had given his evidence, and after Mr Abdou was briefly examined by his counsel regarding the issues raised by the amendments to the statement of claim and the evidence of Mr Chakir. The second stage of his crossexamination traversed, among other things, the following matters:

(a) whether Mr Abdou's previous evidence that the rescission notice was issued to 328NHF was accurate;

(b) the incorporation date and shareholdings of Beach Front;

(c) whether, if Beach Front had been nominated as the purchaser of the Frankston property, the plaintiff would have received any return on its investment, and whether by incorporating Beach Front after the writ was issued, he was taking steps to render any judgment in favour of the plaintiff in this proceeding useless;

(d) whether he had ever informed Mr Moussi that 328NHF had not been nominated as the purchaser of the Frankston property;

(e) whether he was aware of his obligations to notify ASIC of changes to shareholdings and other company details, and whether he instructed 328NHF's accountants to effect changes in shareholdings for 328NHF;

(f) when Mr Abdou gave Mr Moussi the share transfer form for the plaintiff's shares in 328NHF;

(g) whether Mr Abdou controlled the bank account for 328NHF, and the destination of funds transferred from 328NHF;

(h) whether Search charged 328NHF for consultancy services, and whether Mr Abdou transferred funds from the 328NHF bank account for his own personal purposes; and

(i) when the plans and feasibility studies for the development project were prepared and completed, and whether they were provided to Mr Moussi prior to the plaintiff making the advance.

218 In relation to the proposed nomination of Beach Front as the purchaser of the Frankston property, and whether he told Mr Moussi about this, Mr Abdou replied as follows:

We were trying to save a sinking ship that he caused. He put the hole in the company. We couldn't - trying to make it survive and not lose all of the monies of the investors and myself, ... And once the finance would have been approved for Beach Front, then all of the shareholdings would have been distributed from my name to everybody else and we would have been settled.[93]

219 In relation to the question of when the plans and feasibility studies were done for the development project, Mr Abdou replied that plans would have been prepared by Mr Formichelli prior to taking them to the Council, while the 'feasibility' was an ongoing process, which would have started by July 2010, and regularly updated.

220 Mr Abdou was briefly re-examined. He gave evidence that the profit and loss statements for 328NHF were prepared by his accountants, and that the amount of $147,460 referred to in the balance sheet as at 30 June 2012 as a loan by him was in fact owed to him by 328NHF at that date. He explained the calculation of the management fees charged to 328NHF by Search, being that a proportion of the rent and overheads for the Chelsea office were allocated to each of the projects undertaken by the defendants.

221 The plaintiff's case can be summarised as follows:

(a) the defendants are conmen. In order to induce Mr Moussi to use his only asset to raise money for the development project, they made extravagant claims about their experience and their financial standing and resources. The defendants made extravagant claims about the likely profitability of the development project, or indeed any investment made with them;

(b) the representations made by the defendants, as pleaded in the statement of claim, were made with the intention of misleading Mr Moussi, and as such, their misleading character, and the likelihood that they did in fact induce Mr Moussi to make the advance can be inferred. Mr Abdou had a significant motivation to make the representations as he had signed a contract on 1 July and as such was liable to pay the deposit;

(c) at the very least, it is sufficient for the plaintiff to establish that the defendants had told Mr Moussi that they had paid the deposit required to purchase the Frankston property, and as such 'had the contract' when in fact the deposit had not been paid, and Mr Papadimitriou in his evidence conceded as such; and

(d) indeed, contrary to the defences of the defendants, 328NHF never had the right to purchase the Frankston property, thus undermining the defendants' position that the plaintiff acquired a valuable right by reason of the making of the advance. Further, the conduct of the Mr Abdou in establishing Beach Front for the purpose of completing the purchase of the Frankston property after the issue of this proceeding illustrates the lack of commercial morality of the defendants, and amounts to conduct aimed at frustrating the processes of the Court.

222 Counsel for the plaintiff submitted that, viewed in its totality, the defendants' conduct was misleading and deceptive. The defendants advanced no evidence to suggest that they were experienced property developers: rather, they were 'wannabe' property developers. Further, the defendants cannot escape responsibility for their conduct by imputing the knowledge of Dr Kambouris to Mr Moussi: the evidence is unclear as to when Dr Kambouris was spending time in Melbourne with the defendants, and Mr Moussi was away in the US on the property trip for much of May 2010. There was no evidence that Dr Kambouris and Mr Moussi communicated with each other regarding property investments.

223 Counsel for the plaintiff submitted that there were a number of matters which reflected adversely upon the defendants' credibility, including their promotion of Mr Harle, a disgraced former solicitor, as their 'in-house' solicitor, the manner in which the transactions arranged by Mr Abdou breached the constitution of 328NHF, the state of the ASIC records of 328NHF, the use by Mr Abdou of the 328NHF bank account as a 'slush fund', and the use by Mr Papadimitriou of his wife and daughters as 'proxies' for his business activities during his bankruptcy.

224 In relation to the 'persons of substance' representations, counsel for the plaintiff submitted that the representation that the defendants were successful business persons that had access to millions of dollars of funds for property development was false. The development project was the defendants' first attempt at a large scale property development. The reason why they did not win the RSL contracts was because they could not satisfy the RSL they had the necessary financial standing and experience, and a due diligence would have revealed Mr Papadimitriou's bankruptcy. Mr Abdou's profile in the Information Memorandum is consistent with this representation. The representation that for every $150,000 invested with the defendants the investor would generate a return of $900,000 in two years was consistent with the $10 to $15 million profits predicted by the defendants with respect to the development project. The defendants' evidence that Mr Papadimitriou's bankruptcy was disclosed to Mr Moussi is implausible: why would anyone want to invest with a bankrupt? Finally, if the defendants were who they said they were, they would have easily been able to find another investor and pay back Mr Moussi in October 2010 when he requested that the advance be refunded to the plaintiff.

225 In relation to the allegations regarding the development project itself, counsel for the plaintiff pointed to the evidence given by Mr Moussi to the effect that the development project carried no risk.

226 Further, Mr Moussi's evidence was that he had been told that Mr Abdou had paid the deposit for the Frankston property a few days after the 5 June meeting, some weeks before the date on or about which the contract of sale was signed (1 July 2010). Mr Papadimitriou's evidence was that when he met with Mr Moussi in June 2010 he told him that 'they had a contract', despite conceding that the contract had not been signed at that time. Mr Papadimitriou's statement conveys that the defendants had an enforceable contract, which in turn implies that a deposit had been paid, and as such was deliberately misleading. Mr Moussi's evidence regarding his reliance upon the fact that the deposit had been paid was unequivocal, and the plaintiff ought be entitled to judgment on that matter alone.

227 In relation to the representation that Mr Moussi or his nominee would own 15 per cent of the Frankston property, or the investment vehicle which would purchase the Frankston property, it was noted that Mr Abdou retained the right to purchase the Frankston property. The critical distinction between Mr Moussi's version of events (that the plaintiff purchased 250,000 one dollar shares) and the defendants' version (that the plaintiff purchased 15 one dollar shares) was that on the plaintiff's case, it demonstrated that 'real money' was going in from other investors to finance the development project.

228 As for the representation that there were other investors 'going in' for ten per cent, this was admitted by Mr Papadimitriou, even though there was only one investor, and this occurred some months after the making of the advance. Counsel for the plaintiff suggested that it was strange that Mr Waddell was not called to give evidence.

229 As for the issue about the question of what documents the defendants provided to Mr Moussi, counsel for the plaintiff submitted that Mr Papadimitriou's evidence that Mr Moussi had access to the documents because Dr Kambouris had access to the photocopier in the Chelsea office was bizarre, and Mr Abdou's evidence that the documents were provided before the contract of sale was signed and the plans prepared, and that share certificates were issued before 328NHF was incorporated, was also bizarre.

230 Counsel for the plaintiff made a number of criticisms concerning the credibility of the defendants' evidence. He submitted that the defendants' evidence that they only approached Mr Moussi after Parker Design withdrew from the development project cannot be true, as this did not occur until late July 2010. There were a number of matters about which the defendants gave evidence that only emerged during the course of crossexamination, particularly during Mr Abdou's evidence, which were not put to other witnesses. These included, among other things:

(a) that Parker Design was going to contribute $200,000, or $500,000 to the development project;

(b) the conversation he allegedly had with Mr Moussi at the Chelsea office regarding the financial aspects of the development project and the size of Mr Moussi's investment in the development project;

(c) the assertion that Mr Abdou provided Mr Moussi with a share transfer form a matter of days after Mr Moussi completed the loan application;

(d) that the plans and feasibility studies for the development project were provided to Mr Moussi before the plaintiff made the advance;

(e) that Mr Aziz was going to take fifty per cent of the shares of the company that settled on the purchase of the Frankston property, and that Mr Aziz advised Mr Abdou to set up a new company;

(f) that the reason why the RSL contracts did not go ahead was because Mr Formichelli joined forces with another developer behind the defendants' back;

(g) that there was a side agreement between the vendor that Mr Abdou did not need to pay the deposit on the Frankston property upon signing the contract;

(h) that his accountant was responsible for ensuring share transfers to the plaintiff and Mr Waddell were registered with ASIC; and

(i) Mr Moussi's uncle owned the Waltzing Matilda hotel and Mr Moussi was an experienced property developer.

231 As for the defendants' criticisms of the evidence called on the part of the plaintiff, counsel for the plaintiff made the following remarks:

(a) the plaintiff's claim in the statement of claim, as particularised, was largely consistent with the claims made in the 23 September email;

(b) Mr Moussi's evidence that he would get his money back was not inconsistent with his version of the transaction, because of course he was going to get his money back if the development project made a profit;

(c) Mr Moussi's reference to it being a 'sweet deal' for the defendants because they would get a share of the development project without having to put any of their own money in, was, viewed in context, a reference to the Botanical Water project, not the development project; and

(d) Mr Moussi did not lie about tracking down and meeting with Mr Formichelli. Mr Formichelli was probably mistaken in his evidence that he met with Dr Kambouris.[94]

232 The thrust of the defendants' case is that the inconsistencies between the pleadings, other articulations of the plaintiff's claim in correspondence in 2010 and 2011, and the evidence given on behalf of the plaintiff in both examinationinchief and under crossexamination means that the plaintiff simply has not made out its case that the representations as pleaded had been made by the defendants, let alone relied upon by Mr Moussi. Counsel for the defendants noted that the plaintiff has advanced a highly particularised pleading, but it is just not matched by the evidence. The inconsistencies in the evidence are such that it must be the case that either Mr Moussi is not telling the truth, or his recollection is so faulty that it cannot be relied upon. These inconsistencies are significant: if the plaintiff cannot give consistent evidence about the representations said to have been made, it makes it impossible for the Court to determine what the plaintiff actually relied upon, especially if there are two or three versions of the same representation.

233 The defendants submitted that Mr Moussi, an experienced and commercially astute business person, was fully informed by the defendants about the financial and other aspects of the development project, including the strategies proposed by the defendants to minimise the risks associated with the development project. It was he and Dr Kambouris who approached the defendants seeking to participate in the development project, not the other way around. Given Mr Moussi's close association with Dr Kambouris, who spent days at a time with the defendants over a period of months after Dr Kambouris left his employment, Mr Moussi's claimed lack of knowledge of the modest financial standing and largely speculative commercial activities of the defendants lacks credibility. The attempt by Mr Moussi and Dr Kambouris to downplay the amount of time Dr Kambouris spent in Melbourne with both Mr Moussi and the defendants further detracts from their credibility. The insistence of Mr Moussi that he purchased 250,000 one dollar in shares in 328NHF, rather than made a loan and obtained a 15% stake in 328NHF is unsupported by any document, and in any event, is inexplicable, in that arguably Mr Moussi would have been better off under the terms of the agreement contended for by the defendants (had of course the development project proceeded), as the plaintiff's loan would have been repaid, and it would have received 15 per cent of the profits on top of that. In any event, Mr Moussi's evidence about the different versions of the share certificates is strange. He cannot produce his version of the share transfer form. He did not ask for a share certificate until September 2010. Mr Chakir's evidence about what the plaintiff's solicitor told him about the reason why the caveat was lodged by the plaintiff was consistent with the advance being by way of a loan.

234 Counsel for the defendants submitted that Mr Moussi has a propensity to lie. He lied to the Court in relation to Mr Formichelli, where he gave evidence that he tracked Mr Formichelli down, rang him up, and had a meeting with him, when Mr Formichelli's evidence is that he was contacted by and met with Dr Kambouris to discuss the development project and what Mr Formichelli knew about Mr Moussi's involvement.

235 Counsel for the defendants submitted that Dr Kambouris' evidence also lacked credibility. He submitted that it is established that both Mr Moussi and Dr Kambouris have a propensity to lie, and to act in concert together: they did so to mask Dr Kambouris' role as the inventor of Botanical Water, and Mr Moussi was prepared to execute false documents to give effect to that scheme. Their suggestion that they never discussed the defendants' business activities, or the development project, lacks credibility.

236 As for the defendants, all of the evidence points to the defendants having nothing to hide. The defendants took Dr Kambouris with him to meetings, including meetings with the RSL, when Dr Kambouris was in Melbourne, and Mr Abdou invited Mr Moussi and Dr Kambouris to his modest home. They may have had some difficulty in recalling dates, or what was said in conversations, but counsel submitted that one does not even start critically analysing the defendants' evidence if the evidence of the plaintiff does not establish that the pleaded representations were made.

237 Counsel submitted that not only the inconsistencies between Mr Moussi's evidence and the plaintiff's case as pleaded and particularised diminish the credibility of the plaintiff's case, but the plaintiff's case, in itself, was implausible. In particular, the assertion on the part of the plaintiff that Mr Moussi believed and relied upon alleged representations that there was no risk and that the development project would make a return upon the advance of several hundred per cent is incredible. The plaintiff made an investment in a highly risky and speculative building project, which relied for its success upon obtaining planning and building permits, obtaining bank finance, entering into a building contract and completing construction, and selling a large number of apartments at a sufficient price to generate a profit. Counsel for the defendants submitted that this was not a guaranteed investment, but a highly risky venture that failed, and that Mr Moussi, as an experienced business man, knew the risks.

238 In relation to the 'persons of substance' representations, counsel for the defendants submitted that they were either true (in that the defendants operated their businesses through All-States and Search, and that Mr Papadimitriou was experienced in finance), or lacked any credibility, in that they were too ridiculous to believe having regard to Mr Moussi's own capabilities and knowledge, and the objective facts. In particular, the alleged representation that the defendants were successful business persons with access to millions of dollars of funds for property development lacked credibility because:

(a) if they had access to millions of dollars, why would they need an investment from the plaintiff, or funds to raise the deposit;

(b) Mr Moussi visited Mr Abdou's modest home, and the Chelsea office;

(c) Mr Moussi tried to give the impression of being naïve and gullible, but this is a false impression. He is an experienced business person who is branching out into different fields of activity, employing people, and engaging in business interstate. He is experienced in investigating and evaluating investments;

(d) there is no evidence that Mr Moussi viewed the Search website before July 2010, and in any event Dr Kambouris knew that only the defendants regularly worked from the Chelsea office; and

(e) as for the representation that the defendants had contracts to develop 200odd RSL properties, counsel for the defendants pointed to the inconsistency between the plaintiff's case as pleaded, and Mr Moussi's evidence, in particular, the absence of any mention of a $400 million profit in the statement of claim, which is a significant omission. Further, the allegation lacks credibility for the same reasons why the allegations that the defendants were successful and wealthy business people lack credibility. Mr Moussi knew that Dr Kambouris had attended meetings at the RSL with the defendants, but did not ask him what had happened, which was incredible, given that this was one of the representations upon which Mr Moussi emphasised that he placed great reliance upon.

239 In relation to the representation regarding an investment of $150,000 with the defendants generating a return of $900,000 within two years, counsel for the defendants submitted that no reasonable person could rely upon such a representation. No reference to such a representation was made in the 23 September email, and the solicitors' letter in July 2011 referred to a tenfold return. Mr Moussi's evidence regarding this representation is significantly inconsistent with what is pleaded in the statement of claim. In the statement of claim, the statement was said to have been made by Mr Abdou to Mr Papadimitriou in Mr Moussi's presence: in his evidence, Mr Moussi said the statement had been made by Mr Abdou directly to him at the 5 June meeting.

240 Counsel for the defendants also pointed to the inconsistencies between the pleadings and the evidence regarding the alleged representation that Mr Abdou was a major owner of Telechoice and possessed substantial personal wealth. The particulars in the statement of claim refer to a meeting between Mr Moussi, Dr Kambouris and Mr Abdou at a carwash in South Melbourne on 8 May 2010, and a meeting between the same people in a café in South Melbourne in May 2010. However, no evidence is given by Mr Moussi about either of these meetings, and instead Mr Moussi gave evidence that Mr Papadimitriou told Mr Moussi Mr Abdou was an owner of Telechoice when they were travelling from South Melbourne to Chelsea in the back of a car in February 2010.

241 In relation to the representations concerning the property development itself, counsel for the defendants made the following observations:

(a) again, there are significant inconsistencies between the pleaded case and the evidence regarding the rate of return which could be achieved on the development project, which in turn is inconsistent with the proposition that the rate of return was a significant matter upon which Mr Moussi relied;

(b) Mr Moussi's evidence confirms that he well understood how the transaction was to be structured and financed, and that he formed his own view about the desirability of making an investment in property development;

(c) there is a fundamental inconsistency between, on the one hand, a representation that there was no risk in investing in the development project, and, on the other hand, a representation that the development project was going to generate a very high return;

(d) Mr Moussi was an experienced business person, and thus it is highly unlikely that he could genuinely believe that there was no risk in investing in the development project or property generally;

(e) Mr Moussi's evidence that he was told at the 5 June meeting that the defendants had an opportunity to buy the Frankston property and needed a contribution of $35,000 from him to pay the deposit, and that he was told later that the deposit had been paid was inconsistent with the pleaded representation said to have been made at the 5 June meeting that the defendants had a contract to purchase the Frankston property;

(f) it is clear from the evidence that Mr Moussi knew the plaintiff was purchasing an interest in 328NHF, not a share of the Frankston property, and that his continued insistence that the plaintiff was to receive a share of the Frankston property detracts from his credibility generally;

(g) it is clear from the evidence that it was of no significance to Mr Moussi whether the deposit had been paid, as he was quite prepared to make a contribution to the deposit after the 5 June meeting;

(h) the representation that the plaintiff could raise funds through AllStates is of no consequence, and in any event was true;

(i) likewise, the representation that the plaintiff could use Mr Harle to set up an appropriate vehicle for the investment is of no consequence;

(j) as for the representation concerning what documentation he would receive, counsel for the defendants submitted that it is unlikely that an experienced business man such as Mr Moussi would place weight on being given documents such as financial feasibility studies after making an investment rather than before. The fact that Mr Moussi did not ask to see such documents before the plaintiff made the advance suggests that he had either seen them and was satisfied or did not require to see them because he had already made the decision to invest in the development project;

(k) as for the allegation that at the 5 June meeting that the defendants told him there was 'no risk' in making an investment because they sold everything off the plan, Mr Moussi's evidence is that Mr Abdou told him it was 'no risk' because they were investing in property;

(l) the representations that other investors were going in for ten per cent was true; and

(m) again, the evidence regarding the alleged representation that the defendants were putting in more than fifty per cent of the funds needed to purchase the Frankston property does not match the evidence: the particulars alleged that this representation was made during the car trip, while Mr Moussi's evidence was that it was made of the 5 June meeting, and that it was reiterated. Further, the fact that this representation was made was contradicted by Mr Moussi's evidence that the development project was a 'sweet deal' for the defendants, because they were getting a share of the company without putting in any money of their own.

242 As is evident from the summary of the evidence and submissions in the sections above, a number of matters going to the credit of the main witnesses were front and centre during the course of the trial. In the case of Mr Moussi and Dr Kambouris, it was put to them that they had colluded in a scheme to hide Dr Kambouris' role as inventor of the Botanical Water from Dr Kambouris' then employer, who may well have had a claim to ownership of the intellectual property of Botanical Water. It was alleged that in furtherance of this scheme Mr Moussi claimed to be the inventor of Botanical Water in a patent application made in January 2010, and maintained that position in subsequent transactions, including legal documents. Further, it was alleged that Mr Moussi had made misleading statements about his residential status in the loan application the plaintiff made to the Commonwealth Bank to fund the advance in order to bolster the strength of the loan application, in that the loan application indicated that he lived with his parents.

243 In the case of Mr Papadimitriou, it was put that despite being an undischarged bankrupt until December 2010, he was actively involved, as the business partner of Mr Abdou and others, in the management of several companies, including Search, AllState, companies associated with the Botanical Water project, 138FF Pty Ltd, and 328NHF, using his wife and young adult daughters as 'fronts' for his business activities. In the case of Mr Abdou, he was criticised for overstating his business experience and interests in the Information Memorandum prepared for the purposes of raising capital for the commercialisation of Botanical Water. Both Mr Papadimitriou and Mr Abdou were criticised for the rather extravagant claims which were made (and continue to be made) regarding the size and expertise of Search on its website, including the availability of an 'in house solicitor', who in fact had his practising certificate suspended.

244 All of the above claims and the submissions regarding their potential impact upon the credit of the parties have merit. Indeed, it could be said that each of the main witnesses have a track record of making statements and engaging in conduct which indicates a willingness to be loose with the truth when it is in the perceived commercial interests of the parties and their associates to do so.

245 In these circumstances, it can be difficult to make a judgment as to which party, or which witness, is more or less creditworthy than another, such that it would not be possible to determine that on every issue where there is a dispute of fact, the evidence of one party or witness is to be preferred over that of another. Rather, it is necessary to evaluate the evidence in the context of the evidence as a whole, the inherent plausibility of the evidence concerned, including its plausibility in the context of the subsequent statements and pleadings of the parties, the existence and weight of corroborative evidence, and the likelihood that the evidence is likely to be at least in part shaped through the prism of selfinterest. That task is made just that more difficult by the paucity of contemporaneous documents, which in turn is consistent with the rather freewheeling approach to business shown by the parties.

246 In such circumstances, it is necessary, in the case of each of the pleaded representations, to be mindful of who bears the onus of proof. In cases of misleading or deceptive conduct, the onus is upon the plaintiff to establish that the pleaded representation has been made. As stated by Dixon J in Briginshaw v Briginshaw:

The truth is that, when the law requires the proof of any act, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of 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 infinite 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.[95]

247 Other judges of the Court in Briginshaw refer to the necessity for a decisionmaker to feel a 'comfortable satisfaction',[96] 'certainty of intellectual conviction',[97] and to not be 'oppressed with reasonable doubt'.[98]

248 The remarks of the judge at first instance in Briginshaw[99] are reflective of the difficulties facing the Court in the current proceeding:

The case depends entirely on various conversations. There is no written admission, and no writing of any sort. I have read the evidence several times, and the more I read it the more difficult the case seems. ... I don't know what to believe. I have been very troubled. ... I have done my best to decide, but the petitioner must satisfy me that his story is true.[100]

249 The relevance of the above passages from Briginshaw is highlighted by the often quoted passage in Watson v Foxman,[101] another case concerning representations said to have been made orally, where McLelland CJ in Equity said:

Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court must feel an actual persuasion of its occurrence or existence. Such satisfaction is 'not ... attained or established independently of the nature and consequence of the fact or facts to be proved' including 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.[102]

250 However, the law does not require that a party who makes allegations of misleading or deceptive conduct based upon alleged oral representations to have a faultless recollection, or to be an unimpeachable witness. In Lord Buddha Pty Ltd v Harpur,[103] the Court of Appeal dismissed an appeal against a party who had successfully made out a claim for misleading and deceptive conduct in circumstances where the trial judge found the plaintiff/respondent:

to be an unreliable witness who did not give evidence of his negotiations with Mr Turner in a clear and precise fashion, and that parts of his evidence had been reconstructed and exaggerated. He did not accept Mr Harpur's evidence on the alleged representation unless supported by other evidence. [104]

251 Further, the unreliability of the plaintiff/respondent in Lord Buddha and the generality of his evidence regarding reliance did not preclude him from benefiting from the inference able to be drawn pursuant to the statements of Wilson J in Gould v Vagellas that once a material representation is made which is calculated (or, is objectively likely) to induce the representee to enter into a contract, and where the representation is of a kind that it is likely to provide an inducement, and that person in fact enters into the contract, that the representation operated as an inducement to do so.[105] Of course, such an inference can be rebutted by a finding that the representee did not rely upon the representation, which in turn can be inferred from the facts and circumstances of the case.

252 Each of the main witnesses in this proceeding could be said to have 'credit' issues. On one view, deficiencies in the credibility of the defendants might lead to a view that they have a tendency to overstate and oversell matters, and even to go so far as to mislead or deceive others to achieve their commercial objectives. On another view, any lack of credibility on the part of Mr Moussi, and the lack of credibility of the plaintiff's main corroborating witness detracts from the plaintiff's ability to discharge the onus upon it to satisfy the Court that the defendants made the statements said to have been made by them, and that the circumstances in which the statements were made and his own state of knowledge was such that Mr Moussi was led into error by those statements.

253 Prior to making some observations about the evidence of individual witnesses, I should remark that apart from some evasiveness on the part of Mr Moussi and Dr Kambouris, some vagueness on the part of Mr Formichelli, and some defensiveness on the part of Mr Papadimitriou and Mr Abdou, the demeanour of the witnesses in the witness box did not play a great role influencing my view as to what version of events was correct, even in relation to mattes in dispute where the reasons for conflicts of evidence could not be attributed to lapses of memory, but must have arisen as a result of one party not telling the truth. Each of the main witnesses generally gave their evidence in an expansive, confident and forthright manner.

254 This was particularly the case with Mr Moussi, who had no difficulty in recounting his story in his evidenceinchief. The difficulty with Mr Moussi's evidence is that, as canvassed in some detail by counsel for the defendants in his submissions, Mr Moussi's evidence did not always correspond with or support the allegations in his pleadings and particulars, and his and his solicitors' correspondence with the defendants. That of itself would be enough to cast doubt upon the veracity of his story, but during the course of his evidence, he also made some rather incredible statements, such as his evidence that Mr Abdou told him he lived in a modest house because he wanted to hide his wealth, that there could be no risk in investing in property, and that he did not really understand what the term 'inventor' meant. He gave evidence in some detail about tracking down and meeting with Mr Formichelli, which was completely contradicted by Mr Formichelli's evidence that he was contacted by and met with Dr Kambouris to discuss the development project and Mr Moussi's involvement.

255 Some of Mr Moussi's evidence seemed unduly calculated to bolster the plaintiff's case theory. He downplayed the degree of contact between him and Dr Kambouris over the relevant period. Indeed, in response to a question about when Dr Kambouris talked to him about the defendants' property dealings, he stated, presumably in anticipation of what the defendants might advance by way of evidence and submissions:

Dr Kambouris did not convince me to make an investment with them. He did not even know ... [106]

256 Further, Mr Moussi made much of the statements made in the Information Memorandum about Mr Abdou, and the statements made in the Search website in support of his contention that the defendants made the 'persons of substance' representations, notwithstanding the fact that his evidence was that he had not read the Information Memorandum prior to its publication in August 2010, and could only say that he had viewed the Search website 'before September 2010'. However, after giving evidence about when he saw the Search website, he was quick to add:

But in regards to what Search Property Group did and the details of it, that also got covered between March and May, or in the period where I invested my money, where they have gone into a lot of detail in regards to what Search Property Group did.[107]

257 Finally, Mr Moussi was criticised by counsel for the defendants for not volunteering evidence about his commercial experience and capabilities. While I do not necessarily consider that it was necessary for him to do so to make good his case, some of the evidence elicited through crossexamination did contradict the impression conveyed during Mr Moussi's evidenceinchief that he was something of a wide eyed naiveté, easily impressed, who could be readily duped by unscrupulous operators into parting with his money.

258 The evidence of Dr Kambouris did not add much to the plaintiff's case. Some of the inconsistencies between Dr Kambouris' evidence and Mr Moussi's evidence could be put down to faulty recollection, such as his evidence that he was treating Mr Abdou for pain during the meeting at Mr Moussi's apartment on 14 July 2010, not Mr Papadimitriou, and his description of Matthew Harle as having been described as a retired judge.

259 However, some of Dr Kambouris' evidence seemed to be deliberately calculated to assist the plaintiff. The evidence he gave about the representations made by the defendants about their experience and financial standing at his meetings with them in February 2010 is almost identical to what is pleaded in the statement of claim. This is consistent with him either being careful to tailor his evidence to suit the plaintiff's case, or with the fact that he was Mr Moussi's main source of information about the defendants, and neither conclusion assists the plaintiff's case. He gave evidence that he only maintained the fiction that Mr Moussi was the inventor of Botanical Water by reason of the pressure placed on him by the defendants and Mr Harle, even though Mr Moussi made the application for the patent for Botanical Water in his own name prior to them meeting the defendants. While at one point he did say that he did not spend all his time with the defendants after he left his employment in May 2010, his evidence regarding the frequency and duration of his visits to Melbourne was more consistent with the evidence of the defendants. His evidence that he was not aware that Mr Moussi had asked the defendants for documentation concerning the development project prior to the 14 July 2010 meeting directly contradicted Mr Moussi's evidence that Dr Kambouris had telephoned him on or before 14 July 2010 to tell Mr Moussi that the defendants thought he did not trust them: Dr Kambouris' evidence said this exchange occurred after 14 July 2010. He did not directly deny that Mr Papadimitriou had told him that he was bankrupt.

260 He gave evidence that Mr Papadimitriou showed him the Frankston property and told him that Mr Moussi would 'make millions'. It is not clear from the evidence whether this was before or after the plaintiff made the advance. Dr Kambouris himself was very positive about the attributes of the development project.

261 One part of Dr Kambouris' evidence that does not ring true is that he did not know that the plaintiff was making the advance until after the event. If he did not know about it until after the event, what did he think was occurring when he saw Mr Moussi give a cheque to Mr Abdou? Why was he able to recount the events of the evening afterwards, if in his mind nothing of significance occurred? Given the close friendship between the two men, and long history of commercial involvement between them, it beggars belief that Mr Moussi was raising funds using the equity in his most significant asset and did not even tell Dr Kambouris what he was doing. It also beggars belief that Dr Kambouris and Mr Moussi did not, during the occasions which Dr Kambouris stayed with Mr Moussi, discuss the defendant's business activities, including their property developments and dealings with the RSL. Dr Kambouris' description of Mr Moussi as a quiet, reserved 'IT guy' is contradicted by Mr Moussi's own presentation in the witness box. Dr Kambouris himself presents as a chatty and enthusiastic personality. It is very difficult to believe that they did not discuss these matters, given that, at least from May 2010, and possibly earlier, the main focus of Dr Kambouris' energies was his commercial involvement with the defendants. The fact that Dr Kambouris and Mr Moussi gave evidence to the effect that Dr Kambouris was not often in Melbourne in the May to July period, did not discuss the defendants' property development activities, or Mr Moussi's investment in the development project, detracts not only from their credibility generally, but also from the proposition that Mr Moussi was completely reliant upon what the defendants told him about their financial standing and commercial activities, and the development project.

262 Mr Formichelli and Mr Chakir were both subpoenaed by the plaintiff to give evidence, and were both 'independent' in the sense they had nothing to achieve or lose in this proceeding. Mr Chakir's evidence was largely based upon what documents were or were not on his file, but he did give evidence on three matters of relevance: the first being that the sale of the Frankston property did not proceed by reason of Mr Abdou being unable to obtain finance; secondly, that he was told by the plaintiff's solicitor that the plaintiff lodged the caveat over the Frankston property because of a loan that had been made to Mr Abdou; and thirdly, that the plaintiff's caveat had not been an impediment to settlement.

263 Mr Formichelli was understandably a little vague about the chronology of events, and had no real knowledge about the dealings between the plaintiff and the defendants, not being particularly concerned with the funding of the development project. His evidence was largely consistent with that of the defendants: in particular, he identified his signature on the 15 July minute. He agreed that Dr Kambouris was often at the Chelsea office when he visited there, and that Dr Kambouris attended meetings with him and the defendants at RSL clubs. He agreed that it would be obvious to any observer at these meetings that they were 'getting to know you' meetings, and that the defendants were pitching for the work. Mr Formichelli was not forthcoming about the circumstances in which his association with the defendants ended, save that there were some accounts which remained unpaid. However, some of the evidence given and comments made by the defendants regarding what they clearly considered to be the inadequacies of Mr Formichelli's work in preparing the town planning application to the Council were simply not put to him by the defendants' counsel.

264 Both Mr Papadimitriou's and Mr Abdou's evidence was vague on occasion, particularly as to dates: indeed, there is one significant aspect of their version of the chronology of events that does not ring true. The defendant's position is that they had been approached by Mr Moussi (or by Dr Kambouris on Mr Moussi's behalf) about investing in the development project, but told them that they did not need him to participate. That changed when Mr Formichelli left Parker Design, and Parker Design withdrew from the development project. That left Mr Abdou without the means to pay the deposit, and the defendants' evidence is that it was on that basis they resumed discussions with Dr Kambouris and Mr Moussi about Mr Moussi investing in the development project.

265 However, the best estimate the defendants were able to give when Mr Formichelli left Parker Design was mid to late July. This was around or after the time that the plaintiff made the advance, but a number of weeks after the defendants must have spoken with Mr Moussi about investing in the development project, and after AllStates submitted the loan application. Three Point Design was incorporated on 24 June 2010, and its only purpose was to invest in the development project. Indeed, the evidence that Mr Formichelli left Parker Design after mid-July is consistent with the issuing of shares in 328NHF after its incorporation on 1 July 2010, and the 15 July minute. Given that the shareholders in Three Point Design were the principals of Parker Design as well as Mr Formichelli, this reference in the 15 July minute suggests Parker Design was still 'on board' at that time.

266 Accordingly, the defendants' evidence that Mr Moussi was invited to participate in the development as, in effect, a replacement for Parker Design is unlikely to be correct. However, the defendants were adamant that the reason why Mr Moussi was invited to participate in the development project was that they needed the funds to pay the deposit because of the withdrawal of Parker Design. Indeed, Mr Abdou's evidence was that the defendants wanted Mr Moussi to advance $500,000, for which he would obtain a 25 per cent interest in the development project, which is consistent with the value of the cash and in kind contribution said to have been expected from Parker Design. The evidence that Parker Design was going to contribute $200,000 in cash, albeit that it only emerged during the course of crossexamination, was largely consistent with what was alleged in the defendants' further and better particulars dated 25 January 2013.

267 The further and better particulars of the defence also refer to the agreement of Three Point Design on 11 July 2010 to transfer its shares back to A J Phoenix, part of which were to be transferred to the plaintiff in consideration of the advance. While that is consistent with the defendants' contention that the plaintiff in part stepped into the shoes of Parker Design, it is not consistent with the 15 July minute, the ASIC records in respect of 328NHF (which refer to Three Point Design's shares being transferred back to A J Phoenix on 11 July 2011) and the other evidence which points to the falling out between Mr Formichelli and Parker Design occurring in or about late July 2010.

268 Another area where the veracity of the defendants' evidence is questionable relates to the issue of what documents the defendants provided to Mr Moussi prior to the plaintiff making the advance. The only evidence about there being plans prepared and cash flow analyses being in existence came from the defendants themselves. It seems to me to be unlikely that there were any architectural drawings in existence prior to mid July 2010, although work may have started not long after that. The town planning application was not made until January 2011, and Mr Papadimitriou's response to the 23 September email refers to plans being available the following week, which seems far more plausible, given that at the time the advance was made the deposit on the Frankston property had not been paid. Further, while the defendants gave evidence that they prepared financial feasibility statements throughout the course of the development project, the only document in evidence was dated October 2010. That does not mean that earlier versions of that document did not exist (indeed the October 2010 spreadsheet refers to it being an amended document), and the defendants' evidence was that they were aware of what could be constructed on the Frankston property at an early stage and were therefore in a position to make reasonably accurate forecasts of the profitability of the development project. However, there is some real doubt about what documents might have been available to give to Mr Moussi prior to or about the time the plaintiff made the advance. Further, the suggestion of the defendants that Mr Moussi had access to all documentation concerning the development project by reason of him being able to visit the Chelsea office at any time, or because Dr Kambouris was at the office and had access to a photocopier is somewhat disingenuous. Also somewhat disingenuous is Mr Papadimitriou's statement that a reference to the defendants 'having a contract' encompassed the defendants having in their possession an unsigned copy of the contract of sale.

269 Counsel for the plaintiff focussed quite a great deal of attention upon the fact that the ASIC records in relation to 328NHF appeared to bear no real relationship to the transactions that had taken place. Mr Abdou's explanation of why that was the case was a little vague and confusing, and the inaccuracy of the ASIC records for 328NHF does not reflect well on Mr Abdou in particular. However, it is difficult to see how this matter has much bearing on the issues in this proceeding given that 328NHF is now in liquidation. Similarly, it is difficult to see how any reference by the defendants to Mr Harle as a solicitor, or a retired solicitor, would have any real bearing on the issues in dispute.

270 There are also some question marks over the conduct of Mr Abdou in relation to the proposed nomination of Beach Front as the purchaser of the Frankston property after the issue of this proceeding. Mr Abdou's explanation as to the reason why this took place seems plausible enough, although there was no corroborative evidence of this matter from the other potential investors. But again, given that the nomination of Beach Front did not go ahead, the question of whether Mr Abdou would have ensured that the investors in the development project had their interests recognised in Beach Front remains a matter of speculation.

271 The discussions between the parties regarding the development project and the making of the advance, and the extent to which any of the representations made (or said to have been made) were misleading or deceptive in character, needs to be viewed against the backdrop of the commercial and personal relationships between Mr Moussi, the defendants, and Dr Kambouris. The context in which these discussions occurred is also of relevance in assessing which version of events is more plausible, and thus, the credibility of the parties and their evidence.

272 While Mr Moussi only first met the defendants in February 2010, and appears to have been a relatively marginal participant in the Botanical Water project, it is clear from the evidence that Mr Moussi's best friend, Dr Kambouris, had a close commercial and personal association with the defendants by reason of their collaboration over the Botanical Water project, which intensified after Dr Kambouris left his employment in April or May 2010. I accept the evidence of the defendants that Dr Kambouris spent days at a time with them during the course of May, June and July 2010, and that they involved him in many of their activities. I accept that there must have been at least some discussions between Mr Moussi and Dr Kambouris about the defendants and their business activities while he was staying with Mr Moussi at his Southbank apartment. As I previously indicated, Dr Kambouris' evidence that 'Andrew doesn't talk much' is entirely inconsistent with Mr Moussi's presentation in the witness box, which was animated and enthusiastic. Dr Kambouris' attempt to characterise Mr Moussi as a typical reserved 'IT guy' is also inconsistent with the evidence regarding Mr Moussi's involvement in the event planning, entertainment and hospitality industries.

273 That said, I do not accept the proposition that, just because Dr Kambouris was told something, or knew something, the knowledge of Dr Kambouris ought automatically be imputed to Mr Moussi. However, the close association between Mr Moussi and Dr Kambouris, and the defendants' knowledge of that association, does make it less likely that the defendants would tell Mr Moussi barefaced lies about matters where the defendants would be aware that Dr Kambouris knew, or must have known, the true position.

274 A further complication arising out of the association between the key players in this proceeding is that, to the extent that the defendants were promoting themselves and their capabilities, and that Mr Moussi and Dr Kambouris were impressed by the defendants' apparent experience and financial standing, this may have been more influential in persuading Dr Kambouris to entrust the defendants with the task of raising capital for the Botanical Water project than in persuading Mr Moussi to make the advance. Of course, if statements or conduct are misleading, the purpose of the conduct is relevant only to the extent that it may be easier to draw an inference that someone was misled to act in a particular way. However, it is significant that by the time of the making of the advance, the fortunes of Dr Kambouris (and to a lesser extent Mr Moussi) were intimately bound up with the defendants and the Botanical Water project, and Mr Moussi's decision to make the advance needs to be viewed in that context. It is clear that the dealings and discussions between the key players were, at least until September 2010, carried out in an atmosphere of optimism, enthusiasm and general good will, and the parties mixed socially as well as for business purposes.

275 The importance of the broader commercial relationship between the parties and the goodwill between them as the backdrop to the making of the advance is illustrated by the circumstances in which Mr Moussi sought to withdraw from the development project in September 2010. Objectively speaking, nothing had occurred between July 2010 and September 2010 which could have altered Mr Moussi's view about the soundness of the plaintiff's investment in the development project apart from the breakdown in the relationship between the defendants and Dr Kambouris over the Botanical Water project. The difficulties the defendants experienced with obtaining town planning approval came much later. Contrary to Mr Moussi's statements in the 23 September email, all that had changed was that there had been a falling out between Dr Kambouris and the defendants regarding the Botanical Water project, and Mr Moussi, either because of his loyalty to Dr Kambouris, or his adverse view of the defendants' conduct, or both, wanted to withdraw from any commercial relationship with the defendants. Indeed, Mr Moussi in his evidence candidly admitted that he simply lost his trust in the defendants. A critical question is: whether the trust he had in the defendants at the time he made the advance was induced by any misleading or deceptive conduct on the part of the defendants?

276 Prior to turning to the specific representations alleged in the statement of claim, I should say that it is apparent from the evidence, including the Information Memorandum for Botanical Water and the Search website, that the defendants do appear to have a tendency to overstate their business experience and capabilities, and a tendency to engage in 'boosterism'. The evidence about their activities in 2010 paints a picture of the defendants engaged in apparently frenetic activity concerned with finding new business partners, hunting down 'deals', and trying to get property developments and other business ventures off the ground. They were trying to raise capital for the Botanical Water project. They were trying to obtain investors and sales for the 138 FF project. They were 'pitching' to individual RSL branches and the state office of the RSL in an attempt to obtain contracts to redevelop the RSL properties. There were references in the evidence to possible property development opportunities in Doncaster and Ringwood. They located the Frankston property and undertook the necessary steps to get the development project underway. Mr Papadimitriou had an indirect financial interest in a finance broking business.

277 It is unsurprising, given the apparent level of activity, and no doubt the associated 'chatter', that the defendants sought to convey, and may well have conveyed to potential business associates and investors, that they were able and experienced business people, who could make profitable projects happen. The constant talk may have disguised the fact that there was not quite so much action, indeed, no doubt the purpose of the 'talk' was to generate the 'action'. Mr Abdou freely admitted that they were 'all excited' because they were going to make 'millions' out of Botanical Water, and that there was a lot of 'positive talk' about the Frankston property. But, insofar as Mr Moussi says that at least part of the reason why he made the advance was because he believed that the defendants were persons of substance, and that belief was induced by the way the representations alleged to have been made by the defendants, Mr Moussi must establish that the statements and the conduct of the defendants went beyond mere 'boosterism'.

278 As discussed earlier, both sides focussed during the trial, by way of crossexamination and submissions, on the credibility of the key players, including Dr Kambouris. To the extent that this highlighted the propensity of Mr Moussi and Dr Kambouris to lie when it suited them on the one hand, and the tendency of the defendants to exaggerate, and engage in conduct of dubious commercial morality on the other hand, those attacks have been largely successful.

279 There were key issues upon which I have found that the evidence given by the witnesses is either highly unlikely to be true, because it is inconsistent with ordinary human experience, or simply cannot be true, because it is inconsistent with the chronology established by the rest of the evidence. In the first category, I would put Mr Moussi's and Dr Kambouris' evidence that they did not discuss Mr Moussi's proposed investment in the development project, and other matters concerning their knowledge of the defendants' commercial activities. In the latter category, I would put the evidence of the defendants that they asked (or allowed) Mr Moussi to make an investment in the development project because Parker Design had withdrawn their support for the development project, including the funds required to pay the deposit. Accordingly, whatever the reason for the defendants inviting Mr Moussi to invest in the development project, it is unlikely that it is the reason advanced by the defendants.

280 However, whatever the motivation was for the defendants for inviting Mr Moussi to invest in the development project, it cannot have been the motivation ascribed to them by the plaintiff. It was suggested in submissions that at the time the defendants made the representations Mr Abdou was in the position of having signed a contract of sale for the Frankston property, and therefore had a personal liability to pay the deposit, and that as such he would have been desperate to obtain funds to pay the deposit.

281 But that cannot have been the case. The contract of sale was unlikely to have been signed before 1 July 2010. Mr Moussi himself gave evidence that at the 5 June meeting the defendants told him that they had an opportunity to purchase the property. No doubt the defendants were keen to take up the opportunity. But they were not in a position whereby they were desperate to obtain funds in order to meet a liability to pay a debt. The worst that could happen would be that they would miss out on the opportunity if they could not raise the funds for the deposit.

282 In my view, the findings above harm the plaintiff's case more than they detract from the defendants' defences. First, the plaintiff has the onus of proof, and, in the case where the allegations are of oral representations uncorroborated by other witnesses or contemporaneous documents, any deliberate concealment of the true facts by the plaintiff's witnesses detracts from the plaintiff's ability to persuade the Court to reach a state of 'comfortable satisfaction' that the uncorroborated evidence of the plaintiff's witnesses is correct. In the case of the defendants' evidence about the reason why Mr Moussi was invited to make the advance, the evidence may have arisen out of some 'after the event' reconstruction, but the evidence is not of such a character that it must necessarily be dishonest, and does not necessarily add or detract from the likelihood that any particular representation was made or not made.

283 Finally, in assessing the credibility of the parties and the witnesses, there is some value in reviewing the limited correspondence between the parties in 2010 and 2011, and comparing them with the pleadings and the evidence. Counsel for the defendants undertook a detailed analysis of the various versions of the plaintiff's allegations, and some of the inconsistencies illustrated by that analysis are quite telling. There is no need to reproduce that analysis here, but I would make certain observations regarding the 23 September email, Mr Papadimitriou's response, and the September 2011 solicitor's letter.

284 Some allegations made by Mr Moussi in the 23 September email and the September 2011 letter were maintained by the plaintiff in the statement of claim and at trial, although on occasions with variations. These include:

(a) the allegation that Mr Papadimitriou had told Mr Moussi that he had (or the defendants had) the contracts to develop the RSL properties (either 'all of them' or '200 properties');

(b) the complaint in the 23 September email that Mr Moussi had not received any share certificates, planning documents, council approvals and feasibility studies was not referred to in the September 2011 letter, but was included in the statement of claim;

(c) the complaint in the 23 September email that Mr Papadimitriou referred Mr Moussi to Mr Harle was also not referred to in the September 2011 letter, but was included in the statement of claim;

(d) the assertion that Mr Moussi would own 15 per cent of the Frankston property was made in the 23 September email, and the statement of claim, but the September 2011 letter made it clear that Mr Moussi understood that he was investing in the company that was to purchase the Frankston property; and

(e) there was no reference to the projected profitability of the development project in the 23 September email.

(a) the claim in the 23 September email and the September 2011 letter that Mr Papadimitriou (or the defendants) told Mr Moussi that the defendants had successfully completed many property developments on behalf of investors did not make its way into the statement of claim, at least not in those terms;

(b) Mr Moussi's allegation in the 23 September email that Mr Papadimitriou and/or All-States provided Mr Moussi with financial advice was not repeated in either the September 2011 letter or the statement of claim;

(c) the allegation in the September 2011 letter that Mr Moussi was told at the time he made the advance that settlement was 'imminent' was not repeated in the statement of claim, and Mr Moussi gave evidence that he understood that there was a two year settlement period;

(d) the allegation in the September 2011 letter that Mr Moussi had been told that the Frankston property was generating rental income that would support the value of the Frankston property pending the development project did not make its way into the statement of claim, and was not referred to in evidence; and

(e) the statement in the September 2011 letter that the advance was apparently used for the payment of the deposit upon the Frankston property contradicts Mr Moussi's evidence at trial, in which he suggested that the first time he knew that the advance was used to pay the deposit was at trial.

286 Mr Papadimitriou's response to the 23 September email, while rather inflammatory in its language, is generally consistent with the defendants' position at trial, being that the defendants had nothing to hide, in that it set out how the purchase of the Frankston property was to proceed, and the manner in which the advance was to be allocated. Mr Papadimitriou's letter, sent on the same day as the 23 September email, also enclosed the 15 July minute and the share registry entry and share certificate for the plaintiff's shares in 328NHF, and refers to architectural drawings being available the following week. The letter is mistaken about the date upon which Mr Moussi provided the cheque to Mr Abdou, and does not respond to Mr Moussi's allegation that he was told that the defendants had the contracts to develop all of the RSL properties, save to say that

your allegation that you were misled is also maliciously false and defamatory.

287 The tone of Mr Papadimitriou is consistent with the falling out that had taken place between the defendants and Dr Kambouris and Mr Moussi regarding the Botanical Water project.

288 The inconsistencies between the allegations in the 23 September email, the September 2011 letter, the pleadings, and Mr Moussi's evidence do support the submissions of counsel for the defendants that the plaintiff's case is somewhat of a moving feast, and, given the task facing the Court in determining whether the defendants should be liable for misleading or deceptive conduct, is insufficiently reliable to establish such liability.

289 There is merit in these submissions, particularly given that the Court needs to be satisfied not only what representations were made, but whether they engendered an erroneous belief on the part of the plaintiff which caused it to alter its position. However, in my view, these inconsistencies are not, of themselves, fatal to the plaintiff's case, to the extent that they can be explained by lapses in memory owing to the passage of time, and the natural human tendency to subconsciously reconstruct discussions and events over time, usually in a manner which best suits one's own interests, or in a manner which is more consistent with what a person believes should have occurred rather than what did occur. By way of example, Mr Moussi was far more indignant at trial about the defendants' alleged failure to provide him with documents concerning the development project than he was at the time, and that issue is not even mentioned in the September 2011 letter. His evidence was to the effect that 'that's what professional people should do.' Rather, from the point of view of needing to determine whether the plaintiff's case had been made out, what is more troubling is the established propensity of Mr Moussi to be untruthful. It is clear from the evidence, that Mr Moussi consistently and knowingly maintained that he was the inventor of Botanical Water in order to enable Dr Kambouris to pursue the commercialisation of Botanical Water without his employer knowing about it. Mr Moussi's evidence that he tracked down Mr Formichelli and met with him after the issue of this proceeding was not only a falsehood, it was a reasonably elaborate falsehood, and his evidence was given confidently and without any hint of tentativeness. While these examples do not cause me to believe that all of Mr Moussi's evidence is false, it does cause me to approach his evidence on critical matters with extreme caution, especially where that evidence is of itself somewhat implausible or counter-intuitive.

290 Of the five representations pleaded that go to the question of whether the defendants were persons of substance, one can be immediately disregarded: the representation that the defendants operated their developments through All-States and Search is largely true. As for the representation that the defendants were successful business people who had access to millions of dollars of funds for property developments, that is not said by the plaintiff to have been an express statement on the part of the defendants, but an inference which was drawn by Mr Moussi by reason of other representations pleaded, including statements said to have been made by Mr Papadimitriou that he was a former senior banker with Citibank, and that he had gone to school with and was close to 'the Grollos'.

291 Mr Moussi conceded during the course of giving evidence that the defendants had not told him in express terms that they were successful business people with access to millions of dollars for property development, but that Mr Moussi relied upon certain things he was told to draw this conclusion,[108] such as what he was told about the businesses the defendants were involved with, the profits that would be generated by the RSL projects, the fact that Mr Abdou told him that he was going to put $30 to $40 million of his own money into the KeepaFresh invention, and discussions he had with Mr Papadimitriou and Mr Abdou earlier in 2010 about the property developments they had done. Further, he knew from Dr Kambouris that the defendants were undertaking the 138FF project, stating:

I knew they were developing that and that's part of the credibility. These guys were doing property investments absolutely I knew they were doing property investments. [109]

292 It seems to me that in cases where one party is alleging that another party is engaging in misleading or deceptive conduct, which is essentially a species of equitable fraud, the Court should be cautious to find that a party had made a representation regarding a matter, not by way of express words, but that the representation pleaded was a conclusion which might be drawn by reason of other words and conduct. This is particularly the case where the pleaded conclusion was said to be drawn from words said many months before, prior to the development project being conceived, and in the context of a completely different transaction. By way of example, Mr Moussi's evidence was that Mr Papadimitriou told him in the back of a car in February 2010 that Mr Abdou was an owner of Telechoice, and that Mr Abdou told him in a meeting in a café in April or May 2010 that he was going to put $30 to $40 million of his own money into the KeepaFresh invention. Setting aside the question of whether in fact the latter statement was made (it was not pleaded or included in the plaintiff's particulars, and the evidence only emerged in crossexamination), it must have been made some months before the advance, because the uncontested evidence of the defendants was that they abandoned any interest in KeepaFresh as early as February or March 2010, and determined to focus on Botanical Water. If Mr Moussi at any time held the view that Mr Abdou had ready access to $30 or $40 million for investment purposes, that view must have been dispelled, at the very latest, by the time he visited Mr Abdou's modest home on Mother's Day 2010.

293 Turning to the allegations of more substance, there is no doubt that, if the defendants had in fact stated that they, or Search, had the contracts to develop all of the RSL properties, or even any of them, that this would have been false and misleading. However, I am not satisfied that such a representation was made. Of course, the defendants deny making such a representation, but it also seems inherently improbable that the defendants would make such a representation in circumstances where:

(a) Dr Kambouris was in frequent attendance at the Chelsea office, where the defendants conducted their business from a relatively confined space, and exhibited an interest in the defendants' business activities, including their property development activities;

(b) Dr Kambouris attended at least two, and maybe three of the meetings with the defendants with RSL officials, and according to Mr Formichelli, these meetings were merely introductory, 'getting to know you' meetings. The fact that Mr Formichelli stated that Dr Kambouris was 'irrelevant' to these meetings does not alter the likelihood that he knew and understood what was going on during those meetings;

(c) indeed, Mr Moussi's evidence was that he understood that Dr Kambouris was invited to attend the RSL meetings with the defendants because as a builder, he could give the defendants 'credibility'. That evidence is inconsistent with any understanding on Mr Moussi's part that the defendants already had been engaged by the RSL to develop its properties;

(d) while Mr Papadimitriou may, at the 5 June meeting, expressed optimism and enthusiasm about Search's prospect of obtaining the contracts to develop the RSL properties, and the potential profitability of those contracts, it seems unlikely that he would have told Mr Moussi a deliberate falsehood of such a nature given the defendants knew about the close relationship and regular contact between Mr Moussi and Dr Kambouris;

(e) the presence of aerial photographs and conceptual drawings in the Chelsea office does not, of itself amount to a representation that the defendants had the RSL contracts. The presence of these documents at the Chelsea office is equally consistent with Search pitching for the work as well as actually having contracts in place; and

(f) the evidence of Mr Formichelli, who was the person who introduced the defendants to the RSL and is presumably well informed about these matters, was that the RSL had approximately 72 sites in Victoria, which it wanted to reduce to about 40. Presumably he told the defendants that in his discussions with them about the potential development opportunities which might arise. On that basis, it seems hardly credible that any reference by the defendants to the RSL properties, whether as opportunities or as concluded contracts, would refer to '200 odd' properties.

294 It may well be that Mr Moussi believed that the defendants had contracts with the RSL, or some of its branches, to develop a significant number of RSL properties, and that such ventures would be profitable. That belief may have been part induced by Mr Papadimitriou showing him the conceptual drawings and aerial photographs at the Chelsea office during the 5 June meeting, and perhaps explaining the opportunities potentially open to the defendants, no doubt with some enthusiasm. However, Mr Moussi appears to have drawn a conclusion that the defendants had the contracts to develop the RSL properties based upon the mere presence of the conceptual drawings and the aerial photographs. Without more, merely being in possession of and showing visitors these pictures cannot amount to misleading or deceptive conduct on the part of the defendants.

295 The failure of the plaintiff to satisfy me that this representation was made is a serious blow to the plaintiff's case. First, Mr Moussi's evidence suggested that his belief that the defendants had the RSL contracts, whether well-founded or not, was of significance to his decision to cause the plaintiff to make the advance, which is illustrated by the following extract from the transcript:

I invested because these guys were successful. To get 200 RSL properties - why would RSL give 200 of their properties? They would have done the due diligence on these guys as well. I Googled them, I couldn't find anything. I've been to their offices. I did everything I can and I had to put faith in what they said. [110]

296 As well as being the most precise of the 'persons of substance' representations, the plaintiff also relied upon the representations said to have been made about the RSL properties as providing a plausible explanation as to why, if the defendants were wealthy and had access to funds for property development, the defendants approached Mr Moussi to make an investment in the development project. If no such representation was made, then the credibility of the suggestion that the defendants vastly exaggerated their personal financial resources in circumstances where they were still seeking further capital is diminished.

297 The alleged representation that Mr Abdou was the owner of Telechoice and held considerable personal wealth needs to be broken down into its constituent parts: first, that he was an owner of Telechoice, and secondly, that he had considerable personal wealth. I consider that it is possible that the defendants may have dropped hints that Mr Abdou was an owner or at the very least a founder of Telechoice, which is apparently a substantial telecommunications business. Mr Abdou's profile in the Information Memorandum for Botanical Water[111] is consistent with Mr Abdou overstating his connection with that business. That seems to have been tacitly conceded by Mr Abdou in his evidence. When asked whether his profile in the Information Memorandum was misleading he replied '[n]ot totally'.[112]

298 The profile of Mr Abdou in the Information Memorandum is as follows:

Ayman has been involved in the business community for over 20 years. He is a specialist at managing, operating and mentoring start-up organisations to full maturity.

Ayman owned and operated a major telecommunications business which started in 1990 as one outlet, and grew to 110 outlets throughout Australia when it was sold.

He also started his own wholesale communications business which incorporates airtime and hardware. This business grew to being the third largest communications wholesaler before it was sold

He also started other businesses which have started from conception and have grown to being in the top 5 companies in Australia in that specific industry. He is also involved in commercial property developments. Ayman has been CEO for corporations which have employed between 50 to 100 people. Ayman holds a Bachelor of Business (Accounting and Marketing).

299 It seems that I was meant to infer that Telechoice was the 'third largest communications wholesaler' referred to above. However, even if that is the case, this can only be corroborative of Mr Moussi's evidence about what he was told about Mr Abdou's connection with Telechoice: on the evidence the statements in the Information Memorandum cannot amount to actionable misrepresentations of themselves, even if they were pleaded as such. The date of the Information Memorandum in evidence is 9 August 2010, some weeks after the making of the advance, and while no doubt there were previous versions of this document in circulation prior to that date, Mr Moussi gave evidence that he had not read the Information Memorandum before its publication in August 2010.

300 However, the representation pleaded is not simply that Mr Abdou was an owner or founder of Telechoice. The representation pleaded is that Mr Abdou was an owner of Telechoice and possessed considerable personal wealth. I am not satisfied that such a representation was made, and, even if hints of that nature were made to Mr Moussi, perhaps most likely in the context of the parties' dealings concerning the Botanical Water project, then that representation is entirely inconsistent with what Mr Moussi knew or must have known about Mr Abdou. Mr Abdou lives in a modest house in Carrum Downs, which Mr Moussi visited on Mother's Day 2010. The Chelsea office, while no doubt sufficient for the defendants' purposes, does not sound palatial. Mr Abdou drives a prestige motor vehicle, but one which was eight years old at the relevant time. Despite the defendants' enthusiasm for the Botanical Water invention, there is no evidence that Mr Abdou was putting in any money into that project personally, which is presumably what he would have done if he was possessed of considerable personal wealth. The allegation simply does not ring true. As previously indicated, I have serious doubts about whether Mr Abdou told Mr Moussi that he planned to put $30 to $40 million of his own money into the KeepaFresh invention, and even if he did, it is difficult to see how Mr Moussi could have believed such a statement.

301 What does ring true is Mr Abdou's evidence that at the Mother's Day dinner at Mr Abdou's house, at which all of the key players were in attendance, everyone was very enthusiastic and excited about the money that everyone was going to make from the Botanical Water project. Apparently, the development project was only briefly discussed on that day, but that unprompted evidence of Mr Abdou is suggestive of the fact that first, the defendants were not rich, but hoped to become so, and secondly, it illustrated how all of the parties considered their interests to be in common, and how all parties hoped to benefit from their efforts. Presumably, if Mr Abdou was already very wealthy, he personally would have been less excited and exuberant about the possible wealth to be generated by the Botanical Water project.

302 Finally, I accept Mr Abdou's evidence that he would not have told Mr Moussi that $150,000 invested with the defendants would generate a return of $900,000 within two years, for the reasons advanced by Mr Abdou: that is, to the extent that such a representation was made in respect of property development generally, it was not feasible to complete a property development within two years.

303 Accordingly, while I accept that the defendants were at times ardent selfpromoters, I am not satisfied that the defendants engaged in misleading and deceptive conduct insofar as they are said to have induced Mr Moussi to believe that they were persons of substance.

304 The plaintiff sought to make some mileage from the fact that during the period in which Mr Moussi was engaged in discussions with the defendants regarding the development project and caused the plaintiff to make the advance Mr Papadimitriou was an undischarged bankrupt. There is no evidence that Mr Moussi was told of this, although the defendants gave evidence that Dr Kambouris was told Mr Papadimitriou was bankrupt, and as such, was not able to hold office in a company.

305 The plaintiff relied upon Mr Papadimitriou's bankruptcy for two purposes: first, to impugn his credit, because of the suggestion that he has been engaged in the business of managing a company or companies despite the prohibitions on his doing so; and secondly, because his status as a bankrupt naturally detracts from the alleged representations that the defendants were persons of substance.

306 This is not an example of an occasion where the knowledge of Dr Kambouris could be imputed to Mr Moussi. The defendants' evidence is that Dr Kambouris was told in February 2010 that Mr Papadimitriou was bankrupt, and did not care. If, as the defendants contend, Dr Kambouris was unconcerned about this matter, I doubt I could draw an inference that Dr Kambouris, in a period when he was not spending much time in Melbourne, would have necessarily have told Mr Moussi about this.

307 Accordingly, given that I cannot make any positive finding that Mr Moussi was aware of Mr Papadimitriou's status, were the circumstances such that Mr Papadimitriou was under a positive duty to disclose the fact of his bankruptcy to Mr Moussi prior to the plaintiff making the advance?

308 I do not believe so. First, while Mr Papadimitriou was involved, it is clear from the evidence that Mr Moussi knew that 328NHF would be the purchaser of the Frankston property, and Mr Abdou was the person with whom Mr Moussi exchanged share transfer forms and to whom the cheque was provided. Further, notwithstanding the representations alleged to have been made about the development project regarding Mr Moussi owning part of the Frankston property, and the defendants' contributing fifty per cent of the funds themselves, I am satisfied that Mr Moussi was well aware of how the transaction was to be structured. In particular, I accept that Mr Moussi understood that the costs of the development project was to be financed by bringing in investors, with the town planning documentation being drawn up by Parker Design or Mr Formichelli in exchange for equity in the development project. Once town planning approval was obtained from the Council, then the defendants would take the project to the bank, utilising the 'uplift' in the value of the Frankston property to finance the construction of the development project. Indeed, despite the submissions of counsel for the plaintiff that Mr Moussi was referring to the Botanical Water project, I accept that viewed in the context of the questions being asked, the following evidence of Mr Moussi related to the development project:

They were getting other people to put money in and they would get a percentage for the effort of them getting other people to raise money. Sweet deal for them they were getting a percentage for not putting any money in. [113]

309 Accordingly, despite Mr Moussi's protestations that the plaintiff would not have made the advance had he known Mr Papadimitriou was bankrupt, I doubt that had he known that, that of itself would not have dissuaded him from investing in the development project, given that the success or otherwise of the development project did not depend upon any financial contribution by Mr Papadimitriou, but rather, the capacity of the defendants to attract investors, arrange for approvals and finance to be obtained, and to oversee the construction of the development project.

The representations regarding the development project

310 The alleged representations concerning the development project themselves fall into two categories: the representations said to have been made at the 5 June meeting, and the representations said to have made after that time, up to and including 14 July 2010, the day the advance was made.

311 The representations said to have been made during the 5 June meeting are as follows:

(a) an investment with the defendants (or companies associated with them) was 'no risk' because they sold everything off the plan to investors;

(b) a company owned and controlled by the defendants had a contract to purchase the Frankston property; and

(c) an investment with the defendants would be used to purchase the Frankston property such that Mr Moussi or his nominee would own part.

312 The allegations in paragraphs (b) and (c) have no substance, in the light of Mr Moussi's own evidence. First, he gave evidence that at the time of the 5 June meeting, Mr Papadimitriou was seeking a $35,000 contribution to the deposit. Accordingly, to the extent that it is alleged that the term 'had a contract' meant a legally enforceable agreement to purchase the Frankston property which is how it appears that the plaintiff puts its case, then that could not have been the case. All the defendants could have had at the time was a commercial opportunity, and it is difficult to see how Mr Moussi could have sensibly thought otherwise.

313 Indeed, Mr Moussi gave evidence that at the 5 June meeting, Mr Papadimitriou told him that the defendants had an opportunity to buy the Frankston property and that they had to raise the deposit within a week or so. Therefore, while Mr Papadimitriou's evidence that he equated 'having a contract' with being in possession of an unsigned contract of sale was somewhat disingenuous, it is clear from Mr Moussi's evidence that such a statement did not reflect Mr Moussi's understanding of the true position as at the time of the 5 June meeting.

314 Secondly, while it is possible that there was no discussion during the 5 June meeting about the vehicle through which the development project would be carried out, it is clear that by the time of the advance, Mr Moussi well understood that the advance was being made to a special purpose vehicle established for the purpose of purchasing the Frankston property and undertaking the development project. Mr Moussi made out the cheque for $250,000 to 328NHF, and the notation on the cheque butt referred to 'shares'. Prior to sending the 23 September email, he conducted an ASIC search of 328NHF. If he was ever under any misconception that he or the plaintiff would have a proprietary interest in the Frankston property, he could have been under no such misapprehension at the time of the advance. Again, Mr Moussi's own evidence demonstrates that he well understood that he was to obtain shares in the proposed owner of the Frankston property, and would not himself be a co-owner of the Frankston property.

315 Finally, as for the allegation that the defendants told Mr Moussi that an investment in the development project was 'no risk', because the defendants would sell everything 'off the plan', this is an example of an occasion where not only does the allegation lack credibility, but the propensity of Mr Moussi to give selfserving evidence means that I cannot be satisfied that such a representation was made. That such a representation would be made in relation to a multiunit property development is fantastical in itself, but even more so in circumstances where it is alleged that the defendants also represented that the development project would generate substantial returns.

316 I accept the evidence of the defendants that they told Mr Moussi that they planned to structure the development project to minimise risk, and how they planned to do so, simply as being far more inherently plausible than the allegation that they said there was no risk. Further, Mr Moussi's evidence leaves some doubt as to whether he asserts that he was told that there was 'no risk' because properties were being sold off the plan, or because there was 'no risk', because he would be investing in property, or because he independently formed the view that there was 'no risk' in investing in the purchase of the Frankston property, because if the development project did not proceed, the property could be sold. So, even on Mr Moussi's version of events, real questions of reliance arise, but in any event, I do not accept the proposition that such representations were made by the defendants. It is simply implausible that any such representations about a substantial and complex property development project could be made to a person with the commercial experience of Mr Moussi in the vain hope that he might believe it. Mr Moussi presents as being enthusiastic and optimistic, and perhaps as a little too easily impressed, but not as a fool.

317 Taking the representations said to have been made in the period between the 5 June meeting and 14 July 2010, as set out at paragraph 38 of these reasons, two can be discounted as insignificant. All-States did act on behalf of the plaintiff to raise the funds for the making of the advance. Secondly, the allegation that the defendants told Mr Moussi that he could use their 'solicitor', Mr Harle, to set up an appropriate structure for the investment and to obtain advice in relation to the investment appears to have been included primarily as a means of discrediting the defendants. There was no evidence that Mr Harle ever gave any advice to Mr Moussi about the development project or the merits or otherwise of making the advance. The only evidence before the Court is that sometime in August 2010 (that is, after the advance was made) Mr Harle either prepared or assisted Mr Moussi to prepare a trust deed for a family trust of which the plaintiff was trustee. There was no evidence to support any contention that any communications between Mr Moussi and Mr Harle influenced his decision making with respect to investing in the development project in any way.

318 Taking the remainder of the alleged representations in turn, there is a direct conflict of evidence between Mr Moussi and the defendants about whether the defendants told Mr Moussi that the deposit had been paid prior to the plaintiff making the advance. Mr Moussi gave evidence that a few days after the 5 June meeting Mr Papadimitriou called him and told him that Mr Abdou had paid the deposit. Further, he gave evidence that that was a significant matter in influencing him to invest in the development project. The defendants, especially Mr Abdou, denied this, because they stated that the main purpose of obtaining the advance from the plaintiff was to fund the payment of the first tranche of the deposit, and that Mr Moussi was aware of this.

319 This is not an example of an allegation that a representation was made which can be dismissed as inherently implausible. It is quite possible that such a representation was made. If the representation was made, it was patently false, as the deposit was not paid until after the making of the advance: in fact the advance had been used to pay the deposit. If I were to be satisfied that such a representation was made, and that it was a representation made for the purpose of inducing the plaintiff to make the advance, the inference would arise that the representation did in fact induce the plaintiff to make the advance, although that inference is capable of rebuttal by reason of the actual facts and circumstances.

320 There is something odd about the plaintiff's version of events in that, according to Mr Moussi, he was being told at the 5 June meeting that the defendants needed a contribution from him of $35,000 to pay the deposit on the Frankston property, for which he would get ten per cent of the Frankston property, and only days later, be told that for an investment of $250,000, he would get a 15 per cent share of the Frankston property. Mr Moussi was unable to provide a satisfactory explanation as to how and why this shift occurred, and how it was related to the payment of the deposit.

321 On the other hand, the defendants' evidence is that Mr Moussi was approached to invest in the development project because Parker Design had withdrawn, and that fact, along with the fact that the defendants needed funds to pay the deposit was known to Mr Moussi. However, the best evidence is that Parker Design had not withdrawn from the development project at the time that Mr Moussi was engaged in discussions with the defendants about investing in the development project.

322 There was some inconsistency in the defendants' evidence regarding this matter. Mr Abdou was positive that he or Mr Papadimitriou had told Mr Moussi that the advance was needed to pay the deposit. Mr Papadimitriou, however said at first that he could not remember telling Mr Moussi that Mr Abdou had paid the deposit, before denying some minutes later that he had told Mr Moussi that Mr Abdou had paid the deposit.

323 While I accept that the defendants did explain to Mr Moussi about the development project than Mr Moussi was prepared to concede, I cannot be certain that the defendants told him that the deposit had not been paid and that is why they invited him to invest in the development project. The defendants may or may not have had an expectation that the deposit would be paid by Parker Design, although the version of events advanced by their particulars of defence suggests that they did. So it seems that at least part of the defendants' version of events is not true, and Mr Moussi's evidence that Mr Papadimitriou called him to tell him that there was no need to do anything urgently because the deposit had been paid has a ring of plausibility about it, notwithstanding the general caution I would exercise with respect to any uncorroborated evidence of Mr Moussi.

324 Mr Moussi's evidence that at the 5 June meeting the defendants told him that they needed a $35,000 contribution from him and others to pay the deposit and secure the Frankston property was not directly disputed by the defendants, although it is inconsistent with the defendants' evidence that Dr Kambouris approached them with a proposal that Mr Moussi invest $250,000 in the development project. Therefore, the evidence that Mr Papadimitriou called Mr Moussi to tell him that the deposit had been paid and that there was no urgency about the matter, while denied by Mr Papadimitriou, does not of itself lack credibility. But it is necessary to analyse Mr Moussi's evidence about this question carefully, both in respect of whether the representation was in fact made, if so, what belief it engendered in Mr Moussi, how he acted on that belief, and if he changed his position in any way on that belief.

325 Mr Moussi gave evidence under crossexamination that he was told at the 5 June meeting that the deposit had been paid, although that contradicted his earlier evidence that he was told this by Mr Papadimitriou a few days after the 5 June meeting. His answers to questions about whether it would have made any difference to him whether the deposit had been paid were at first nonresponsive, but he then gave evidence that it was important to him because it meant that he was putting money into a property which had been 'locked down' by a deposit, so it could not be sold to someone else.

326 The fact that there seemed to be a lesser sense of urgency about Mr Moussi's investment in the development project is consistent with the defendants having told Mr Moussi that the deposit had been paid. After all, the advance was not made until five weeks after the 5 June meeting. However, it is also consistent with Mr Abdou's evidence that he had some type of arrangement with the vendor's real estate agent that he did not have to pay the deposit at the time he signed the contract of sale, and that failure to pay the deposit would simply cause the contract of sale to lapse. This evidence is not as implausible as contended for by counsel for the plaintiff.

327 The defendants were adamant in their evidence that they told Mr Moussi and Dr Kambouris that they needed the advance to pay the deposit because Parker Design had withdrawn from the development project. But the inconsistencies in the defendants' evidence are such that I cannot be positively satisfied that the defendants' version of events is correct. And, while I have some hesitation in accepting Mr Moussi's version of events where there is a direct factual contest, his evidence that he was not aware that the advance was being used to pay the deposit is consistent with the September 2011 letter, which expresses some indignation about the advance having been used to pay the deposit.

328 My cautious conclusion that the defendants told Mr Moussi the deposit had been paid is consistent with the evidence of both the plaintiff and the defendants as to who approached who regarding the plaintiff's investment in the development project. It is certainly consistent with Mr Moussi's evidence that the defendants invited him to invest in the development project. But it is also largely consistent with the defendants' evidence that Dr Kambouris approached them and told them that Mr Moussi wanted to invest $250,000 in the development project. Regardless of whether at one point in time the defendants thought Parker Design would fund the deposit, the reality is that by the time of making the advance, there appeared to be no other funds at the defendants' disposal to pay the deposit.

329 Whilst it is not strictly necessary to determine this factual dispute for the purpose of determining whether this or any other representation was made, I do accept the defendants' evidence that they were approached by Mr Moussi, or Dr Kambouris acting on Mr Moussi's behalf, expressing an interest in investing in the development project, probably after their visit to Mr Abdou's home on Mother's Day 2010. It may well be that the defendants' responses at that time was noncommittal, but it seems to me to be tolerably clear that by the time Mr Moussi returned from his property trip in early June 2010, Mr Moussi was interested in investing in the development project, and the defendants wanted him to invest in the development project, although the urgency of this matter may have subsided once Mr Abdou made some arrangements with the vendor to secure the Frankston property.

330 Therefore, the plaintiff has established that the defendants, or at least Mr Papadimitriou, conducted himself in a way that engendered in Mr Moussi an erroneous belief that the deposit had been paid. However, in order for the defendants to be liable to the plaintiff for misleading or deceptive conduct, the plaintiff must establish that that erroneous belief, caused, or at least materially contributed to, Mr Moussi to cause the plaintiff to make the advance.

331 Of course, when it comes to the question of reliance, the plaintiff has the benefit of the inference referred to by Wilson J in Gould v Vegellas, and more recently endorsed by the Court of Appeal in Lord Buddha. However, notwithstanding the inference in its favour, it is an inference capable of rebuttal by evidence regarding the facts and circumstances of the case, and the High Court in Sidhu has confirmed that where reliance is a necessary element of the cause of action, the onus of proving reliance remains with the plaintiff.

332 Mr Moussi's evidence was that the fact that the deposit had been paid was important to him, because it meant that the defendants had secured the Frankston property, and therefore it could not be sold to someone else. However, it is clear from the evidence as a whole, including in particular Mr Moussi's own evidence that what motivated Mr Moussi to cause the plaintiff to make the advance was not whether or not the deposit had been paid, but his own perception of the benefits of investing in the development project, in particular, the potential return that he would receive upon what for him would be a passive investment, which, depending upon what forecast is accepted, ranged between a fivefold and ninefold return upon the advance. Mr Moussi (whether encouraged by Dr Kambouris or not) was impressed by the apparent commercial acumen of the defendants. He thought the Frankston property was 'beautiful'. He knew that the defendants planned to construct over 80 apartments on the site, and understood, if not the fine detail, the manner in which the property development was to be structured and financed. That is evident not only from his evidence, and that of the defendants, but also from his response to Mr Papadimitriou's response to the 23 September email, which referred to the deposit being paid in two tranches, with settlement due in 2012. While the September 2011 letter denied that this was how Mr Moussi understood how the purchase of the Frankston property would proceed, this was twelve months later. One would have expected that if he did not know how the transaction had been structured prior to receiving Mr Papadimitriou's response, then he would have responded in quite a different way, quite quickly, rather than simply requesting that the advance be returned to him with no other comment.

333 That the question of whether or not the deposit had been paid was not of any material significance to Mr Moussi is illustrated by the fact that, at the time of the 5 June meeting, on his own version of events, he knew that the deposit had not been paid, but was still enthusiastic about the investment, and indeed, I accept the defendants' evidence that it was Dr Kambouris that made the original overtures to the defendants on Mr Moussi's behalf.

334 The question of reliance is closely bound up with the question of causation. On the plaintiff's case, the defendants induced in Mr Moussi an erroneous belief that the deposit had been paid on the Frankston property. However, the plaintiff must also establish that Mr Moussi changed his position by reason of this erroneous belief.[114] The plaintiff must show that if the defendants had not told him the deposit had been paid, either by remaining silent on the matter, or if they had informed him of the true position, he would have acted differently. I am not satisfied that, given the other matters which motivated Mr Moussi to invest in the development project, that he would have acted any differently. His own evidence does not bear that out.

335 As noted above, Mr Moussi gave evidence that the fact that the significance of being told that the deposit had been paid was because he wanted to make sure that the advance was 'going into' the Frankston property. That was consistent with his later conduct, after he became concerned about the bona fides of the defendants, when he conducted a title search and pressed Mr Papadimitriou for the share certificates. He gave no evidence that being told that the deposit had been paid influenced his view as to the financial resources the defendants had available to them, or his view about the level of risk involved in investing in the development project, or the potential profitability of the development project. His evidence regarding the impact upon his state of mind of having been told the deposit had been paid indicated that his particular concern was whether his opportunity to invest in the development project would be realised, because the defendants had secured the Frankston property, and it could not be sold to someone else. There was no evidence to suggest that his belief that the deposit had been paid influenced his assessment of the value of the opportunity to invest in the development project, which was primarily, if not exclusively informed by his confidence in the defendants' expertise and experience, his belief about the potential profitability of the development project, and his own desire to invest in property. Accordingly, I do not accept that the plaintiff relied upon any representation by the defendants that the deposit had been paid.

336 As for the alleged representation that for a $250,000 investment Mr Moussi or his nominee would own 25%, alternatively 15% of the Frankston property and/or the investment vehicle (being 328NHF), that investment vehicle having and retaining the benefit of having entered into a contract to purchase the Frankston property, this representation needs to be broken down into its constituent parts. First, as previously noted, it was not, and could not seriously be contended that Mr Moussi or the plaintiff would be registered on the title of the Frankston property. Further, the pleading as to what proportion of the share of 328NHF would be owned by the plaintiff appears somewhat confused. This confusion appears to have arisen because of the difference between what proportion of shares the defendants told Mr Moussi the plaintiff he had in 328NHF (15%) and the instructions Mr Moussi gave to his lawyers that that he had received 250,000 one dollar shares in 328NHF. In any event, at trial, Mr Moussi agreed that he was only entitled to 15 per cent of the shares in 328NHF, and not much turns on that now that the development project did not proceed and 328NHF is in liquidation.

337 An issue of significance in relation to this representation which emerged at trial is whether the defendants engaged in misleading and or deceptive conduct by reason of the apparent intention on the part of Mr Abdou to nominate Beach Front, rather than 328NHF, as the purchaser of the Frankston property. That there was such an intention after 20 June 2012 is in no doubt, and Mr Abdou conceded as such. However, while the plaintiff would have a good cause of action if Beach Front had been nominated as the purchaser of the Frankston property, the purchase of the Frankston property proceeded, and Mr Abdou failed to arrange for the shareholdings in 328NHF to be reflected in the shareholdings of Beach Front, this does not mean that, at the time that the plaintiff made the advance, the defendants' conduct in this regard was misleading or deceptive. The evidence all points to 328NHF being the intended purchaser of the Frankston property from the time of its incorporation up until the date of the incorporation of Beach Front in June 2012, or at least not long before that. The nomination form dated 15 July 2010 is in evidence. Mr Abdou gave evidence that he provided the nomination form to the vendor not long after 15 July 2010, which might explain its absence from Mr Chakir's file. A substantial number of payments, including the payment of the deposit, were made from the bank account of 328NHF, and the value of the deposits was recorded in the balance sheet of 328NHF. The plans for the development project submitted to the Council in January 2011 have the Search logo printed on them, but also includes a reference to '328NHF Pty Ltd'. As such, there is no evidence that, at the time that the advance was made, the defendants intended anything other than that the development project would be conducted through 328NHF.

338 Of course, the proposed nomination of Beach Front after the issue of this proceeding does not reflect particularly well upon Mr Abdou. The question of whether Mr Abdou would actually do what he said he would have done (that is, give the plaintiff an equivalent interest in Beach Front that it had in 328NHF) remains untested. But in this proceeding, the most that can be made of this by the plaintiff is that their sequence of events suggests there is a propensity on the part of the defendants to engage in dubious conduct. It does not of itself amount to actionable misleading or deceptive conduct. I am also not satisfied that the proposal to nominate Beach Front as the purchaser of the Frankston property was with the intention of frustrating the processes of this Court.

339 Again, the representation that there were other investors 'going in' for ten per cent of 328NHF, and that the defendants themselves were investing more than fifty per cent of the money needed for the development project needs to be broken down into its constituent parts. First, the defendants agreed that they told Mr Moussi that other investors would be 'going in' for ten per cent, because that was the business model used by the defendants: that is, the shares in the investment vehicles would be sold off to investors who came on board to fund the development project, and that is what in fact occurred, with Gregory Waddell and an associate investing $150,000 in October 2010 in exchange for ten per cent of the shares in 328NHF.

340 The defendants denied telling Mr Moussi that they would be funding fifty per cent of the costs of the acquisition of the Frankston property themselves. Mr Abdou's evidence that if he was in fact in a position to make an investment of that size he would not need other investors, but would have obtained the town planning approvals himself, seems perfectly plausible. He and Mr Papadimitriou were adamant that Mr Moussi well understood how the development project was to be funded, and I accept, substantially on the basis of Mr Moussi's own evidence, that he did.

341 As for the representation that Mr Moussi or his nominee would make a 25% or alternatively 15% return on a profit of $15 million, I would repeat my earlier observations regarding the confusion about whether the plaintiff held a 15 per cent on a 25 per cent interest in 328NHF. As for the question of the size of the potential profit, there are in evidence a range of different profit forecasts. They include the $15 million referred to by the plaintiff in the statement of claim. The further and better particulars relied upon by the defendants make reference to them writing up on a whiteboard and showing to Dr Kambouris cost estimates for the development project which showed a forecast profit of $9 million. Mr Moussi gave evidence that Mr Abdou told him that $10 million would be the profit if the market was bad. In October 2010, the forecast profit was $12.5 million, as shown by the spreadsheet in evidence, and a profit of between $7 to $10 million was referred to by Mr Papadimitriou in his evidence, although the latter range appears to have been calculated on a development of 32 apartments rather than 86 apartments.

342 The defendants accepted, or at least Mr Papadimitriou accepted, that they had given Mr Moussi an estimated profit for the development project. While Mr Papadimitriou's evidence was that he had given Mr Moussi a lower estimate, I consider that it is more likely that the defendants told Mr Moussi that the expected profit would be in the range of $10 to $15 million, given that at the time the defendants believed that 86 apartments could be constructed on the Frankston property, and that the cash flow analysis in the October 2010 spreadsheet which is in evidence shows a profit forecast of $12.5 million.

343 Given that it is accepted that a representation regarding the potential profitability of the development project was made, and it was a representation as to a future matter, the onus shifts to the defendants to establish that it was made honestly and that there was a reasonable basis for making the representation. I accept that, at the time they made the representations about the potential profitability of the development project, the defendants genuinely and reasonably believed that if the development project proceeded as planned, an outcome within the range of figures referred to in the pleadings and the evidence was capable of being achieved.

344 On the defendants' expectations, had the development project proceeded, which was what they wanted to occur and what they worked towards to achieve, the plaintiff would have been repaid his loan of approximately $250,000, and received between $1.05 million and $2.25 million by way of profit share, that is, somewhere between a fivefold and a ninefold return on the advance. While there was no documentary evidence of any cash flow analysis having been carried out in or around June or July 2010, there is no reason to suggest that the defendants did not believe a profit of those dimensions could be achieved. They had been informed by Mr Formichelli that an 86 unit development would be able to be constructed at the Frankston property. While this turned out not to be the case, it hardly seems unreasonable for the defendants to rely upon Mr Formichelli, given his expertise, in relation to such matters. As stated by Mr Papadimitriou in his evidence, they knew the costs of construction and finance, and, as at June 2010, believed that the architectural and town planning services would be provided to them in exchange for equity, so the cash demands upon them would be relatively limited.

345 I consider that the differences between the various profit figures referred to in the evidence and the pleadings are of no great significance in determining whether the defendants have engaged in misleading or deceptive conduct. It is apparent that at the time of the making of the advance, all of the parties concerned genuinely believed that the development project would be very profitable, given at the lower end of the range, $7 million, the plaintiff stood to receive approximately $1.3 million, or a fivefold return on the advance, increasing to a ninefold return on an estimate of $15 million.

346 I have no doubt that Mr Moussi was induced to make the advance by the prospect of making an extremely substantial profit within a relatively short period of time, whether it be two, three or four years. However, I doubt whether the exact amount of the profit would have made a great deal of difference to his decision making, once in the range that was in evidence in this case. Mr Moussi gave at least two versions of how he became aware of the forecast profit for the development project: first, that he was told by Mr Abdou that the development project would make a profit of $15 million, perhaps only $10 million if the market was bad, and secondly, he extrapolated the return he was told by the defendants that they could make generating ($900,000 for every $150,000 invested with them) to make an estimate of the profitability of the development project, given that he had been told by the defendants it was their most profitable project. Indeed, the confusion in the pleadings regarding what proportion of 328NHF the plaintiff owned, and as such, the actual dollar value of the forecast profits, suggests that the exact forecast return was not of great significance to Mr Moussi. The defendants have discharged the onus upon them to establish that any representations made by them regarding the profitability of the development project were honestly made and reasonably based.

347 Further, while I doubt much turns upon this in the end, I accept the defendants' contention that the advance was characterised in the manner contended for by them and recorded in the 15 July minute, that is, the plaintiff made an interest free loan to 328NHF of $249,485, and paid $15 to obtain 15 per cent of the shares in 328NHF. While Mr Moussi disputes that this was not the nature of the transaction (for reasons which are not entirely clear), the evidence all points to the transaction being structured in that way. First, there is no reason to believe that the 15 July minute is a fabrication. Mr Formichelli confirmed in his evidence that he signed the 15 July minute. While he may not have had close regard to its contents, it is inherently unlikely that, given Mr Formichelli's role as representing another shareholder of 328NHF, Mr Abdou would put before Mr Formichelli a document that was a blatant misrepresentation of the true position. Secondly, the structure of the transaction was consistent with the arrangements between 328NHF and a subsequent investor, Gregory Waddell. Thirdly, the evidence of Mr Moussi that he signed a share transfer form in which he accepted 250,000 one dollar shares, a document he could not find, was quite implausible. There were never 250,000 one dollar shares to transfer, and it is a document that Mr Moussi would be unlikely to lose in his small apartment. In any event, given that Mr Papadimitriou described the structure of the transaction in his response to the 23 September email, one would expect that Mr Moussi would have taken issue with that had he genuinely believed that he held 250,000 shares.

348 Finally, as for the representation that Mr Abdou would provide Mr Moussi with copies of the contract of sale, the architectural drawings, the projected financials and the like within a few days of making the advance, evidence to that effect was given by both Mr Moussi and Dr Kambouris. Mr Papadimitriou's evidence was that Dr Kambouris had access to all of the documents concerning the development project while he was visiting the Chelsea office. Mr Abdou's evidence was that he did not believe he showed Mr Moussi a copy of the contract of sale, he had taken Mr Moussi through the 'fundamentals' of the development project prior to Mr Moussi making the advance.

349 As earlier indicated, I do not consider the defendants' evidence regarding what documentation the defendants gave Mr Moussi prior to the plaintiff making the advance was particularly satisfactory. In particular, the suggestion that Mr Moussi had access to all relevant documents because he could visit the Chelsea office at any time, or because Dr Kambouris could photocopy them at the Chelsea office is a little absurd.

350 However, it is difficult to see how the defendants' failure to provide these documents after the advance was made caused him any loss. I accept the submissions advanced on behalf of the defendants that, at the time of making the advance, Mr Moussi was aware of the key features of the development project, at least for the purposes of determining whether to make the advance. I accept the evidence of the defendants that they explained the structure and financing of the development project to Mr Moussi, including Mr Abdou's evidence that he took Mr Moussi through the feasibility analysis on the computer at the Chelsea office. In my view, this evidence is consistent with the failure of Mr Moussi to take any steps to obtain these documents until at least six weeks after making the advance, and that seemed to be spurred more by the broader falling out between Dr Kambouris and the defendants, and his concerns about whether he had his shares in 328NHF, rather than for the purposes of perusing the financial forecasts and architectural drawings. Indeed, Mr Moussi gave evidence that by that time, he was not really concerned about the performance of the development project, as he had lost faith in the defendants and simply wanted his money back.

351 To summarise, in regard to the 'persons of substance' representation, I have found that the defendants have not acted in a manner which induced any erroneous belief on the part of Mr Moussi regarding their commercial experience or financial standing. In relation to the representations regarding the development project itself, I have found that the defendants made certain representations regarding the investment vehicle which would complete the purchase of the Frankston property, and the forecast profitability of the development project, but that these representations were honestly made and reasonably based at the time they were made. I am not satisfied that the defendants represented to the plaintiff that an investment in the development project was 'no risk', or that the defendants would be contributing at least fifty per cent of the funds required to purchase the Frankston property. I consider that it is more likely than not that they told Mr Moussi that the deposit on the Frankston property had been paid, but I do not consider that Mr Moussi would have acted any differently had the defendants not told him this, or if he was appraised of the true position.

352 Having not found that the defendants are liable to pay damages for any misleading or deceptive conduct, it is not strictly necessary for me to consider the issue of apportionment raised by Mr Abdou's amended defence. However, in the event that it becomes relevant, I would make a number of observations regarding the apportionment issue.

353 First, I accept the submissions advanced by counsel for the plaintiff that Mr Abdou's pleading in relation to Part IVAA of the Wrongs Act 1958 (Vic) ('apportionment provisions') is deficient, in that it lacks sufficient particularity. However, I accept that the question of what is a sufficient pleading of a defence based upon Part IV of the Wrongs Act remains somewhat unsettled, at least in Victoria.

354 The apportionment provisions relate to claims which arise out of a 'failure to take reasonable care'. In Dartberg v Wealthcare,[115] Middleton J stated that a party seeking to rely upon the apportionment provisions must plead and prove each of the statutory elements of Part IVAA, including the failure to take reasonable care, and that it would be desirable that at an early stage of the proceeding for a respondent to put forward the facts upon which it relies in support of the allocation of responsibility it contends.[116]

355 The statement of Middleton J in Dartberg has been endorsed by this Court in Wheelahan v City of Casey,[117] and Main Road Property Group Pty Ltd v Pelligra and Sons Pty Ltd.[118] However, in Wealthcare Planning Pty Ltd v Financial Industries Complaints Service Ltd,[119] Cavanough J, while expressing general agreement with the reasoning of Middleton J in Dartberg, stated that:

I should nevertheless not be taken to have formed a concluded view as to whether it is the pleadings or the facts that should be regarded as the principal determinant of whether or not a claim is an apportionable claim.[120]

356 However, even if the position is that Mr Abdou is not shut out by the lack of specificity in his pleading, he could only rely upon the apportionment provisions to claims involving a 'failure to take reasonable care'. In my view, the only representations said to be made by the defendants which could be said to arise out of a failure to take reasonable care would be the representations said to have been made as to the future profitability of the development project.

357 Accordingly, even if Mr Abdou is able to rely upon the apportionment provisions, which is doubtful, the extent to which any damages payable by him would be reduced would depend upon which representations the plaintiff was successful in establishing amounted to misleading or deceptive conduct. For, while the defendants clearly work closely in concert, Mr Moussi's evidence, while generally referring to the defendants collectively, also attributes responsibility for different representations to only one of the defendants. By way of example, the plaintiff pleaded and Mr Moussi gave evidence that Mr Papadimitriou first told him that Mr Abdou was an owner of Telechoice, but gave evidence that later Mr Abdou told him that as well. Mr Moussi said he relied upon what Mr Abdou told him about investing $30 to $40 million of his own money in KeepaFresh to draw the conclusion that Mr Abdou had considerable wealth, and Mr Abdou was the one said to have made the statements that every $150,000 invested with the defendants would generate a return of $900,000, and that the development project was likely to generate a profit of $15 million. However, while Mr Abdou was present at the Chelsea office at the time, Mr Moussi said that it was Mr Papadimitriou that told him that the defendants had the contracts for the RSL properties. Further, Mr Moussi's evidence was that Mr Papadimitriou telephoned him to tell him that Mr Abdou had paid the deposit. Other representations were said to be made by the defendants jointly, or the evidence is unclear as to which of the defendants was said to have made the representations.

358 Accordingly, if it were necessary to determine whether Mr Abdou is entitled to rely upon the apportionment provisions, including the issue of whether Mr Abdou was entitled to rely upon the apportionment provisions by reason of s 24AM of the Wrongs Act, which precludes a party against whom a finding of fraud is made from relying upon the apportionment provisions, it would be necessary to do so having regard to which of the representations the defendants, or either of them were to be found liable. Given that I have found that the defendants are not liable in respect of any of the alleged representations, it is not appropriate to embark upon any such enquiry in the course of these reasons.

[1] See Re Botanical Water Holdings Pty Ltd [2013] VSC 96.

[10] The Fair Trading Act 1999 was repealed on 1 July 2012 and replaced by the Australian Consumer Law and the Fair Trading Act 2012 (Vic).

[11] The particulars reproduced here are those provided by Mr Papadimitriou, but Mr Abdou's are in largely identical terms.

[12] [2013] VSC 534 ('Vouzas').

[14] Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 39 FCR 546, 557 ('Henjo').

[16] Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592, 604-605.

[17] Bill Acceptance Corporation Ltd v GWA Ltd [1982] FCA 269; (1983) 50 ALR 242, 247.

[18] (1984) 157 CLR 215.

[22] [2014] HCA 19; (2014) 251 CLR 505.

[23] (1988) 38 FCR 546, 558-559.

[24] Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, [24] (French CJ).

[27] [2001] HCA 52; (2001) 206 CLR 459.

[28] Ibid, 320-321 [13]. (Emphasis added).

[94] However, the submission referred to in paragraph 231(e) above, which was made during the course of counsel's oral submissions, directly contradicts the written submissions relied upon by the plaintiff, where it was conceded that Mr Moussi lied to the Court when giving evidence that he located and contacted Mr Formichelli about the development project some time in 2013.

[101] (1995) 49 NSWLR 315.

[103] [2013] VSCA 101 ('Lord Buddha').

[115] [2007] FCA 1216; (2007) 244 ALR 552.

[117] [2013] VSC 316.

[118] [2010] VSC 167.

[119] [2009] VSC 7; (2009) 69 ACSR 418.